Described as the Warren Buffett of the North, head of a global conglomerate with over $30 billion invested globally, Toronto-based Prem Watsa is one baron of the financial world that most outside rarefied circles of the cognoscenti are unaware of.
Fairfax Financial Holdings Ltd chairman and CEO Prem Watsa speaks during the company’s annual meeting in Toronto. (Reuters Photo)
Watsa, 63, founded the Toronto-based Fairfax Financial Holdings Limited in September 1985, and now, 28 years later, he remains at its helm, as Chairman and CEO. Watsa is a value investor, one with a penchant for risk aversion. Perhaps nothing defines his investment style more than his words of warning prior to the 2008 global economic meltdown.
There's a speech from May 2007, at the Ben Graham Centre for Value Investing's first annual Intelligent Investing Conference.
Watsa pointed at slides and charts and said, "This idea exists in the marketplace that you can take any risk, put it into a structure, into an asset-backed bond, and you can eliminate, get rid of the risk." He wasn't buying that, explaining to the audience that Fairfax believed "there's a lot of risk".
He went on, "Protect yourself, you don't know when Katrina comes in." He was referring to the hurricane that devastated New Orleans in 2005.
The manmade disaster went swimmingly for Fairfax: 2008 was a record year for Fairfax and that trend continued into 2009, even as major financial institutions were being bailed out.
In his annual letter to shareholders, Watsa crowed: "We ended the first decade of the 21st century with one of our best years ever." He laid out Fairfax's growth despite the turbulence that had left the markets winded: "In 1985, we began with $30 million in assets and $7.6 million in common equity.
We ended 2009, 24 years later, with $28 billion in assets and $7.4 billion in common equity - almost 1,000 times higher than when we began."
Born in Hyderabad, Watsa studied chemical engineering at IIT-Chennai before emigrating to Canada, where his brother was based in the province of Ontario. He studied at the University of Western Ontario's Richard Ivey School of Business, where he would later endow the Ben Graham Centre.
His career began in 1974 at Confederation Life, an insurance company. Little more than a decade later the Fairfax journey commenced. Today, Watsa's personal worth is estimated at over a billion dollars.
In recent years, Fairfax has looked towards India, establishing a wholly-owned subsidiary Fairbridge Capital in Mumbai last year. In May 2012, Fairbridge acquired a 77% interest in Thomas Cook (India) Ltd, and this February, Thomas Cook signed an agreement to buy a 74% stake in the Bangalore-based IKYA Human Capital Solutions.
Not every investment made by Watsa has worked. Fairfax holds nearly 10% of Blackberry, the Canadian tech company that was till recently known as Research in Motion or RIM.
In fact, Watsa resigned from Blackberry's board this summer citing potential conflict of interest issues, even as speculation has surfaced that he may become part of a consortium to acquire Blackberry.
Whether Blackberry can charge its way out of the doldrums remains to be seen, but Watsa is certainly dialled into astute investing.