Will BCI's Minority Stake in ZEDRA Prove Problematic?
The British Columbia Investment Management Corp. is acquiring a minority stake in a corporate consultant and fund administration provider.
Zedra, which provides wealth, governance and administrative services for corporations, pensions, trusts and funds, was launched in the Isle of Man in 2016. It now conducts operations in Asia, Australia, Europe, North America and South America.
BCI’s investment follows Zedra’s acquisition of a series of financial sector service providers in 2022. During the year, it acquired PTL Governance Ltd., a British pension trustee and governance consultant; Axelia Partners, a global expansion service provider; and BNP Paribas Jersey Trust Corp., a fiduciary service provider.
In a press release, the BCI described the move as part of a broader strategy to expand its presence in Europe. “The corporate services, active wealth, pensions and fund solutions sector remains a core area of focus for BCI and we look forward to generating attractive returns for our pension plan and insurance fund clients through this investment,” said Jim Pittman, executive vice-president and global head of private equity at the BCI.
In other news, the BCI’s real estate investment arm is building a residential apartment tower in Brisbane, Australia.
In a joint venture with Lendlease, a property management firm specializing in build-to-rent projects, QuadReal Property Group is funding the construction of a 37-storey tower. The building, which will be located near Brisbane’s centre, will include 433 residential units and will feature an onsite pool, gym, spa, yoga room, recording studio, canine cleaning station, barbecues, co-working spaces and lounges. The tower will also be fully electric and powered by renewable energy.
The move comes in response to a period of extreme population growth in Brisbane. According to government figures, the city’s population grew by about 19 per cent, from 2.1 million to 2.5 million between 2012 and 2022, faster than any other Australian city.
BCI issued a press release announcing the closing of a strategic minority investment in ZEDRA:
LONDON, NEW YORK, and VICTORIA, British Columbia – ZEDRA (“ZEDRA” or “the Company”), a global specialist in active wealth, corporate and global expansion, funds as well as in pensions and incentives solutions, today announces the successful close of a strategic minority investment from British Columbia Investment Management Corporation (“BCI”), one of Canada’s largest institutional investors. This investment, which was announced in March 2022, has been approved by all relevant authorities. Corsair, the company’s existing majority investor, will remain the lead shareholder following the transaction. This new investment will not affect the ongoing operations of ZEDRA, whose management team will continue to hold a significant shareholding in the company.
Founded in 2016, ZEDRA is one of the fastest growing global specialists in trust, fiduciary, corporate, and fund services delivering a tailored and diversified range of wealth, governance, and administrative solutions to clients who include high net worth individuals and families, multi-national companies of all sizes, corporate pension schemes as well as alternative investment managers. With this additional investment, and the continued support of Corsair, ZEDRA is better positioned to further expand its global footprint and enhance its offerings to clients.
Bart Deconinck, executive chairman at ZEDRA, said “We are excited to officially bring on board BCI as an investor to support and accelerate ZEDRA’s plans for global sustainable growth. The senior management teams across ZEDRA, Corsair, and BCI have a shared vision for the future of the company, and we feel strongly that this partnership will further our ability to provide unparalleled, high-quality service to our clients’ evolving needs.”
Raja Hadji-Touma, partner at Corsair, said “We are delighted to announce the close of this transaction and formally welcome BCI as an investor in ZEDRA. As majority shareholder since 2020, we are proud of the work we have accomplished in supporting the rapid growth of the company and believe the successful closing of this strategic investment speaks to Corsair’s unique ability to operate and execute within highly regulated industries.”
Jim Pittman, executive vice president & global head, private equity at BCI, said “ZEDRA has successfully built a strong, global franchise in recent years. We continue to be impressed with the business’ growth and approach to expansion through numerous strategic acquisitions. As we expand BCI’s presence across Europe, we see the completion of this investment as a significant milestone. The corporate services, active wealth, pensions and fund solutions sector remains a core area of focus for BCI, and we look forward to generating attractive returns for our pension plan and insurance fund clients through this investment.”
About ZEDRA
ZEDRA is a global specialist providing tailored corporate & global expansion, active wealth, pensions & incentives as well as fund solutions, all aligned under one common goal: to embrace the future with certainty.
In a highly regulated environment, ZEDRA delivers its clients high quality solutions through bespoke planning, governance, and operational services, ensuring the highest standards of compliance and integrity are met.
The firm’s experienced teams enable high net worth individuals and families as well as, medium to large sized companies, pension funds and trustees, asset managers, and their investors to focus on their core activities by choosing ZEDRA as their trusted partner.
