An update on Gluskin Sheff, now owned by Onex
On Monday, the Globe and Mail published a list of Bay Street firms that had taken advantage of pandemic-related federal wage subsidies (aka CEWS). Back in December, I shared a longer, more entertaining list here…
…but I missed Gluskin Sheff, which was owned by Onex. Applying for pandemic aid is a significant setback for a company that once positioned itself as a luxury brand. Ira Gluskin is probably rolling in his grave. (This is a figure of speech, similar to saying it’s raining cats and dogs – Ira is still alive.) This is a stain on Gluskin Sheff’s illustrious history, particularly in the 1990s and 2000s.
So far, the Gluskin Sheff platform has been detrimental to Onex. In fact, during the height of the pandemic, Onex recorded a $100 million goodwill impairment charge on its acquisition. When Onex purchased Gluskin Sheff in 2019, they stated two goals:
1) to broaden and diversify distribution channels (for Onex funds)
2) to increase AUM
Onex manages approximately C$37 billion in fee-generating assets, a 10% increase over the previous year. The acquisition cost Onex $445 million. As of the end of 2020, Gluskin Sheff clients had invested approximately C$1 billion in Onex funds.
This was primarily accomplished by transferring clients from Gluskin Sheff public strategies to Onex credit strategies. As a result, Gluskin Sheff lost -10% of its AUM in its own public strategies. In this table, you can see the details of Gluskin Sheff assets in USD:
Gluskin Sheff made $40 million in profits between four partners in 1993. Today, with significantly higher overhead, they generate base annual fees of around $80 million on an AUM of C$7.7 billion as of the end of 2020. That is less than 5 years ago. Onex has implemented some significant fee reductions, but they still charge 10-20% performance fees on approximately C$3 billion in assets.
Onex’s management team has invested $65 million of their personal funds in Gluskin Sheff products, indicating some form of alignment. In comparison, they had $535 million invested in private equity strategies. In summary, Gluskin Sheff reduced fees while losing assets, so things aren’t looking good.
Gluskin Sheff has had very strong performance in the past, which they were happy to advertise, but try finding any investment numbers on their website now. You simply cannot! Except for long-term mountain charts produced primarily by stars who have passed away (such as Brad Dunkley, Bill Webb and Jeannine LiChong).
Aside from fee reductions, I don’t see anything particularly transformative done by the new owners. They did fire fortune teller David Rosenberg, but that was probably the most obvious management decision in business history. They maintain the same $3 million minimum relationship size that they have for many years. They have included the “holistic financial planning” service that wealth managers now provide. Consider these blog posts about income splitting and home office expenses!
As part of their previous luxury brand positioning, I was a fan of the Gluskin Sheff design aesthetic and marketing. I recall some of their advertising copy, such as “Are you a billionaire trapped in a millionaire’s body?” Their website is currently quite bland.
This is a marketing strategy I refer to as Non-Threatening Grandma. As a marketing expert, I strongly recommend it. Inexperienced marketers frequently ask me, “Shouldn’t our website feature nubile young women?” Because the majority of the High Net Worth money in the boomer generation is controlled by a Mr. Moneybags. Rookie error!
What they don’t realise is that regardless of who created the wealth, wives frequently have veto power over financial decisions. You can’t afford to irritate them! You may be wondering: isn’t there even a sliver of wealth in the hands of red-blooded males? You’re insane! Gender roles and identities are, of course, completely fluid today. That’s why Grayhawk, a progressive upstart, chose a Non-Binary Grandparent: