Amid instabilité, India looks more predictable: Alexandre De Rothschild, executive chairman, Rothschild & Co

Amid widespread instability and amplified geopolitical flux, Europe is showing positive signs of “resilience,” even if the Eurozone hasn’t always worked in a coordinated manner, said Alexandre de Rothschild, 45, the seventh generation of the continent’s first family of finance and scion of a 215-year-old banking dynasty.

“There's concern around GDP growth, indebtedness of Europe. But for us, being able to navigate Europe on a micro basis is proving there's still a lot of hopes on the continent,” said Rothschild, current leader of the Anglo-French institution that has been bankrolling wars and empires, and helping shape the region’s economic and political history. “If you look at the financial markets, several large and even mid-sized and smaller companies are actually holding up quite well.”

The European indices have been seeing a bull run this calendar year with MSCI Europe Index advancing over 8.2% through March in euro terms, outperforming the S&P 500 thus far. Corporate earnings growing at 10% have also trumped the slothful GDP numbers across the region. Yet the index is trading at a 35% discount to the US counterpart.

So is Europe much misunderstood?

“It's a very complex continent to apprehend if you're not able to be very plugged in,” said the executive chairman of Rothschild & Co, who is in India on a four-day trip. “In order to be very plugged in, you need to have teams pretty much everywhere, deeply embedded in the communities to be close to clients, whom you are advising without offering balance sheet support.”

The Nordics he would argue are different from Sothern Europe much the same way the erstwhile Soviet bloc in the east is different from western Europe.

Family owned, private nature helps

The beauty of the Rothschild model is the ability to navigate this “sort of fairly complex landscape and not get caught up by the macro,” Rothschild said.

In each European market, “you still find amazing companies that are continuing to perform well and grow — even in sectors that you would assume from a distance are more challenging, like heavy industrials, for instance — and are able to be part of a number of very exciting cross-border adventures.”

He should know his backyard exceedingly well.

From its 18th century Frankfurtian roots that grew from the city’s Jewish ghetto to the entire continent and beyond, the Rothschild family’s DNA is rooted in secrecy, exclusivity and discretion. They financed wars against Napoleon, helped in building the Suez Canal (1859-69) as well as the railway line between Kolkata and Mumbai (1881). They even provided seed capital for De Beers but refused to insure the Titanic.

In between, the key branches of the family–its Five Arrows insignia stands for strength in unity among the five sons tasked with building tent poles around the world–have also wrangled over cross-Channel rivalries and cross-holdings, business overlaps, use of the family name and have buried their differences.

Former Socialist French President François Mitterrand even nationalised the bank in 1982, snatching it from Alexandre’s father, the urbane David, just when he had himself had taken over from his own father, Guy.

Brain Trust of the Brave

Tumults, both personal and professional, only made their bond with their blue blooded clients – many of whom like the Dassault and Peugeot families, the Chanel-owning Wertheimer brothers, are also part of his own shareholder roster – stronger. Trust is a currency they have never run out of.

“You have to navigate across cycles, which our firm has been able to do for two centuries,” he quipped in between sips of sparkling water. “You need to often advise your clients not to do a transaction if it's not the right moment. Our private nature (the family took the bank private in 2023, unlike Wall Street peers) helps us can really think long term.”

Even after being forced to start again from scratch and rebuild the bank, David, known in Parisian circles as the brain trust of the brave, and then Alexandre, have grown the empire advising clients on strategic initiatives like mergers, carve outs, cross border acquisitions. They are also custodians of their personal fortunes being their wealth managers – the business AUM stands at 130 billion euros.

But in today's hyper information age of social media, FATCA and 24x7 scrutiny, is their business model fast becoming a bane than a boon?

"Discretion is indeed one of our beliefs. We want our clients to be in the limelight not us. We are there to support them and deliver high quality independent advice," he said as he sat down with Economic Times in their plush new office in midtown Mumbai to discuss a wide range of topics -- role of institutions like NATO, energy prices, Trump, trade, tariffs, technology arms race, alternative investment opportunities to expanding the Rothschild franchise in Asia and India.

An Indian oddessey

Visiting after six years to mark the silver jubilee celebration of the firm in the country, Alexandre has been crisscrossing cities, meeting up with some of the leading business families, financial institutions, PE funds and corporate clients, many of whom are currently grappling with succession planning and wealth preservation. A raging debate over the lackadaisical approach of the younger generation of business inheritors has snowballed into a nationwide discourse. Family offices are taking centre stage as gen next is busy separating ownership with management by creating family offices. “I don’t believe there is one answer that fits all,” he argues. “But a few principles should be respected and particularly in people’s business where the assets are the people and they have to feel that a management role needs to be earned by credibility by all stakeholders (including clients) and not just through an ownership right,”

The core philosophy of the Rothschild wealth business therefore is capital preservation most of the time. “These are families, entrepreneurs that take risk in operating their businesses, and they're looking for advice in preserving, beating inflation, transmitting wealth to the next generation. And I think that's where we have a sort of a special USP,” said Rothschild.

Like him, his uber rich European clients are looking at India as an “unbelievably refreshing” and exciting destination that is ripe for reaping its demographic dividends and leverage its brilliant innovations to emerge as a prime investment destination. “Sitting in Europe and looking at the state of the world in relative terms, India actually looks more predictable place than most places which I don't think we were able to say that of India in the past.”

With Asian outposts in Tel Aviv and Dubai, the Rothschild’s are tapping into the private bank clientele of the Indian super rich besides continuing deal advisory – the firm’s legacy mainstay. “For a country which has a growing list of successful families, our DNA of being a family-controlled firm speaks well for the market and compliments their needs.” India being such a growth market, Rothschild said the firm is “starting to have discussions with clients that are interested in understanding the risk, reward profile of investing in India.”

Wealth preservation

Helping India Inc and governments in marque and complicated transactions – restructuring of Enron in 2004; Tata’s acquisition of Corus (largest cross border M&A by an Indian corporate); the $9.5 billion takeover of Cairn Energy in India by Anil Agarwal’s Vedanta or more recently stitching the $1.47 billion alliance between Coca Cola and Bhartia family for their India bottling operations, have already cemented their niche identity and aided a consistent top 10 standing in the league tables in deal volumes. There is no urgency to expand into multiple products except wealth management, but increasingly the focus has been to also expand and deepen private equity engagements across the life cycle of funds – right from investments to exits and even coming in to prep a company for an eventual listing as a strategic IPO advisor.

This multi-layered approach works even better in the ongoing environment of “instabilite” as Alexandre puts it when corporate clients are refraining from transformational transactions. “M&A is based on confidence and predictability,” he explains. “When one cannot see the future clearly, they tend to put it on hold.” Having counter cyclical offerings in asset management, wealth, alternatives become a natural hedge.

The model now is “unbelievably well diversified, across sizes of transaction and product range.” Besides M&A it also includes financing, equity (IPO) and debt advisory and restructuring transactions.

For a family with diverse business interests ranging from real estate to wine making to art, agriculture and mining apart from high finance, it was imperative to find out if new asset classes like crypto or ETFs are attracting smart European money?

“We could debate what smart money means,” he says before rushing for his next pit stop. “During unpredictable environment, smart money wants to be preserved. First and foremost.”