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April 14, 2017 | Kevin O’Leary’s Investing Fund Misadventure

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Kevin O’Leary is a successful salesman: but buyers should beware of what he’s selling.

A MacLean’s article this week offers the latest update on the hype that was O’Leary funds. O’Leary used his media personality and platform in 2009 to attract more than $1 billion into funds of his name in just 2 years.  Then in 2011, performance for investors went south.  Read: Inside Kevin O’Leary’s investing fund misadventure:

“O’Leary served as the company spokesman and raised funds. The products were aimed primarily at baby boomers and retirees who desired stability and yield. As such, O’Leary said the funds would invest in safe, dividend-paying securities, and never touch the principal. (The Globe and Mail found in 2012 that the company had, on occasion, paid distributions from the investors’ principal.) O’Leary put some of his own cash into the funds, too, giving Canadians the chance to invest alongside the wealthy businessman they saw on television. How much of his net worth landed in the funds was never made clear.

O’Leary was a tireless promoter, travelling the country to meet with financial advisers and brokers. At one point, O’Leary hosted advisers for lunch at CBC headquarters in Toronto while he was taping Dragons’ Den. The visitors even got to watch “Mr. Wonderful” in action on the set. O’Leary raised hundreds of millions of dollars from Canadians over the first couple of years.”

By 2015, the asset base had shrunk by 46% to $800 million.  As assets under management declined O’Leary Funds charged new expenses called “administration fees” and “directors fees” to buoy firm revenues.  Then late that year, he sold the remaining client assets under management to another company named “Canoe” for an undisclosed sum.

MacLean’s reports that the acquiring company agreed to pay $13.7 million with the possibility of up to $8 million in equity—provided the funds’ assets could grow by another $200 million over the following year.  An audio recording of an internal O’Leary Funds conference call obtained by Maclean’s, (you can listen to the audio link of O’Leary talking, embedded in the MacLean’s article) speaks volumes:

O’Leary vowed on the call to deploy his television fame—by this point, he’d left the Den but was working as a commentator for BNN— to help make that happen. “I’m signing for another year with CTV for one reason: just to keep their brand bannered on BNN everyday,” O’Leary said, referring to Canoe. (As part of the deal, he signed an 18-month part-time consulting contract with Canoe to provide marketing assistance.) O’Leary rallied his sales force on the call. “We want to go get $200 million, and everybody benefits from that,” he said. “We are indifferent on which products we’re selling.”

One more chapter in the self-aggrandizing and self-enriching history of Kevin O’Leary.  As he sets his sights on running for Prime Minister, Canadian voters have many good reasons to be wary.  See: Why you should be wary when O’Leary promises big GDP growth

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April 14th, 2017

Posted In: Juggling Dynamite

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