Seth asks: With the current global economic situation, the landscape for the weathy in Canada has still remained largely the same. We have the usual ultra weathly receiving their wealth through inheritance and success of previous generations such as the Thomson family and Irving family. We also have some that made it through the usual process of hard work and smart business skill such as Jimmy Pattison of Vancouver. As well, however, we also have a new comer in Dennis (Chip) Whilson who now appears on the list with the successful public share issue of his clothing store lululemon athletica.
Due to the favourable credit environment for the past decade, it was becoming increasingly easier for those versed in the ways of the capital markets to catapult themselves into the billionaires club but recently because of uncertainty in the U.S. only select few, such as Chip Wilson, are able to release their shares to the public and join the billionaires club. Some hedge funds in the U.S. have also gone public recently even though all factors point to the shares having a rough time in the markets. Some analysts suggest this is a growing belief in the U.S. that the environment might get worse and investors appetities for these investments may be even worse in 6 months and they should issue the shares anyways since they may not be able to issue them at all in 6 months. Fortress Investment Group and then Blackstone Group are two hedge funds that completed an IPO in 2007.
Hedge Fund IPO’s are a good benchmark on the ‘froth’ in the investment environment. These investment funds are not understood by the typical investor, their investment methodology are typically proprietary and secret and they are exempt from disclosure and reporting requirements required by other under funds such as mutual funds etc. Investors in these funds are typically thought to be highly sophisticated and thus do not require the hand-holding requirement of other investor protections. A successful hedge fund IPO would suggest that investors are truly in ‘buy anything’ mode and thus shows the high watermark on what investors can accept. Both the Blackstone and Fortress shares are down substantially from their IPO prices.
So if the US hedgefund IPO market is any indiction, the Canadian list of billionaires may have to start growing through the usual method of hard work or inheritance rather than windfall gains through tapping of the capital markets.
