Michael Lee-Chin often applies the words of a Canadian proverb to investing. “To be successful you have to make sure that you are where the puck is going.” In August, Lee-Chin decided that the puck was no longer with Berkshire-TWC Financial Group Inc., Canada’s largest independent, privately-owned financial planning and wealth management organization. Lee-Chin’s holding company, Portland Holdings Inc., sold Berkshire to Manulife Financial Corp. for an undisclosed amount.
“It was a strategic decision,” says Jordan Benincasa, a fund analyst at Morningstar Inc., a provider of independent investment research. “One of the reasons he is selling it is because there may be minimal synergies between Berkshire and AIC,” he says, referring to AIC Limited, a mutual fund company in which Berkshire sold its products and an asset owned by Portland Holdings, that has suffered a wave of net redemptions since 2002. Still, efficiency and outsourcing have kept AIC profitable, Lee-Chin asserts.
Berkshire had amassed $13 billion of assets under Portland Holdings, but profitability aside, selling it freed up management time and capital, says Lee-Chin. “As a result of consolidation and increased interest from banks and insurance companies, the wealth-management business has become very capital intensive, very competitive, and it is also a very low-margin business. For all of those reasons I decided I would rather reallocate my capital elsewhere.”
For Lee-Chin, who was born in Jamaica, “elsewhere” is the Caribbean where he has aimed his puck at a new goal: retirement services. “The Caribbean has high, long-term growth potential emanating from retirement and baby boomers,” he says.
Lee-Chin has reinvested 100% of the profits at National Commercial Bank of Jamaica Limited back into Jamaica, a strategy that has already compounded human and financial capital in the region. In 2002, other banks were picking at the carcass of NCB before he bought a 75% stake. Now, Lee-Chin predicts that in 2007 NCB will make nearly $100 million in after-tax profits.