Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

Once the companies merge, Mr. O’Leary will become vice-chairman of Canoe but won’t be doing any money management.

The sale of Kevin O'Leary's fund company to Brett Wilson's Canoe Financial is being billed as a "dragon deal" because the two men were once colourful characters on Dragons' Den. A better description might be "last, best hope."

O'Leary Funds caught fire after launching in 2008, raising roughly $1-billion in assets under management in only two years. Pounding his chest, Mr. O'Leary then suggested the company's assets would hit $5-billion within three years and even dangled the idea of going public.

The fund company Canoe is buying is a fraction of that size. Mr. Wilson's firm is acquiring $800-million in assets under management (AUM) – one-third less than the $1.2-billion O'Leary Funds managed at the end of 2011, even though the S&P/TSX composite index has climbed 15 per cent since. (Assets under management grow when the market rises, or when new money is invested.)

Story continues below advertisement

Throughout O'Leary Funds' short history, some funds have stood out for solid returns – notably the Canadian Bond Yield portfolio, which won a Lipper award last year. But a number have struggled with poor performance. Despite promising investors reliable returns, the company occasionally had to hand capital back to investors to make up for shortfalls in their distribution income.

The spotty history doesn't bother Canoe all that much. "He got hit with some big redemptions," Mr. Wilson said of Mr. O'Leary, but Canoe also had growing pains. "One can point out that Kevin overpromised and underdelivered," but fomer Canoe senior portfolio manager Bob Haber did the same, so he was replaced by Rob Taylor, whom Canoe hired from BMO Asset Management in 2013, he said. "Everyone has their moments."

Rather than look at past results, Mr. Wilson said he is focused on something else. "The question is how well can we convince the unitholders of O'Leary funds to convert to Canoe funds." The deal was largely struck to bulk up because scale matters when managing money, but even though the acquisition is expected to boost Canoe's AUM to "almost $4-billion," there is no guarantee that all investors will transfer their savings to the new portfolio managers.

Once the new assets are acquired, few of the 19 existing O'Leary funds will remain in their current form. Most will be merged into existing Canoe funds, while others will have their investment strategies amended.

Since setting up the fund company, Mr. O'Leary has merely been a marketer of the funds and generated some investment ideas, while Stanton Asset Management has served as the portfolio manager. As it stands, Stanton will only subadvise on one fund after the merger – although Mr. Wilson said there is a chance that the company, which is based in Montreal, ends up doing more. "I still need more people," he said.

After some tough years for performance and asset outflows, O'Leary Funds started turning things around in 2014, posting record fund sales and earning the Lipper award. However, it is difficult to judge what these mean for the bottom line. The sales figure reported wasn't a "net" one, and that means existing investors could still be taking their money elsewhere.

It is also tough to get an accurate picture of fund performance because of survivorship bias. Most of O'Leary Funds' poor-performing portfolios – such as the former Global Equity Yield Fund and the Yield Advantaged Convertible Debentures Fund – were merged with other portfolios, so the weaker returns are no longer reported.

Story continues below advertisement

Financial terms of the sale to Canoe were not disclosed – but Mr. Wilson said the final price is still in flux, suggesting that it will depend on how many O'Leary investors ultimately migrate to Canoe, a common feature in asset-management deals.

Once combined, Mr. O'Leary will become vice-chairman of Canoe but won't be doing any money management. "Kevin is not actively involved with investing these assets going forward," Mr. Wilson said.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies