There’s a Winnie the Pooh episode where he learns that you can’t always be liked by everyone. I tried to remember that when I heard that Ninepoint co-CEO John Wilson is not a fan of this blog. He has said hurtful things like “The OPM Blog peddles falsehoods and gossip.” He has used expressions like “zero credibility” and “no insight.” I take some consolation in that these hurtful words were uttered in the heat of their private debt fund redemption crisis a year ago. Of which I apparently was a prime catalyst. I guess the implication is that Ninepoint advisor clients are not smart enough to arrive at their own independent judgment. Ninepoint even complained about my “misinformation” to the OSC, which apparently made the OSC “very concerned”, as they often are. But I always look on the bright side. John Wilson paid me a backhanded compliment when he said in a conference call to his advisor clients: “Literally, if he said I was an axe murderer, people would come and ask me to prove I wasn’t an axe murderer. That’s how far this has gone.”
That’s not true! If I said John Wilson is an axe murderer, his clients would ask: Will this affect my commissions?
Admittedly, I have my share of the blame. I did start it by writing a post titled “Ninepoint will sell any old crap.” To the untrained eye, this looks like a gratuitous insult. But to anyone who understands the m.o. of fund complexes, this is a matter-of-fact description of what they do. Launching a fund, from the perspective of a fund manager, is a cheap call option. I could say Vietnam is the next hot market and launch a Vietnam-themed fund. The setup costs are about low 6-figures, if that. If Vietnam does prove to be hot, my fund will grow and my fees could amount to millions. If it doesn’t, then I have only lost the 6-figure setup costs. A sincere belief in the thesis is not required! It’s all about throwing stuff at the wall and seeing what sticks. Nevertheless, I don’t know how much insight you have into human behavior, but I have often found that just because something is true, it doesn’t mean people welcome hearing it.
The first time I ever heard about John Wilson, I was a fan. He used to be a telecom hardware analyst at RBC DS (covering Nortel and the like). Sometime around 2003, he had written a report that essentially said that trying to do DCFs of stocks in his sector was bogus. This was quite bold since almost every sell-side report on the street is backed up by a “discounted cash flow” model. Even early-stage biotech companies! This got picked up in the papers and I was very receptive. I have always believed that modeling was a delusional activity, like predicting the weather in 3 months time. There are just too many variables. Not long after this, I was working as an analyst for one of the early hedge fund managers in Canada. One day, my boss mentioned he was meeting with John Wilson, who was looking for advice as he was launching his own hedge fund. I said I was a fan of his work. So my boss introduced me to John Wilson.
While his startup hedge fund DDX had some difficulties, John Wilson rebounded, first at Cumberland Private Wealth and eventually, he became the CEO at Sprott Asset Management (“SAM”). In 2017, SAM split into two businesses so that they could more nimbly compete at being the crappiest. The part that John Wilson and his partner James Fox acquired had $3B in assets at the time, including the poisoned chalice known as Bridging Finance. They changed the name of the business to Ninepoint, but kept the pretense that they add value. The cost was $46m and James and John were in a 50/50 partnership. How did they get the money to orchestrate the management buyout? Maybe it’s one of those “sophisticated”, “enlightened” “alternative” lenders.