Lee-Chin takes on exempt-market myths

In an exclusive interview with WealthProfessional.ca, Michael Lee-Chin challenges conventional thinking on public versus private market investment and what if any transparency differences exist.

Video transcript below:

Sophie Nicholls, Wealth Professional
Sophie Nicholls:
 Billionaire, Michael Lee-chin is no novice when it comes to investing or advising.  In fact he is a trail blazer.
With Mandeville private [client] is taking in at the idea that all the clients should be in a publicly traded basket.  Taking our cue from Lee-chin, it’s buy, hold and prosper on WP TV.

Michael Lee-chin, Chairman, Mandeville Holdings Inc.
Michael Lee-chin:
 The financial crisis was an indelible moment for all of us.  And a few years, it happened in the fall of 2008, a couple of years after, I started to ask, I started to take stock as to how did I come through the crisis less bruised or how did I come through the crisis?   And I thought the conclusion was it was my private businesses that got me through the crisis, not my public businesses.  So my conclusion was, oh my gosh, if I didn’t have private businesses I would have been, I would have come through the crisis a lot more bruised.  It was my private businesses that gave me some solace with a safe haven.  But I felt awful because I have been an advisor since 1997 and all my clients that I, whom I have been advising since 1997, their portfolio was a 100% public and I always pride myself on leading by example, in this case I didn’t.  

So I thought I had two choices, I can be like, I could say well my clients, I am no different from every single advisor.  We put together portfolios, we construct portfolios that are 100% public.  I could have hidden behind and just like everybody else and not felt badly about it.  Or I could do something about it.  I chose to do something about it, because it’s not right.  

Sophie Nicholls:  Misperceptions abound that the private capital market simply don’t offer the transparency advisors need to send their clients there.  

Michael Lee-Chin:  The perception is wrong and because the hall mark of a great investor is to understand what you own.  When you buy a private business, you have the opportunity to get every piece of information available from that business.  You can go and look at obviously their assets, their liabilities, you can go and look at what liens are against the assets, you can look at email trails, you can go to the HR department and you can look at compensation packages etc. etc.  So you have access to all the information when you are buying a private business.  So conversely when you buy a stock, the information that you have access to, is the information that the investor relations department gives to you, which is definitely a fraction of what the amount of information you get when you buy a private business.  So if you conclude that having more information will make you understand the asset better, you would have the confidence that owning a private business with the access to information from an investor’s perspective, you can make better decisions, for you have more information.