This newsletter has only been around for a short while, but it has already amassed a readership that is larger than that of Obama’s inauguration. I am under a lot of pressure to stay current, so I am going to write about a guy who was at the height of his career in the 1980s and who has since passed away. It is going to be fun for you, and you should fax it to all of your friends.
NEVER FALL IN LOVE WITH AN ASSET, THERE’S A TIME TO BUY, AND THERE’S A TIME TO SELL.” “NEVER FALL IN LOVE WITH AN ASSET.” — SAM BELZBERG
In 2006, I established a nascent but still relatively modest hedge fund with the intention of implementing an earlier, more trading-centric iteration of my investment strategy. It was initially started with my own money, and I approached wealthy investors in Canada with the intention of soliciting their support as seed investors in the company.
The Influential Sam Belzberg
In the summer of 2007, I was made aware of an intriguing Vancouver-based financier by the name of Sam Belzberg. Sam Belzberg had once been famous and feared, but he had largely disappeared from the public eye in recent years.
When I found out that Belzberg had been the first investor in Millennium Management, which had been established in 1989 and is now a legendary hedge fund managing $38 billion, I made the decision to go after him as a target.
With a cumulative gain of $22 billion and a compound annual growth rate of 14%, Millennium Hedge Fund is ranked no. 12 on the list of the greatest hedge funds of all time. The initial funding for Millennium came from the company’s founder, Israel Englander, who contributed $5 million, as well as the Belzberg family, who contributed $2 million (though accounts vary as to the exact amounts).
Permit me to take a moment of your time and provide some background information on Sam Belzberg. The narrative begins with Abraham, Sam’s father, who came to Canada from Poland, where he had worked as a fishmonger before moving to Canada. (Israel Englander’s family originated in Poland as well). Abraham opened a furniture store in Edmonton at some point in the future.
When Abraham passed away in 1976, he had amassed a fortune in real estate holdings, which he left to his five children. Fred Trump-style! After graduating from college, Sam became involved in the oil and gas industry as well as the real estate development industry.
He moved to Vancouver in 1968, when he was 40 years old, and from that location, he eventually came to control a number of trust and financial companies in both Canada and the United States. Sam was the main character, but his brothers Hyman and William were also involved in the story in some capacity.
The trend of corporate raiders in the 1980s is largely responsible for Belzberg becoming what it is today. That era was a golden age for very aggressive acquirers who financed their deals with junk bond offerings. They used a strategy known as greenmailing, in which they would buy stock in companies and then threaten to take them over.
When faced with the possibility of a hostile raid, management teams will frequently opt to simply buy back the greenmailer’s stake at a premium. Fear was the primary commodity that corporate raiders dealt in, despite the fact that they occasionally followed through on their hostile bids.
First City Financial Corp. was the name of the primary vehicle operated by Belzberg. Bache Securities, a large but troubled stockbroker at the time, was one of the first major acquisitions that First City made in the United States. John Clark, one of Belzberg’s analysts, was the one who initially presented him with the concept (later, of Connor Clark and JC Clark fame).
Clark believed that Bache was undervalued despite the fact that it had suffered losses as a result of its involvement in the Hunt brothers’ attempt to corner the silver market. After accumulating a 22% stake, Belzberg began to engage in conflict with management. In the summer of 1981, Bache agreed to be acquired by Prudential Insurance for the price of $385 million.
This was done so that the company would not fall prey to Belzberg. Because of this, there was a spate of mergers and acquisitions in the brokerage industry, with Amex purchasing Shearson and Sears purchasing Dean Witter. Belzberg’s reputation as an astute and aggressive investor was solidified as a result of the coup.
The Belzbergs, who were considered complete outsiders even in Canada, were now playing in the heart of Wall Street. They frequently collaborated with the king of junk bonds, Michael Milken, and supported individuals such as T. Boone Pickens.
Other important targets included Ashland, which was the most important refiner in the United States at the time, Scovill, a major manufacturer that they acquired for $523 million, and an attempt to take over Gulf Oil, which resulted in estimated gains of $157 million. At the height of the family’s power, they exercised control over assets worth more than $5 billion.
I’m just a little guy working out of the basement of my mom’s house with a six-figure fund, but I’ve decided to get in touch with Sam Belzberg. After I emailed him, he called me a few days later, we had a brief conversation, and then he asked for some references. Again, he called and said that he needed to be in Israel (the country) very soon, so he gave me a week to make arrangements for a trip to Vancouver.
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