Robert Krembil is a legend on Bay St, but many of you millennials may not know him. Fortunately, OPM Wars is here to provide some background.
Krembo (as he is likely known to close confidantes) was the founder of Trimark Financial along with Michael Axford and Arthur Labatt. (From the famous brewery). The firm was started in 1981 with $900k from the partners and another $300k from outside investors. At the time, mutual funds were not popular and were reeling from a major scandal by the Madoff of the day (Bernie Cornfeld). Trimark founders wanted to create a culture that put client interests first. This was considered crazy at the time.
The beginnings were not glamorous. Imagine driving through a snowstorm to an investor meeting in Peterborough attended by 12 people. The firm had an aborted IPO in 1987, but by 1992, the firm was public and had $2.5 billion in assets. At the time, total Canadian fund industry assets were $62 billion. The 90s bull market propelled AUM growth: at one point inflows were of $500m per month. But Trimark, being a sensible value investor, stayed mostly out of tech so as that bubble heated up, investors started redeeming by the billions. Trimark stock fell from $42 to $15. Long story short, they merged with British fund manager AMVESCAP (currently operating as Invesco in Canada).
When they sold in 2000, Krembil and Labatt pocketed $400 million each (on top of shares they had sold along the way).
So Krembil started a fund company at the bottom of a deep bear market and made a big score. Well, Krembo has done it again!
For many years after his sale of Trimark, Krembil resisted entreaties to start up again. But in 2008, he backed three people out of AIM Trimark, fund managers Tye Bousada and Geoff MacDonald along with operations guy Patric Farmer to start a new firm called EdgePoint Wealth. EdgePoint started by marketing a publicly-listed closed-end fund called Cymbria...around the same time as the Lehman collapse. Cymbria raised $234 million, to be managed by EdgePoint. Launched at $10, it's currently trading at $52.
After Cymbria, EdgePoint mostly raised money from conventional mutual funds and went from zero to a current $23 billion in AUM (mostly retail).
There was an important twist: investors in Cymbria, as an incentive to invest, got a 20% stake in EdgePoint Wealth. This stake only cost Cymbria $509k. Get a load of this: this stake is now valued at over $248m, on top of earning more than $60 million in dividends from EdgePoint over the years. That’s 600x bagger in 10 years.
Krembo also owns a significant stake in the firm (somewhere between 26% and 51%), so he has done it again: started a firm at the bottom of a bear market and made a 9-figure score.
You are a tough and sophisticated crowd and will likely wonder: why would people with such pedigree (and wealth) sell a significant stake in their startup firm for the paltry sum of $509k? You are right, it was sub-optimal. Well, 2008 was a really tough fundraising environment and Krembil himself was quoted as saying that the business was unlikely to ever manage "many billions". On that point, he was wrong. The OPM business is the best business on Earth and is constantly under-estimated by even those who know best!
I will write more on Krembo, Cymbria and EdgePoint later.