Since 2016, ZEDRA’s solid foundations combined with innovative thinking have allowed the company to grow rapidly in a competitive marketplace to a team of 900+ industry experts across 16 countries spanning Asia, Oceania, the Americas, and Europe.
About Corsair
Corsair is a specialist investment firm offering opportunities for investors and solutions for companies across its private markets buyouts and infrastructure platforms. The firm’s buyouts business is a financial services investor focused on making control investments in three verticals: payments, software & business services. The infrastructure business focuses on core plus and value-added opportunities, and blends operating platforms, deep sector expertise, and traditional equity sponsorship. Corsair has invested $9.4 billion in capital across buyouts and $4.4 billion in capital across infrastructure since inception.
For more information please visit https://corsair-capital.com/
I would invite you to read more about ZEDRA here to familiarize yourself with this company:
We are a global powerhouse providing Corporate & Global Expansion, Active Wealth, Pension & Incentive services and Fund solutions, all aligned under one common goal: to DO MORE so our clients can ACHIEVE MORE.
This motto keeps us true to our foundations as a business that exists to simplify our clients’ complexities, and in doing so, elevate their prospects. That means as our clients’ needs shift, so will we.
Embedded in key jurisdictions around the world, our years spent in the market brought to light an opportunity: the idea of a more holistic, collaborative partnership with our clients, where we could leverage our legacy to plan and deliver a tailored, first-class solution for all of them.
Agile and entrepreneurial, we don’t believe in the idea of a ‘finished picture’.
Something all our people share is a belief that the one-size-fits-all approach does a disservice to our clients. With such a wealth of curated expertise and past experience to draw upon, every service we deliver is imbued with a deep understanding of the nuanced challenges our clients are facing.
With an ear to the ground and a perpetual eye on the horizon, we continue to future-proof our services with innovation and commercial intelligence.
ZEDRA has grown fast through strategic acquisitions and this strategic investment from BCI will allow them to grow even faster.
Interestingly, back in Mach, ZEDRA entered the US private wealth market by opening a new office in South Dakota:
ZEDRA’s new office will strengthen the firm’s presence in the Americas and promote its proven active wealth expertise in the US private wealth space. The new office, led by its Managing Director, Jon Olson, will offer a full set of trust administration services tailored to international clients, spanning from high-net-worth-individuals, families, entrepreneurs as well as their relevant advisors.
The office opening follows a number of recent acquisitions in the Americas, including US and Curaçao-based, Atlas Fund Services, now rebranded to ZEDRA Funds, which provides long-term, tailored, and reliable alternative investment fund services to US-based investment managers. ZEDRA also acquired US Global Expansion Specialist, Axelia Partners, in 2022, now rebranded to ZEDRA Global Expansion Services US, which facilitates the expansion in the US of predominantly European headquartered businesses and entrepreneurs.
Commenting on the office opening, Ivo Hemelraad, CEO at ZEDRA, said: “We have been working with private clients for decades, providing that all-important strategic oversight of a nuanced big-picture.
“The expansion of ZEDRA’s trust services in the US supports our reputation as an international leader for trust services and is a natural next step in bolstering the firm’s global offering for private clients, cementing the business opportunities of our Miami office across North and Latin America.”
Jon Olson, Managing Director of ZEDRA in South Dakota, said: “We are excited about the endless possibilities that the new office represents, both for the firm and our clients.
“As ZEDRA has established itself as a strong and trusted partner in Europe and Asia in the trust services business, we look forward to repeating our successes in the Americas by offering all the advantages of South Dakota trust laws to our clients.”
South Dakota? Private wealth?
You'd be surprised. In 2019, Oliver Bullough of the Guardian wrote an article on the great American tax haven saying South Dakota is known for being the home of Mount Rushmore – and not much else. But thanks to its relish for deregulation, the state is fast becoming the most profitable place for the mega-wealthy to park their billions:
Late last year, as the Chinese government prepared to enact tough new tax rules, the billionaire Sun Hongbin quietly transferred $4.5bn worth of shares in his Chinese real estate firm to a company on a street corner in Sioux Falls, South Dakota, one of the least populated and least known states in the US. Sioux Falls is a pleasant city of 180,000 people, situated where the Big Sioux River tumbles off a red granite cliff. It has some decent bars downtown, and a charming array of sculptures dotting the streets, but there doesn’t seem to be much to attract a Chinese multi-billionaire. It’s a town that even few Americans have been to.
