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Kevin O'Leary: He's not a billionaire, he just plays one on TV Add to ...

“If you walk down a street with Kevin, it’s like parting the Red Sea,” says Stuart Coxe, the television producer who cast Kevin O’Leary on Dragons’ Den in 2006. “It’s ‘Kevin!’ and high-fives.… We’ve never had someone like Kevin.”

O’Leary himself likes to tell the story of being buttonholed by a man in a bathroom at Toronto’s Pearson International Airport not long after Dragons’ Den went on the air. The stranger told O’Leary he was a “total asshole.” This is an anecdote that O’Leary relishes. It shows he’d arrived.

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Welcome to another episode from The Kevin O’Leary Show—proof, perhaps, that Canada, too, has finally arrived. We now have our own celebrity businessman, our own Trump, our Branson: someone who is famous for being famous, who makes money just by being.

The story so far: O’Leary makes his name selling his software company to Mattel Inc. for billions. That’s the backstory that he leverages into careers as a venture capitalist, board member, broadcaster, author, speaker and—critically for the story arc—fund-company executive. Coming up next—sorry if this is a spoiler—is O’Leary Fine Wines.

The twist is that, right now, O’Leary’s performance is getting a critical drubbing. People in the investment community are turning on him over the performance and management style of his funds—a business, it turns out, that is less forgiving than reality TV.

However the plot turns out, July 30, 2008, will be a pivotal date. That is when O’Leary announced the first offering from O’Leary Funds and came squarely into the sights—should the story turn out this way—of his nemesis.

On that fateful day, O’Leary was holding forth on SqueezePlay, the Business News Network show he co-hosted with journalist Amanda Lang. O’Leary explained to Lang how his fund was designed to produce yield on a monthly basis. “You got to pay Daddy,” he declared, “because my wife costs a fortune, my kids cost me a fortune. I need dough and I need dough every month. You got to pay Daddy number one.”

O’Leary said his fund would not touch investors’ principal. “This fund doesn’t grind its capital, which means it has enough generation of yield to pay 5%, which is paid monthly because Daddy wants to get cash—that’s what Daddy wants.”

Nor would the fund invest in anything risky. In answer to a caller, O’Leary said that investing in National Bank “is too risky for my fund. My fund is for grandmothers, that’s what it’s for.” Promotional materials for this and subsequent funds also emphasized that the O’Leary Funds were a natural “home” for value investors intent on capital preservation.

One person who caught the segment on BNN that afternoon was Mark McQueen. He didn’t like what he saw.

To McQueen, O’Leary was an interloper, someone without experience as a money manager—but someone who knew he could tap in to a vast pool of retail investors due to his television profile. McQueen has since used his blog to maintain a critical eye on O’Leary Funds. And of late, his skepticism has been seconded by a chorus of investment advisers who say Daddy isn’t looking after them.

“Just because you’re on television doesn’t mean you’ll be good at managing money,” says McQueen, the CEO of Wellington Financial LP. “When a non-trained money manager shows up in the market…if it goes badly, what does this mean to everybody else whose stock-in-trade is this industry? If it brings the industry into disrepute, you bring a pox on all of our houses from investors.”

Of course, O’Leary doesn’t literally manage the funds himself—he’s too busy, and he’s not licensed. Yet when O’Leary promotes himself—which he does endlessly—he’s also, like Trump and Branson, marketing his businesses. As the man promotes himself from multiple platforms, O’Leary’s audience may not discern the distinction between O’Leary and O’Leary Funds. Nor do they likely know about the inconvenient details that complicate the founding myth of the guy who sold his software start-up for billions.

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Born in Montreal in 1954, O’Leary likes to say his mother, Georgette, endowed him with his investing savvy. Georgette studied the markets and developed a philosophy of only investing in bonds that pay interest and stocks that pay dividends. It’s the same guideline that O’Leary proclaims for his funds today.

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