Whether you’ve seen him on various television shows such as BNN’s SqueezePlay, or as a ‘dragon’ on the CBC’s Dragons’ Den, Kevin O’Leary is truly a colorful character. With his recent move from BNN to the CBC’s The Lang & O’Leary Exchange, along with his appearances on ABC’s Shark Tank, chances are, you have seen this cat on the tube. One thing is for certain – this guy is one busy man.
But have you heard of his funds? And could they offer sound investment opportunities to for you and your hard earned dollars? The Canadian billionaire who made his fortune in the consumer software industry is never shy in expressing his thoughts or pursuing new ventures. After selling his company back in 1999 to the Mattel Toy Company “for a staggering 3.7 billion dollars”, he decided to go on and form his own mutual fund company, O’Leary funds.
The company’s site will tell you that “O’Leary Funds was formed by Stanton Asset Management CEO Connor O’Brien, and top-rated television host Kevin O’Leary to provide investors with deep value, tangible yield and unique global investment opportunities.”
Let’s take a closer look at the types of funds that are currently being offered to the investor and then compare some of the pros and cons associated with investing in any of the O’Leary Funds.
In terms of the closed-end funds, here is the list of funds available:
- O’Leary Global Equity Income Fund (OGE.UN)
- O’Leary Global Infrastructure Fund (OGN.UN)
- O’Leary Global Income Opportunities Fund (OGO.UN)
- O’Leary Global Canadian Income Opportunities Fund (OCY.UN)
- O’Leary Founder’s Series Income & Growth Fund (OFS.UN)
- O’Leary Canadian Equity Income Fund (OCZ.UN)
- O’Leary BRIC-Plus Income & Growth Fund [IPO on Jan 26, 2010 (NEW)]
Regarding mutual funds offered to investors, the company offers its new O’Leary Strategic Yield Class fund (Class Series A, F, F6, and T6).
From my perspective, I believe that some of the pros in relation to some of these funds are that many of them offer global diversification “by region and by sector”, and their investment funds are primarily allocated in “dividend-paying common shares, preferred shares, and bonds of public issuers, with each issuer generally having a market capitalization of $1 billion or more”.
Equally importantly, if we check out some of the current yields of some of the funds we find that most of the closed-end funds offer above-average respectable yields between 6%-8% with distributions paid out monthly. Having shares can allow for the investor to have an income stream while waiting for long-term capital appreciation, unlike many other funds in the industry.
Now comes the cons, and in my view, they cannot be overlooked. Despite some of the positive elements to some of O’Leary’s funds, on the flip side, unfortunately, we know there are MERs (management fees) associated with purchasing funds.
After navigating the company website for a considerable period of time in search of the funds’ associated MERs, I came to the conclusion that I would have to first seek elsewhere as the site was not as open and transparent as I hoped it would be. My gut was telling me that there was ‘more than meets the eye’.
It turns out that the MERs appeared to be relatively high indeed. A spring 2009 post by Wellington Financial states that the MER for OGE.UN as an example was “at 3.52%…a far cry from the ‘low’ 1.5% level that Mr. O’Leary promised last summer”.
A fairly recent thread at Four Pillars by Mike titled, “Questrade Mutual Fund Fee Rebate and Free Transfer Offer” engaged a sizeable audience, and one of the commentators (Josh Thurston) on the post mentions how O’Leary created a hidden “vampire fee” by supposedly originally stating that the OGE management fee would be only 1.5%, but because of the 0.4% trailer mentioned in the fund’s prospectus, the management fee is now 1.9%.
After reading this, I immediately went to investigate further and finally opened up the O’Leary Global Equity Income Financial Statements, June 30, 2009. In it, on page 14, I was able to confirm the above-mentioned comment after reading the following:
“…the Manager is entitled to an annual management fee of 1.5% of the net asset value of the Fund at month-end, plus an amount equal to the service fees, paid monthly in arrears, plus applicable taxes. The Portfolio Manager will be remunerated by the Manager out of the management fee. Savtrev will be remunerated by the Portfolio Manager. The Manager will pay registered dealers a servicing fee equal to 0.4% annually of the net asset value per unit for each unit held by clients of the registered dealers, plus applicable taxes.”