The money of the world’s mega-wealthy, though, is heading there in ever-larger volumes. In the past decade, hundreds of billions of dollars have poured out of traditional offshore jurisdictions such as Switzerland and Jersey, and into a small number of American states: Delaware, Nevada, Wyoming – and, above all, South Dakota. “To some, South Dakota is a ‘fly-over’ state,” the chief justice of the state’s supreme court said in a speech to the legislature in January. “While many people may find a way to ‘fly over’ South Dakota, somehow their dollars find a way to land here.”
Super-rich people choose between jurisdictions in the same way that middle-class people choose between ISAs: they want the best security, the best income and the lowest costs. That is why so many super-rich people are choosing South Dakota, which has created the most potent force-field money can buy – a South Dakotan trust. If an ordinary person puts money in the bank, the government taxes what little interest it earns. Even if that money is protected from taxes by an ISA, you can still lose it through divorce or legal proceedings. A South Dakotan trust changes all that: it protects assets from claims from ex-spouses, disgruntled business partners, creditors, litigious clients and pretty much anyone else. It won’t protect you from criminal prosecution, but it does prevent information on your assets from leaking out in a way that might spark interest from the police. And it shields your wealth from the government, since South Dakota has no income tax, no inheritance tax and no capital gains tax.
A decade ago, South Dakotan trust companies held $57.3bn in assets. By the end of 2020, that total will have risen to $355.2bn. Those hundreds of billions of dollars are being regulated by a state with a population smaller than Norfolk, a part-time legislature heavily lobbied by trust lawyers, and an administration committed to welcoming as much of the world’s money as it can. US politicians like to boast that their country is the best place in the world to get rich, but South Dakota has become something else: the best place in the world to stay rich.
At the heart of South Dakota’s business success is a crucial but overlooked fact: globalisation is incomplete. In our modern financial system, money travels where its owners like, but laws are still made at a local level. So money inevitably flows to the places where governments offer the lowest taxes and the highest security. Anyone who can afford the legal fees to profit from this mismatch is able to keep wealth that the rest of us would lose, which helps to explain why – all over the world – the rich have become so much richer and the rest of us have not.
In recent years, countries outside the US have been cracking down on offshore wealth. But according to an official in a traditional tax haven, who has watched as wealth has fled that country’s coffers for the US, the protections offered by states such as South Dakota are undermining global attempts to control tax dodging, kleptocracy and money-laundering. “One of the core issues in fighting a guerrilla war is that if the guerrillas have a safe harbour, you can’t win,” the official told me. “Well, the US is giving financial criminals a safe harbour, and a really effective safe harbour – far more effective than anything they ever had in Jersey or the Bahamas or wherever.”se of us who cannot vote in South Dakota elections have little hope of changing its laws. But if we don’t do something to correct the imbalance between global wealth and local legislation, we risk entrenching today’s inequality and creating a new breed of global aristocrat, unaccountable to anyone and getting richer all the time – with grave consequences for the long-term health of liberal democracy.
Now, I'm not claiming BCI is investing in a company that is harboring financial criminals engaging in money laundering and other shady activities but when I read ZEDRA opened up an office in South Dakota and has offices in Cayman Islands, Curaçao, Malta, Guernsey, Luxembourg and other tax havens, my antennas went up:
No wonder the company is growing fast, there are a lot of ultra wealthy people (especially in Europe) looking to preserve their wealth and protect it from their governments looking to tax it.
And it's not just ZEDRA, well-known big banks are offering their ultra high net worth clients the exact same services at the exact same locations.
Most of this activity is legal tax avoidance but some of it is illegal proceeds which get funneled through these tax havens in established trusts.
That's what makes me nervous about ZEDRA and other financial services companies in this area that are growing fast. It could prove to be a great investment for BCI and its contributors and beneficiaries but it can also prove to be problematic if they do not know who their clients are and where their wealth came from.
There are also ethical concerns raised by these companies and the activities they engage in, concerns that BCI's clients will raise with them.
Alright, let me wrap it up there, not saying this is a bad investment, just saying it raises a host of issues for a large Canadian public pension fund.
Below, Institute for Policy Studies' Chuck Collins explains how South Dakota's "secret sauce" has allowed it to emerge as a global tax haven. PBS Frontline also examines who is establishing trusts in South Dakota.
Lastly, The Guardian's Oliver Bullough discusses how South Dakota's trust industry went from 'tax relief' to 'tax haven'. Listen carefully to his comments and read his article here.
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