The billionaire US investor Wilbur Ross has warned that London’s Alternative Investment Market is “dangerous” for investors because of its lower corporate governance standards.
In an interview with the Financial Times, Mr Ross also said the private equity boom might be a bubble that could contribute to a sharp rise in corporate bankruptcies over the next few years.
Mr Ross, who has accumulated an estimated fortune of more than $1bn by investing in unfancied sectors such as steel and car parts, said London’s junior market was in danger of attracting “the wrong kinds of people”.
His comments come as London is engaged in a battle to dislodge New York as the world’s pre-eminent financial centre by competing with US exchanges in attracting international groups.
Asked whether he thought Aim was a dangerous market, Mr Ross said: “It clearly is a dangerous one. I think it is no accident that quite a few of the companies have fallen far short of the business performance that had been forecast at the time of their launching.
“I’m certainly not saying that Aim should be done away with, but there is a risk when you have materially lower standards, that you’ll attract the wrong kinds of people.”
In March, Roel Campos, a top official at the Securities and Exchange Commission, the US regulator, was reported to have described Aim as a “casino”. He later claimed the remark had been taken out of context.
In response to Mr Ross’s attack, the London Stock Exchange said on Thursday: “We will not dignify these remarks by commenting further.”
On private equity, Mr Ross singled out the levels of debt taken on by buy-out groups for their ever-larger takeovers as a big concern.
“The concept of risk-adjusted rate of return has been replaced by what I would call risk-ignored rate of return. People are substituting yield for credit judgment. I think it is a very dangerous phenomenon.”
Mr Ross reiterated predictions of a sharp rise in the number of corporate bankruptcies in America from their current low levels.