Pay cap urged by Abramovich

LONDON // Roman Abramovich, the Chelsea owner, wants to see a salary cap introduced to world football in an effort to control the spiralling wages of the game's leading players.

The billionaire Russian businessman is alarmed by the wage inflation that saw Wayne Rooney increase his pay by 50 per cent last week after a public threat to exit Manchester United.

Though Abramovich contributed to the extraordinary escalation of footballer's remuneration by spending around £700 million (Dh4.1 billion) on buying Chelsea and equipping them with the Premier League's most expensive playing staff, he has sought to limit his funding of the club in recent years.

Abramovich is a strong supporter of Uefa's Financial Fair Play regulations which are designed to prevent European clubs from spending more than their revenue on player salaries and other costs.

In addition to Uefa's accounting controls - which will result in heavy loss-making clubs being excluded from European competition from the 2013/14 season - the Russian is in favour of a formal cap being placed on wage bills.

Bruce Buck, the Chelsea chairman, confirmed the club's support for a salary cap.

"We would seriously consider a wage cap. It has to be properly implemented," said Buck, who feels the cap should be at least Europe-wide to ensure that the game's top performers are not encouraged to leave the Premier League.

Chelsea unilaterally cut their wage bill last summer, shedding more than £25m in salaries by releasing or selling five senior internationals - Michael Ballack, Deco, Ricardo Carvalho, Joe Cole and Juliano Belletti. Those and other cost-cutting measures combined with significantly improved sponsorship and a kit supply deal with Adidas worth £20m a year until 2018 will bring the club closer to breaking even for the first time in the Abramovich era.

Chelsea declared a loss of £44.4m in their last set of accounts, covering the financial year to June 2009.

Consistent with Chelsea's new stance on salaries is the club's refusal to involve themselves in an auction for Rooney's services that developed over the past three months. Abramovich was alerted to the England forward's availability as he sought an unprecedented pay rise to £7m a year after tax, which is 40 per cent for Britain's highest earners. The club, however, would not countenance breaking their current wage structure which maintains Frank Lampard and John Terry as top earners on £150,000 a week.

Meanwhile, Chelsea are close to losing a second of their expensively acquired youth signings. Fabio Borini, the Italy Under 21 striker, has joined Gael Kakuta in refusing to extend a contract that expires at the end of this season. Like Kakuta - who has cost Chelsea well over £5m in wages and compensation following his illegal recruitment from RC Lens, the French side - Borini was promoted to the first-team squad this season, but is free to sign a pre-contract with foreign clubs in January. Italian sides AC Milan, Juventus and Sampdoria are interested in taking him for a Fifa-mandated fee of €270,000 (Dh1.37m).

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”