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Secret billionaire Kenneth Dart places $ 6.7 billion bet on tobacco stocks

(Bloomberg) – It has taken decades for sustainable investing to become mainstream, but now every week one giant investor after another is announcing their commitment to ESG. Kenneth Dart will not join this club. The billionaire is heir to a fortune of plastic cups. Over two decades ago, he renounced his US citizenship and moved to the Caribbean, becoming the largest real estate owner in the Cayman Islands. For years he invested in troubled sovereign debt, with former Argentine President Cristina Kirchner calling him a “vulture”. And over the past six months, 66-year-old Dart has quietly racked up one of the classic investments in sin. Through a Cayman Islands vehicle called Spring Mountain Investments, Dart acquired a 7% stake in British American Tobacco which is now worth $ 6 billion. Spring Mountain last month unveiled a separate $ 634 million position in rivals Imperial Brands. The Financial Times first reported on the company’s investments in the tobacco sector. A small portion of the positions were entered into using total return swaps, the documents said. These types of swaps were at the center of the March implosion of the Archegos Capital Management family office, causing billions in bank losses.Tobacco WagerSpring Mountain is the latest in a series of entities that advertising shy Dart has used to buy titles. He previously created Portfolio Services Ltd., Seneca Investments, EM Ltd., Eastern Capital and LBS Investments. In recent years, they have been used to invest in obscure biotech stocks that represent a fraction of his fortune, estimated at $ 6.6 billion by the Bloomberg Billionaires Index. Dart’s bet on tobacco goes against one of the hottest trends in finance: investing in companies that focus on environmental, social and governance factors, which in theory means that companies have long-term sustainable prospects. The tobacco industry has been the antithesis of ESG for decades. investment. Dominated by a few corporate giants, companies operate in a market that risks being canceled out by regulation or that customers give up – or die – from this habit.Michael Bloomberg, founder and majority owner of Bloomberg News, the parent company Bloomberg LP, was Although a larger group of investors are avoiding stocks, this may create opportunities for those less concerned about the societal outcomes of their portfolios. Before worries about the new regulations, especially in the United States, began to deter investors, according to Duncan Fox, analyst at Bloomberg Intelligence. Over the past five years, the MSCI World Tobacco Index has fallen 32%. It’s punished long-term holders, but it has contributed to the dividends that stocks pay. British American Tobacco and Imperial Brands have dividend yields above 8%. Investors can also overestimate regulatory risk – after all companies have the experience of adapting and taking advantage of new regulations – and there is potential growth in alternative tobacco products and new cannabis. Still, there’s a reason why so many investors shy away from stocks. “Smoking has been on the decline for five decades due to what we call ESG compression: pressures from societal attitudes, regulation and taxation,” Citigroup Inc. analyst Adam Spielman wrote in March. According to Jefferies analyst Owen Bennett, in 10 to 20 years there may be no more smokers in many markets. He has earned billions through companies such as Salomon Inc., Federal Home Loan Mortgage Corp., and in distressed sovereign debt, according to a Businessweek profile from 1995. Trained as a chemical engineer, he s’ has long focused on its investment portfolio rather than on the family business. , Dart Container, where it no longer has a role or ownership. Dart Container, based in Mason, Michigan, is run by his brother, Robert Dart. In recent years it has seemed to move from markets to real estate development, primarily in the Cayman Islands, where it has made its home. Dart Real Estate has developed $ 1.5 billion in projects, including hotels, office buildings and residential complexes, according to its website (updates with total return swaps in fifth paragraph, Dart Enterprises response to seventh). Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP

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