Hintze has shown he is not afraid to make significant hedges on the market, as his intervention in the Australian currency showed in 2013. He later told the Business Insider it was part of his “patriotic duty” as his friends in the banks were worried about the high $US-$Au exchange rate.
CQS lists Brexit uncertainty as a key risk for its business in its account documents according to Business Insider. The company said it is “ …actively monitoring political developments to counter the risk”.
Hintze however likes to play down the significance of world events, as he told the Australian Financial Review in October this year. “Brexit feels important here [in London], but in the world as a whole it doesn’t really matter”.
But recent levels of short-term bets backing a no-deal Brexit has shown the hedge funds are taking sides and the implications of Brexit are likely to be felt well outside the borders of the UK. In October this year it was also reported that £4.6 billion of “aggregate short positions” on a no-deal Brexit crash-out have been taken out by hedge funds. These are the same hedge funds that have directly or indirectly funded Johnson’s recent political campaign, including CQS.
In fact, Hintze’s (and other hedge funds) donations to the Conservative Party and support for Brexit are well known.
Sir Michael likes to promote debate on one issue in particular and that is climate change. He has done this through supporting various think tanks and organisations and sponsoring Chairs at various Trusts and University centres in the UK and in Australia.
Two of these here are the University of Sydney UK Trust and the Centre for International Security Studies, also at the University of Sydney, for which he established a chair in 2006.
On the issue of climate change, it seems Sir Michael is taking a bet each way on this one. While supporting climate denying think tanks such as the Global Warming Policy Foundation in the UK, his financial backing of the CISS at Sydney University has seen firstly the appointment of Professor Alan DuPont who advocated strongly for action on climate change.
Then the appointment of Prof. James Der Derian in 2012, who holds the directorship to this day. His projects have painted a dystopian future unless we grapple with some key issues in a timely manner. Project Q is the Centre’s current focus and has received over $1.6 million in funding from the Carnegie Corporation in the last few years. ‘Q’ stands for Quantum and the project may be described thus:
“Project Q is our coda to Einstein’s fears, hopes and ultimate lament, which will be distributed to world leaders as well as the general public through multiple media. Project Q will engage peace and security scholars as well as physicists and philosophers, diplomats and soldiers, journalists and filmmakers, historians and futurists in a critical dialogue on the peace and security implications of a quantum age”.
A video outlining the areas of research can be found here.
Project Z was an earlier work that Prof Der Derian initiated prior to his employment at the CISS and focussed the implications of impending global catastrophes, and our readiness to deal with them. While recently taken down from the CISS website, the trailer to a 70-minute video can be seen here.
Key future dystopia identified were pandemics and climate change refugees, also referred to as a ‘zombification’ of the world population. Ok this sounds weird but seems to be a growing assumption made in elite circles.
Hintze is generally seen as a well-informed risk taker. But he sees himself as more than that, and despite his public modesty, he clearly thinks of himself as a player in international affairs. Having an influence in world events and shaping opinions is an important strategy that Hintze sees will place his firm at a distinct advantage. Whether it is currency or the property market, political events, political donations and elections to global catastrophes, it seems Sir Michael has some very good ‘inside knowledge’ and given his connections within the UK and Australian elites, one to follow for a little flutter on the future.
Perhaps more concerning however is the relentless expansion of the tax haven and offshore financial sectors not just in Australia, but globally. Most hedge funds in the UK operate out of offshore entities, like CQS. As CQS is registered in the Caymans, Hintze pays little tax here, after all he advised the Abbott Government on how to manage the financial system in 2014, even though was found guilty and fined in the UK for tax avoidance in the previous year, amounting to some $43 million in a settlement with the UK taxman, apparently after his companies were found to have used ''employee benefit trusts'' as a means to avoid tax.
However, given the rise in capital owned by the firm and the little they pay in tax each year, the tax fine was merely a blip. For example, in 2011 it was reportedly that CQS generated $154 million but only paid an apparently modest $55,000 in corporation tax.
The growth of the offshore financial sector, together with increasing trends for tax avoidance and money laundering as a result is perhaps the key economic issue of this century. A 2017 study on the extent of national wealth contained in the offshore havens globally, up to half of which is backed by the City of London, was estimated to be about 10% of world GDP or about $10 trillion.
While levels of wealth contained in offshore havens varies from country to country, this figure rises to about 15% in Continental Europe, and to as much as 60% in Russia, Gulf countries, and in a number of Latin American countries. In Australia it is about 7% of GDP and growing.
A recent discosure of corporate tax avoidance to the Tax Justice Network in July 2020 shows that tax avoidance is increasing with $427 billion lost to the world economy each year to tax havens, the State of Tax Justice 2020 reports that $245 billion is directly lost to corporate tax abuse by multinational corporations and $182 billion to private tax evasion.
But because offshore wealth is concentrated at the top, it increases the top 0.01% wealth share substantially, even in countries that do not use tax havens extensively. The 2017 study found that offshore wealth has a large effect on inequality around the world, particularly countries like the U.K., Spain, and France, “… where, by our estimates, 30%–40% of all the wealth of the 0.01% richest households is held abroad.”
Some observers contend that a Brexit deal is not only desirable for big finance (as it will avoid looming EU restrictions) but will open up opportunities for the offshore unregulated market to expand. Not the least because the City of London, which backs the unregulated offshore system, is at the centre of ‘spider-web’.
And the City has its eyes on Australia, one of the largest foreign investment destinations in the world. After all, Sir Michel has done so well already. As the Lord Mayor of the City of London, Peter Estlin, said recently while visiting Australia,
“The UK’s relationship with Australia is already very strong, but there is still so much more that we can achieve. For example, our unrivaled Fintech and green finance expertise can help remove barriers to international investment and business, creating jobs and prosperity and unlocking opportunity.”
Prime Minister Tony Abbott said, “We’re open for business” and there is little indication that the current government leadership sees things any differently. But as the sharks circle, there is little reason to think the ongoing flight of capital, as the #Watergate fiasco exposed, into the ‘dark economy’ will subside, unless we as a nation decide to take the necessary measures to ensure wealth generated in this country is taxed and stays in the country. Measures being developed by the EU could provide some opportunity for public accountability, given a little political will here to do so, though within the current political context of Brexit seems to be becoming less likely.