After investigating some of the other funds, they too had the 1.5% + 0.4% servicing fee for a total of 1.9%. Depending on your level of comfort, this may be a positive or negative aspect to your own personal strategy.
Personally, my investment strategy no longer entails me owning funds in general. Despite the fairly lucrative yields that the O’Leary funds offer, coupled with an impressive basket of equities he and his team have concentrated on for global diversification and capital appreciation purposes, I just cannot get over the management fee component.
My position is that I would rather invest directly into equities and other investment vehicles, which do not entail buying funds. What about you? Would you invest in any of the O’Leary funds? Do you already own some of them?
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Interesting. When the first fund (OGE.UN) came out, it was heavily promoted on BNN’s SqueezePlay. KO said it was a fund designed for his mother. I wonder if she pays the fees. Amanda Lang wasn’t biting… I hope she will continue to hold him accountable for the performance of these funds as time passes and subtract the fees, of course… 3.52% is usurious! This is why thinking people don’t buy mutual funds.
Basically, his funds all missed the giant rally after the March 2009 lows. He should have been beating the drum on equities at that point, but instead went heavily defensive and as a result his returns lag the market badly. He may be a good businessman, but analyzing equities is a different game entirely and requires a specialized skill set, not just a high public profile.
I totally agree. Being successful in running and managing businesses does not necessarily translate to being good in handling portfolios. I have a neighbor who runs a few pretty successful business ventures. But he got burned pretty badly in trading equities and commodities.
.-= Forex Trader 4 Life´s last blog ..Isunia: Steady Rise =-.
Btw, it is a misconception that O’leary is a billionaire. He did sell “his” company for $3.7 billion, but the actual cash he pocketed was closer to $10 million. Search for O’leary on the Wellington Financial website.
O’leary perpetuates the myth that he is a billionaire to benefit his tv image.
As far as the yields that his funds offer, they are clearly negatively outweighed by the poor performance of the capital appreciation (depreciation).
One more point to think about: from the looks of it, the actual aggregate yield of the funds’ holdings barely equat 6%, let alone 8%. Consequently, in order to sustain 6-8% distribution yields, and considering the miserable performance of the funds, one has to wonder, how is that distribution yield maintained? Not many options remain in my opinion…
You have got to be kidding about him only making $10 Million. Where did the rest of the $3.7 Billion go? They did stop calling him a billionaire on Dragon’s Den.
As of last nights Dragon’s Den…he is STILL being called a billionaire
The rest of the billions of dollars went to the stock holders of the company he ran. It was listed on the stockexchange.
he only owned about 10 millions worth..!
When you start a company, you’ll most likely have partners and early investors that will have a stake in it. SoftKey (O’Leary’s company) also has a history of aggressive acquisition to a point its said he once acquired a company larger than his, usually these acquisitions are finance cash and also in stocks because banks will not lend the entire amount since unsolicited acquisition includes a goodwill payment that “symbolic payments” to entice a person to sell something he didnt want to sell.
In essence, by the time Kevin sold his company, his ownership stake was most likely diluted over the years with the acquisitions, raising working capital etc.
To say he only walked away with $10 million is possible, but way too low, I heard he had around 5% in ownership by the time the company sold, putting his wealth at $200 million, however minus taxes and depreciation (rumor has it he was paid in mattel stocks).
Lastly, If you watch the Dragon’s Den, Shark Tank or whatnot, youll notice Kevin never states he a billionaire, they state that he sold a company for billions. They implied he is a billionaire, you guys inferred he is one, hence the myth.
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I attended a ‘performance’ by Kevin O’Leary last night in Saskatoon. He was a very interesting and knowledgeable speaker both about about investing and television. His philosophy of never spending the principle and using the interest for spending parallels my own (actually his mother’s philosophy). I am sad to hear that he charges so much (MER) for his funds. After hearing him, I had seriously considered investing with him. I have no problem sharing my wealth with others as long as I make a decent return myself.
Thanks for all of you who commented!
The Rat
.-= The Rat´s last blog ..BIN Revisited: From Tantrum to Tantalization =-.
Anyone who has watched BNN over the years, or more reciently CBC, knows that Mr O’Leary seems to change his tune on a dime, as it suits him. I won’t go so far as to call him a liar but I have questioned his ethics and motives on more than one occassion. Long story short – he is not someone I would trust to manage my money.
Seems that Time magazine doesn’t have many kinds words to share about Kevin O’Leary:
http://www.time.com/time/business/article/0,8599,1921635,00.html
To be honest, I’m suprised CBC news is willing to allow him to represent/tarnish their news brand.
Quoting Dave: “I won’t go so far as to call him a liar”
I will! He’s a liar!
The man may be entertaining (to some) as far as one dimensional characters go but he has no place in finance. I often use him as a contrarian indicator – when O’Leary is onboard it’s time to get out. The extent of his research appears to involve reading the paper and a few “good” fund manager commentaries. I’ve caught him regurgitating the work of other almost verbatim more times than I care to count. I’d take tips from a cabbie before I trusted him with a single penny of my money.
As far as fees go, good luck finding any easily accessible disclosure on his site. That speaks volumes about what he must think of his investors! Be afraid! Be very afraid!
Mr O’Leary appears to be suffering from the “tall poppy syndrome” at the hands of others. Although he may not represent the stereotype he is successful and has demonstrated that he has sustained his wealth through entrepreneurial approaches.
lol – tall poppy syndrome? Sometimes people are disliked because of their character. So if people don’t like conrad black does that qualify as tall popply syndrome? While Mr O’Leary may not have been convicted as Mr black was his ethics appear to be cut from the same cloth.
Do you really want to trust your money to someone who claims he believes money is all that matters? I would be suprised if he didn’t nickle and dime his investors to death.
Be sure to read the fine print before investing in any of the O’Leary funds, the fees they collect are way above average.
No, I would not invest with Mr. O’Leary, I try to invest ethically, and in this department he is bankrupt. I still have to sleep at night, I do care where my money comes from.
Actually, he received a LOT more than $10 million upon the sale of “his” software company. Get your facts straight before you continue to show your ignorance.
KO is a buffoon and as he so often depreciatingly calls many of the TV Dragon’s GUESTS “cockroaches”, I can only say ” It takes one to know one”. Amen.
With out knowing any thing about investing I would absolutely 100% invest in O’leary funds or any thing he had to offer.How could you not? The man is all about making money.
Oh he is all about making money all right, just don’t think for a minute because he makes money you will too. Oleary funds is about enriching uncle Kevin, as he likes to call himself. Personally I wouldn’t touch his funds with a 10 foot pole.
noting is free buddy. not in the finance world. Do you even have enough money to invest? 10 foot pole? you go find a firm that charges no fees, and then tell me, cause if their saying they do have no fees, its BS. they all do. thats how they make their capital. grow some balls little boy
The MER’s for the O’leary funds are excessive IMHO…by the way did you not catch David Chilton schooling O’Leary recently about the ridiculous fees in the Canadian mutual fund industry as a whole…Kevin showed his ignornance yet again in this interview.
You might want to go back and check the ethics involved in the selling of TLC to Mattel, where Kevin made his 10 million..questionable ethics, dubious accounting, some litigation…not a chance I would trust this guy with one cent of my money.
I truly wonder if BNN or CBC ever ran background checks on this guy…one day, he will come crashing back down to earth.
i have invested in o’leary funds for the past six years, never lossing a dime. The fees are common among alot of successful fund firms, but ya they have never let me or my “MONEY” down. But he made wayyyy over 10 million on that deal. and who cares if hes a billionair or not.
