Tom Hockin, the Ottawa minister in charge of reordering financial institutions, recently proposed that Canada’s Big Five chartered banks be given the right not only to handle money but virtually to print it, by removing existing limits to their already-rampant growth. Meanwhile, the disappearance over the past 18 months of six other banks that once provided competition has shifted the emphasis to the five major entrepreneurial money pools still left in the country: Hal Jackman’s National Victoria and Grey operation in Toronto; the Belzbergs’ First City greenmail post office in Vancouver; Gerry Pencer’s burgeoning Financial Trustco in Calgary; Counsel Trust in Toronto; and, fastest-growing of them all, Central Capital Corp. of Halifax.
Last week the Central conglomerate-controlled by Reuben Cohen of Moncton and Leonard Ellen of Montreal-tabled its 1986 results, showing a 233-per-cent jump in net income, shareholders’ equity having ballooned to $390 million from $67 million since June 30. Assets of the relatively unknown corporation now top $4.3 billion, up 47 per cent from 1985.
Central Trust, which remains the group’s main operating arm, accounted for a 36-per-cent profit increase. An amalgamation of Eastern Canada Savings and Loan, and Nova Scotia, Crown and Federal trusts, it is now one of Canada’s largest trust companies, with 60 branches in place and another 90 being planned.
Central Capital (which owns 95 per cent of Central Trust) sits at the centre of a complicated web of 17 companies that includes an aviation overhaul plant at Sackville, N.B. (Enheat Inc.), an Atlanta insurance firm (LifeSurance) and a mid-Canada energy distribution outfit (Inter-City Gas in Winnipeg). The portfolio was significantly enlarged in 1986 with the purchase of $285 million worth of the Continental Bank’s leasing contracts, which include seven Air Canada jets. During the year the acquisition of MICC Investments and the Mortgage Insurance Co. of Canada was also succesfully negotiated.
Because Cohen and Ellen are expending most of their energies fighting the Nova Scotia establishment over control of the relatively minor Nova Scotia Savings & Loan Co. of Halifax,
the exponential growth of Central’s stable of companies has been due mainly to the efforts of a self-effacing former telephone company executive named Struan Robertson. A native of Shubenacadie, N.S., Robertson spent 29 years with Maritime Telegraph and Telephone, the final decade as the tightly regulated company’s president. “I really stayed far too long at Maritime Bell,” the 57-year-old Robertson told me recently, “and I certainly
wasn’t going to stay till I was 65.”
A lawyer by profession and dealmaker by nature, Robertson believes in all the latest buzz words: “There is a sort of gestalt effect in what we’re putting together,” he said. “The sum is much greater than the addition of the elements that make it up.” He is particularly proud of his merchant banking operation being put together by Peter Cole, who now heads Central’s Toronto office.
Central recently hired Earl Beder-
man, formerly chief economist for Canada Permanent. Bederman now manages Central’s $900-million portfolio, using some highly innovative strategies.
One of those techniques is “passive” fund management, which means having a stock portfolio that parallels the whole market and moves with it. “At the other extreme,” Bederman explained, “you’ve got active management, which implies you should apply judgment in the extreme. That’s like saying, T have intuitive forecasting skills that allow me to identify undervalued securities in the market, based on my uncanny understanding of everything from what the President of the United States is thinking to the movement of anchovies off the coast of Peru—and not only that, I’m the only person who got this morning’s copy of the Globe and The Wall Street Journal.' ”
Bederman uses an ice-cream analogy to explain that managing such a portfolio doesn’t mean “being just passive, plain vanilla—but using the whole Baskin-Robbins array of variations” in terms of managing individual fund assets. Whatever that means, it seems to be working, and Robertson is inordinately proud of his protégé. He recognizes almost no limits to his company’s growth. “While the future looks like it’s not going to be dominated by onestop shopping entirely,” he admits, “there are going to be unlimited opportunities for agile entrepreneurial financial services like ours.”
In a way, Robertson’s flash success—he joined Central only 20 months ago—has created his largest worry: that an outside raider will try to grab the company away from his management. “We’ve got more suitors than I can handle,” he confided. “People are always asking me if I have my golden parachute ready. At a board meeting I was at, a note was passed to me stating as a fact that we were about to be taken over by Victoria and Grey. So I thought for a minute and said to the fellow who brought me the rumor, T don’t give a damn, because I’m leaving for Rome tomorrow to become the next Pope.’ I think he got the message. . . . This company is not for sale, because for Reuben Cohen, owning it is something of a love affair, and with Leonard Ellen, it’s megabucks. I’ve seen Reuben’s eyes fill with tears when he contemplates some of the things we’re planning to do.”
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