“Bad things happen to good people sometimes.”
-Lawrence Bloomberg, CFA on his brokerage’s underwriting work for YBM Magnex, an issuer later found to have ties to the Russian mob
"However beautiful the strategy, you should occasionally look at the results."
-Winston Churchill, CFA
Lawrence Bloomberg turned 80 in May. Here’s an update on what, if anything, is up in Larry’s world. The good news is that BloombergSen’s $2B flagship fund (for ease of reference, the “BS” fund) is solidly middle of the pack this year, losing 15% to July. But the same can’t be said about the firm’s newest product, the Optimist Fund, launched on March 1st. Over its first four months, that fund has lost 45%. That’s even worse than the ARK Innovation ETF, the poster child for the current downturn (down 42% over the same period).
While BloombergSen doesn’t even acknowledge the very small fund on its website, Jonathan Bloomberg and Sanjay Sen are listed as “advisors” to the Optimist Fund. They are “advisors” in a “consigliere” sense, not “portfolio manager” sense. The actual man in the hot seat is Jordan McNamee, a former small cap manager at CI Global Asset Management. An in-depth investigation conducted by OPM Wire has identified the main cause of this setback. Jordan is about 30 years old. He thought stocks only go up. His investments tend to be in what I would call "less proven" business models. Having no first-hand knowledge of the situation, here’s how I would have imagined the narrative:
- For more than 10 years, pressures build up on active managers, especially those that are so-called “value” managers. This is the usual pattern of investment styles being cyclical, but probably the most extreme cycle in memory. Among these forces are the heavy flows into passives, the outperformance of technology stocks, the rise of “disruptors”, etc. A full description of the zeitgeist would be too long and too complex.
- The pandemic hits. Astonishingly, within weeks, it appears that rather than obliterating the zeitgeist, the pandemic will only make it more intense.
- OPM Wire, who many on the street consider a greater scourge than Covid, writes a mean blog post about BloombergSen’s inability to beat the S&P 500 since inception in 2008. The ridicule that ensues exacerbates the usual cyclical pressures.
- BloombergSen cries uncle and decides to back a newbie manager with his own fund. This manager had only graduated from Wilfrid Laurier in 2014, been a buyside tech analyst for a few years, been a co-manager for 1 year and 6 months and had been lead manager of a fund for all of 5 months. But presumably he totally gets the New World Order.
- Jordan joins BloombergSen in October 2021. The Nasdaq peaks in November 2021.
Well, it turns out the reality might be different. Jordan says the fund is his own show, it just happens to be hosted by BloombergSen. Jonathan Bloomberg and Sanjay Sen are strictly advisors. The Optimist Fund only has $5m under management, which Jordan described as just his own money and that of friends and family. While as a matter of securities regulation, the Optimist Fund is a BloombergSen fund, I totally, totally accept Jordan’s story. I don’t know why the firm’s principals would take on the reputational risk of backing a small newbie manager under their license, but I commend Jordan for putting himself in this position at such a young age. Although I’m skeptical, it’s of course way too early to conclude anything about Jordan’s strategy. Gracious as I am, I have offered to review the fund in 4 years time.
Big news in Larry’s world. He’s now Dr. Dr. Bloomberg. In June, McGill University awarded him an honorary doctorate, his second. Larry has made multiple six-figure donations to McGill, but that’s very dog bites man. Larry’s philanthropy has been most notable in healthcare, especially his longstanding work for Sinai Health, where he’s still Director Emeritus. The Faculty of Nursing at U of T also bears his name. Despite this, his honorary PhD was in Law. And that’s, of course, because virtually no institution offers an honorary degree in medicine. A PhD in Outperforming the S&P 500 is rarer still.
If, as they say, the BS fund focuses on "high quality businesses", where does that leave the Optimist Fund? It’s ironic that the BS fund itself was founded on plucking an unproven manager out of obscurity, Sanjay Sen. Fourteen years later, the BS fund is a $2 billion abomination to Rational Economic Man. Larry’s career reminds me of an old saying from the investment world: it takes twenty years to build a good name and another twenty years to destroy it, because inertia is such a powerful force. It’s a bit unfair that I drag Larry into BloombergSen’s performance issues, because it turns out he owns just about 5-10% of the firm. It’s really his son Jonathan Bloomberg’s and investment prodigy Sanjay Sen’s show. The Bloombergs are treating Sanjay well, he seems to have the same ownership interest as Jonathan. I assume it’s the Bloomberg name that brought most of the assets to the fund.
The BS fund has a $2m minimum. It probably helps that the firm is very connected. For example, Carolyn Mulroney was vice-president there before entering politics. And they’re not afraid of throwing their weight around. It was reported that they once lobbied the Ontario PC party to stop criticizing the activities of one of their holdings, Great Canadian Gaming. They did this via the supremely connected celebrity lawyer Walied Soliman. There are probably easier ways to make money. Like letting a monkey throw darts at a stock table.
The firm recently lost their sales guy, Brian Ginsler. He left to open Ginsler Wealth, some sort of Multi-Family Office operation. Brian is perhaps the only Harvard MBA who is also a Certified Financial Planner. He has attracted Jeremy Freedman, former head of Gluskin Sheff to his advisory board. But do not fret! BloombergSen’s titular brain trust, so to speak, remains intact. Even Larry Bloomberg, although his main capacity seems to be sales, did you know he’s still an active Chartered Financial Analyst? Make sure to read all 7 paragraphs of his official bio.
Larry pocketed a reported $74m from the 2000 sale of his brokerage First Marathon to National Bank for $712m overall. I listened to Larry’s convocation speech at McGill. I learned how his First Marathon had profitable offices in London, New York, Geneva, Zurich and Paris. That’s impressive, Canadian boutiques these days don’t have much of a global presence. I also learned that Larry was a pioneer in the securities clearing business, which National Bank expanded when it acquired First Marathon. That business is now called NBIN and I believe it’s currently the largest clearing operation in the country. But the highlight of Larry’s speech was when he opened up about a difficult episode in his life and how he showed persistence. Apparently, there was a time Larry was Chairman of a $2 billion-dollar fund that had underperformed the S&P 500 over 14 years. But he never once thought about quitting because of the large fees involved. Moving!
You can read our original story reviewing the BloombergSen fund here.
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