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Rating:Does the Fund Industry Need More Owners Like the Late Paul Desmarais? Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, October 10, 2013

Does the Fund Industry Need More Owners Like the Late Paul Desmarais?

Reported by Tommy Fernandez

You probably don't know a lot about the proud French Canadian financier Paul Desmarais, who died Tuesday at the age of 86.

You should, because his family owns Power Corporation, which owns Putnam Investments [profile]. In fact, he and his sons Paul, Jr. and Andre hired Bob Reynolds to take the helm at Putnam and revitalize the Boston assets manager after years of being adrift.

But Reynolds would not have been able to work his magic without the patience and long-term thinking of Desmarais and his sons. They gave Reynolds the time and the freedom to run the company the way he sees fit and gave him the backing and resources to substantially bolster Putnam's talent pool, its technology as well as its retirement business.

Perhaps the industry could use more owners like Desmarais.

But first, more about the man.

Desmarais was born a French-speaking Canadian, born Ontario, who always felt like an outsider in his country's predominantly English-speaking business world, according to the New York Times. His family was already successful in business thanks to his grandfather's acquisitions of companies around the nickel-mining bastion of Sudbury, Ontario.

Desmarais himself entered the business world in 1951 when he quit law school and bought, for a buck, his family's failing bus firm.

He made the bus line profitable again and used its revenues, and his growing genius with corporate debt, to buy increasingly larger companies, until he bought the Power Corporation of Canada, which became the framework of what would ultimately be a global empire that had more than $500 billion in assets, according to the Montreal Gazette. He himself was worth over $5 billion personally, according to Bloomberg.

Indeed, he and his family's long-term approach to investing in companies has been so successful that Bloomberg in July 2009 dubbed the Desmarais family better at long-term investing than Warren Buffett.

When Power Corp bought Putnam in 2007, the investing world thought the Desmarais family was taking a big risk buying in a company still tainted by previous trading scandals and faltering fund performance. The $3.9 billion deal had also closed two weeks before the S&P had hit its peak at the time, only to be followed by the 2008 financial crisis.

Nonetheless, Desmarais and his sons loudly, and frequently, declared their willingness to be patient with their investment.

For example, his son Paul Jr. had this to say on the subject in June 2007 during an investors conference held in Montreal, a quoted by the National Post.
MFWire covered many of the moves made by the family as they worked to turn the company around, including their hiring of Bob Reynolds and supporting supporting Reynolds' hiring and investment in the company's infrastructure.

The people at Putnam clearly miss him. Here is the official statement responding to the news of Desmarais' death:

Putnam Investments mourns the loss of Paul Desmarais, Sr., who was an extraordinary business visionary and an open-hearted philanthropist. His strength of character and graceful presence will be missed by all who had the privilege of knowing him. Our deepest condolences are with the Desmarais family at this time.

When you consider the number of firms that have fought, and continue to fight, to break free of their owners in this industry, maybe there are lessons to be learned from the management style of this proud, astute, and quiet Canadian. 

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