Billionaire Lee-Chin bullish on Bermuda
Billionaire investor Michael Lee-Chin sees a bright future for Bermuda — a view he has backed with hard cash in the form of his purchase of a controlling interest in Clarien Bank.
The charismatic Jamaican-born chairman of Canadian firm Portland Holdings is not troubled by the growing pressure being applied on the island by major countries looking to clamp down on tax avoidance.
In an interview, he said he saw opportunity amid the uncertainty, guided by his long-term confidence in both the island and its wealth-management industry.
And he spoke of his penchant for wealth-building opportunities at times of crisis, of moving in when other investors are moving out.
On December 1, Clarien Group announced agreement on a deal that would give companies controlled by Mr Lee-Chin's Portland group of companies a 68 per cent stake in the Bermudian company.
Portland Private Equity, which initially invested in Clarien in April 2016, will hold a 17.9 per cent interest in Clarien under the terms of the deal, while NCB Financial Group will own 50.1 per cent. Edmund Gibbons Ltd owns the remainder.
Speaking from Canada, Mr Lee-Chin explained the thinking behind this substantial investment. “I'm very bullish on Bermuda, because Bermuda has a phenomenal global reputation, and because its current situation has given us an opportunity to enter the market,” he said.
“Also, wealthy people from around the world still want to protect their assets, so there will be an opportunity to service their needs.”
He said the attention focused on offshore financial centres like Bermuda from tax-hungry major countries had created an improved investment opportunity.
“We are firm believers in the Chinese definition of the word crisis,” Mr Lee-Chin said. “Crisis = danger + opportunity. We can't get the opportunity unless there is a crisis.
“When there is a crisis, most people focus on the ‘danger' component, but those with long-term thinking recognise the opportunity.”
Global financial institutions were pulling out of offshore centres, he said, something he described as a “kneejerk reaction” to today's circumstances.
“In five or ten years from now, the global players will want to return,” he said. “With the benefit of time they will realise that there is still a strong demand from clients to protect their assets and Bermuda has developed a reputation as a safe place to do that.
“The rising demand for asset protection is a long-term, secular trend and I always want to invest in a business with a rising tide that will lift all boats and will lift ours.”
The island's advantages included its British legal system, the fact that it is English speaking, has a great mid-Atlantic location, and also that it has a strong reputation for stability, he added.
An example of how Mr Lee-Chin's opportunity-from-crisis investment philosophy has worked for him came with Portland's purchase of National Commercial Bank Jamaica Ltd in 2002. At the time, NCB had 24 per cent market share in Jamaica, where Canadian banks, one of which had a 54 per cent market share, were dominating.
He recalled: “At the time we bought the bank, staff morale was low because they couldn't compete against the Canadian banks, their IT infrastructure was outdated, inflation was about 30 per cent and the currency was depreciating.
“The year before we bought it, NCB made a profit of US$6 million — in the year through September 2017, it made US$150 million and now it has a 44 per cent market share. Over the 14 years, it has made about US$1.5 billion in profits and paid about US$475 million in corporate taxes.”
The fact he highlighted taxes paid highlights another aspect of Mr Lee-Chin's approach to doing business. The Portland mantra is prosperitas cum caritate, or prosper with care for people, which speaks to his desire for his businesses to “not only do well, but also do good”.
“I want every staff member to come to work believing there is a direct connection between their efforts and the wellbeing of the next generation,” Mr Lee-Chin said.
He personally works on developing such a community-minded culture in his businesses, he added, striving to lead by example through his own personal life and values.
Mr Lee-Chin was born in Port Antonio, Jamaica in 1951 and moved to Canada in 1970 to study civil engineering at McMaster University in Hamilton, Ontario.
He went into the mutual fund industry and became a financial adviser at 26. Having achieved some success, at the age of 32, he borrowed money to buy $500,000 of Mackenzie Financial stock, which appreciated sevenfold over the next four years.
He then bought a small Ontario investment firm called AIC Ltd with $800,000 of assets under management — 20 years later it was managing more than $15 billion. In 2009, he sold it to Manulife.
Now he is chairman and CEO of Portland, which has invested heavily in the Caribbean region, owning stakes in wealth management companies, insurers, banks, telecommunications groups and the Wallenford Coffee Company, the largest cultivator of Jamaica Blue Mountain and Jamaica High Mountain coffee.
He said there were three preconditions that he looked for in potential investments.
“When all three are present, that gets us excited,” he said.
Gap between perception and reality: Jamaica, for example, was not perceived to be “a nirvana for investors” back in 2002, he said. Establishing the reality required “boots on the ground”, rather than “sitting in an office in New York or Toronto” reading a World Bank report that would provide only a macro view.
Lack of equity capital flowing to the business or region: “We love situations where there is a lack of equity capital because every last dollar is well treated,” Mr Lee-Chin said, adding that such investments are high impact in terms of being beneficial to society.
Inefficiencies: when they exist are there clear opportunities from becoming more efficient.
The first thing Mr Lee-Chin said his investment will bring to Clarien is to bolster its balance sheet, which would in turn help the bank to bolster its asset-management and trust services, as well as strengthening the back office and front office.
Asked whether the bank would be likely to add to its staff, Mr Lee-Chin said: “That will be a function of how well we do over time. If we are successful, more staff would be a natural by-product.”
And the advice he would give to any budding entrepreneur?
“Understand the eighth wonder of the world, as it was described by Albert Einstein — compounding,” he said. “If you don't understand compounding, it's difficult to lead a successful life.
“It's about reinvesting and growing. Investing the experiences you had yesterday to make you stronger tomorrow. Doing the same thing over and over, versus flipping from one thing to another.
“Persevering, bringing forth everything you've learnt to this point in your life.”