No – I’m not comfortable with Kevin’s take on China – he won’t invest in Russia ’cause they stole his $$$ – wait ’till China does the same thing to him and it won’t be long – did you see the police on the streets of
China today??
He seems like a smart guy. The problem is, as a Lang&O’Leary watcher, I find that he contradicts himself all the time.
And furthermore his take on China is a little rosy for me. He seems to think the current growth rates are sustainable. As can be seen, this growth is feeling the effects of inflation.
How much more growth and thus inflation can a country with a tiny middle class take before political unrest spreads? Not sure, but it can’t go on forever.
Besides, there are disturbing imbalances and inefficiencies in the real estate market there. I wonder if the low hanging fruit (yields) have already been picked.
why are the oleary funds not listed at least weekly with the rest of the mutual funds companys in the various newspapers?
I will take 8% return anyday of the week… if he makes a little money as well who cares!!
At BNN KEVIN had a huge conflict of interest always slipping in the O’Leary funds. He did not know how to deal at arms length. Whether rich at $ 3 billion or por at $ 10 million is of lkittle consequence to the funds he supposed to manage.
If he had much above performance the MERs would be palpable. I put up my performance on behalf of $ 130 million assets under management on the line at any time. I think I will put him to shame he being a sub-par performer for his investors.
I better leave the Dragon’s Den appearances alone. He does attract viewers and therefore CBC income.
KO is only to be viewed as clown. That is the only value he adds to both Dragon Den and Shark Tank. Please don’t take him seriously. He is just a good laugh that thinks he knows what he is doing. And for the Mattel deal he just lucked out big time. Mattel didn’t really know what they were getting into.
Bloomberg news this morning (1/3/12) has an article entitled: Did Psychopaths Take Over Wall Street Asylum?
It sure fits Kevin O’Leary. Socially irresponsible, can’t see beyond his own immediate self interests, can’t think overall and while bad mouthing the CBC (which I don’t like either) he’s using it to promote himself and his funds to the 1 percenters.
Bloomberg full article at: http://www.bloomberg.com/news/2012-01-03/did-psychopaths-take-over-wall-street-asylum-commentary-by-william-cohan.html
Actually I wouldn’t buy a loaf of bread from this man if I were starving.
He has no scruples or morals and hope ,with him as he stated tonight on the Lang/O’leary exchange, after going to PR. George in 50 below weather he never has any kids.
KO is definitely a psychopath – as is anyone out there that puts money above all else! He is a TV clown and buffoon, and uses this hard-hitting image to drive money into his own pockets – nothing else. He isn’t offering these funds to make money for anyone – and certainly not the 1%, as they are all making money off the deluded 99% – but is using his image of a great businessman to make people think they will make money with him.
But if you look at these “amazing” deals that he has pulled off, they are shams. The Mattel deal may have made him 20 or 30 or 60 million, but he certainly didn’t get the lion’s share of the $3.7billion that was given out – and then the whole thing went belly up. No one (especially him) reports or factors in the immediate demise of the stock or company that he sold, or resulting court case by the investors. With the results from that, it can be seen that he is a complete shyster and shouldn’t be trusted. The reason why it is called the O’Leary Funds is simply because he is trying to cash in on his name with people that don’t know any better to look elsewhere. Although, he isn’t a good brand to invest in for the future, as he has no morals or sense.
Even on DD, KO has turned down investing in a company that was seeing a 10% return (higher than his funds supposed 6-8%) as a start-up because they weren’t making enough money!! They were not doing their production in China, which meant that their costs were too high (according to that psychopath) even with the return they were seeing. He couldn’t see the benefit of giving work/livelihood to people in another country, because his big dick was swinging up in his face again! His comment was to make as much money as you can from production in China, and then give some of the profits to the people of the other country, if you want to do a good deed! Not the statement from an insightful person, but the delusions of a psychopath.