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The billionaire philanthropist, CEO of Portland Holdings and chair of National Commercial Bank of Jamaica, on what turned him against the mutual fund business and why investors should be looking for public companies that act like private ones

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Othello Grey/The Globe and Mail

My mother had me when she was 18. She is an orphan, and my biological father emigrated prior to my birth. She was on her own. That was my beginning. She remarried when I was seven, and I am the oldest of nine children. Our parents had three jobs each, and it was our responsibility to look after each other—and we just did it.

In my primary class, there were 120 students and one teacher. There were 60 students on the teacher’s left who were classified as the bright students, and 60 students on the right, classified as the dunce students. Because I was tall and big for my age, and I was playful, I qualified for the dunce section.

When I was 12, my family bought a small dry-goods store. My dad was a Singer sewing-machine salesman, and my mother was an Avon lady. After school, I’d man the store. Then I’d take a four-hour bus trip to Kingston and four hours back, to provision my mom’s orders. When I got home, we’d ship the orders to buyers. I refer to this as getting my BSc—behind shop counter.

I got a job as a mutual fund salesman for Investors Group. As a young immigrant, I knew no one who had money. I had to cold call until I got prospects. I would sit at their kitchen table and ask myself, What is the highest value I can give to this family? The answer kept coming back: to make them wealthy.

I asked myself, Is there a formula that, if you practise it consistently, the only outcome is wealth? I figured it out by 1978. Everybody who creates wealth does five things: They own a few high-quality businesses. They make sure they really understand those businesses. They make sure those few businesses are in strong, long-term-growth industries. They use other people’s money to invest in them. And they vow to hold them as long as they remain great businesses.

Mutual funds were totally dissonant with the goal of creating wealth. So, I thought, Okay, I’m going to start a mutual fund that is honest to those principles. In 1987, I bought a fledgling mutual fund company out of Kitchener, Ontario—the AIC Advantage Fund. It held 100 stocks and $800,000 in assets. I immediately shrank the portfolio to 15 companies, 60% of them in the asset-management business.

Outside wealth is created when there’s a difference between perception and reality, when there are inefficiencies, and when there’s a lack of equity capital flowing into the country, sector or company. National Commercial Bank and Jamaica met all those criteria.

If the management of a public company makes good decisions, they get a bonus. If they make bad decisions, management gets half a bonus. If they’re really bad, they get a golden parachute. I’m not saying we should not invest in public companies. But find public companies that behave more like private ones.

The financial crisis was horrible. AIC saw its assets under management decline from $15 billion to $4 billion. It was a function of retail investors not being long-term-disciplined. Secondly, because our portfolios were concentrated, they were more volatile, and retail investors are skittish. The whole advisory community has done a terrible job at making them great investors. Look at Berkshire Hathaway: There are numerous times the stock price fell by 50%. But it went from $1,000 in 1982, when I bought the stock, to $330,000 now.

Any product I’m being sold by the investment industry, I can buy less expensively on the Internet. If advisers do not come up with ways to add value, we’re going to go the way of the dodo.

CPPIB’s portfolio is 50% public securities and 50% private. The Yale Endowment Fund is 20% public, 80% private. Yet, when retail investors go to a securities dealer, their portfolio is 100% public. Is CPP stupid, or are we in the adviser industry totally off the mark?

I’m not afraid to swim upstream. In fact, when I’m not swimming upstream, I get nervous, because it’s easy to float downstream.

I was fortunate that I grew up in Jamaica. Everybody’s equal. My country made me a confident person. I didn’t have that baggage. When I came to Canada, my approach was, I see no colour. And I just acted that way. I may have been dumb, but I just kept pressing on.

There are not enough role models on Bay Street who are non-white. One of the primary reasons I made the Royal Ontario Museum donation was to be an example. When immigrants, or any Canadian, walks into the museum, I want them to say, “If this man can come from Jamaica with nothing, build a career and give back to society, I can do that too.”

Interview has been edited and condensed.

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