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ELO Market Outlook Webinar - Presentation Slides
1. 2020 Strategic Outlook
Richard (Rick) J. Goossen, BA (Hons), LLB, LLM, PhD
Business Development
Ron Haik, MBA, CFP®, CIM®, FCSI®, CIWM, TEP
Senior Financial Advisor & Regional Manager, Ontario at Nicola Wealth
3. extend the application of (a
method or conclusion, especially
one based on statistics) to an
unknown situation by assuming
that existing trends will continue
or similar methods will be
applicable.
8. How would you
invest and allocate
your capital if it was
committed for five
years ?
9. 25 years 1 depression and 4 recessions
Dividend Yield 13.4% June 1932
10. 7.5 years and 2 recessions for full recovery beyond the prior peak
-45% drop 15 months later
25% recovery before recession is over
S& P 500 Price ( nominal )
11. 24 years and 5 recessions for full recovery beyond the prior peak
S& P 500 Price ( adjusted for inflation)
12. S& P 500 Price ( nominal )
Riding a Wave –No net change in 12.5 years
-57% before recession over
-49% 1 year after
recession is over
13. $1.43M more per $1M
Than 60/40 balanced
Over 20 years
Core YTD=-1%
Vs. -3.75 % for 60/40
14. Not Public or Private,
but Public and Private
The Tyranny of the ‘Or’
Vs.
The Genius of the ‘And’
15. December 2000 to June 2019
Return Value of $1M Invested
S&P500TR: 6.7% $3,540,000
R3000TR: 7.0% $3,740,000
PRIVATE EQUITY: 9.1% $5,460,000
25. • 2% on committed capital for five
years
• If 80% of committed funds
invested average fee is >5% /year
• Performance fees of 20%
• 1.5% on invested capital for five
years
• Offer co-invest opportunities
• Blended fee can be under 1%/yr.
• Performance fees 15%
• About 75% lower overall first five
years
Fees: Committed vs. Invested Capital
26. Managers
Vintages
Geography
Industries
Asset Classes
(equity, debt, infrastructure,
real estate)
NW Private Equity
$275M AUM – 21 Funds
12 managers
14 direct / co-invest assets
Global companies
4%/yr. higher 5 year returns vs.
avg. other NW equity funds
Diversification
27. Significant minimum investment
5-year funding period 10-14 year
fund
Liquidity when assets sold
Investor responsible for “Dry
Powder”
Small minimums
No other capital commitment
1-3 year minimum hold
Liquidity periodically (monthly /
quarterly, annually)
Add new capital when available
Closed End vs. Evergreen Funds
28. $3400
$770
Equity ($Billions) Debt ($Billions )
Less Risk
Lower returns
Shorter Duration
Current Income
RRSP/ TFSA and
Foundation eligible
US Private Asset Markets 2018 (Preqin)
35. Private
Equity
15.3%
Cdn. Real
Estate
19.5%
US Real
Estate
34.5%
Value
Add Real
Estate
11.6%
Infra.
6.7%
Global
Real
Estate
12.4%
$1,000,000
$1,658,000
$658,000
$156,450
$10,070
Starting
Capital
Ending Capital
(before fees)
Gain
(before fees)
Taxable
Income
(gross )
Tax Paid
(after fees /
RDTOH)
Private Assets
How Is This Possible?
• RDTOH reduces corporate tax by 60%
• Low turnover of assets
• Depreciation creates return of capital
• Planning fees deductible
5 Year Results (2014-2019)
• Gross return before fees = 10.7%/yr
• Net return after fees = 9.7%
• Net return after taxes = 9.6%
36. Private
Equity
10.5%
Mortgage
23.0%
Private
Debt
10.5%
CDN Real
Estate
12.5%
US Real
Estate
23.0%
Value Add
Real Estate
7.5%
Global
Real Estate
8.0%
Infra.
5.0%
$1,000,000
$1,579,000
$579,000
$116,000
$-
Starting
Capital
Ending
Capital
(before fees)
Gain
(before fees)
Taxable
Income
(gross)
Tax Paid
(after fees /
RDTOH)
Private Assets
How Is This Possible?
• Interest income paid into registered plans
• Other private assets have low tax turnover
• Portfolio is balanced within private assets
• Weighted cash flow 4%+ annually
5 Year Results (2014-2019)
• Gross return before fees = 9.6%/yr.
• Net return after fees = 8.6%
• Net return after taxes = 8.6%
37. Lessons From This
• Planning first: portfolio design
and financial planning
• Diversify
• Cash flow matters
• Private does not = higher risk
but it does = less liquidity
• How much of your returns are
taxable?
• What can you do about that?
38. Therefore, it could be somewhat misleading and biased to translate "机"
(jī) in the context of the word "危机" (wēijī) to "opportunity" instead of "a
changing point" or "a confidential event"
Are we at a changing point?
46. Future Factors for real estate
• Geographic diversification
• Growing population
• Residential safest , Industrial next
• Some retail will work ,regional, neighbourhood malls with
development value add
• Build to own ( especially residential )
• Spread between cap rates and mortgage rates
0.0%
5.0%
10.0%
15.0%
20.0%
Canadian
Income
US Income Value Add
8.2%
11.8%
13.9%
9.2%
11.9%
15.5%
9.8%
11.2%
0.0%
1 year
5year
10 year
