Great to see many of you at our Private Debt & Real Estate event at the Vancouver Club last night. We had about 150 people attend and for those of you who weren’t able to make it, here’s a brief recap of what I covered:
• Over the last 20 years, it has become increasingly difficult for investors to reach high single-digit returns without taking on more risk through a higher allocation to equities.
• While there are roughly 45,000 publicly traded companies around the world, it is estimated that 115 million private companies exist worldwide. Investing in the businesses of public companies by purchasing their underlying stocks or bonds, is not the only way to make money. Investing in private businesses may prove to be a very profitable alternative with significantly lower volatility.
• Our 3 favourite areas to invest in the private security space include 1. private debt (lending) such as bridge financing and factoring (the purchase of company receivables), 2. alternative mortgage lenders, 3. North American Commercial & Residential Real Estate.
• Pension funds and endowment funds have been investing in private securities for decades but access to private investments by retail investors has been marginal at best. The current allocation to private debt in client portfolios in the US is estimated to be as low as 5-7% while in Canada, the allocation to private debt in portfolios is significantly lower.
• Private securities offer an alternative to publicly traded securities and provide true diversification as these securities are generally negatively correlated to equity and fixed income markets.
• We are of the belief that private debt and real estate limited partnerships should be allocated to most investor portfolios to complement publicly traded securities.
• Private Debt should increase the odds that investors reach their goals, increase the predictability of returns and create diversification to dampen volatility in traditional portfolios.
• It is projected that Canadian Private Debt will hit $1 trillion by 2020 which represents a 20% annualized growth in investor participation over the next 2 years. This can simply be attributed to the supply and demand imbalance for money as the banks continue to tighten.
• As of now, private debt is only accessible through individual providers focusing on specialized areas making diversification extremely difficult for retail investors. In addition, some of these individual providers place liquidity hurdles with some as long as 1 year, often making such investments impractical in retail portfolios.
• The Canadian asset manager Willoughby Asset Management is in the final stages of building a Private Debt & Real Estate portfolio solution with diversification amongst the three asset classes mentioned above, as well as service provider diversification as 3-5 providers will receive a portion of the allocation in each of the three aforementioned private asset classes.
• Most importantly, the upcoming investment vehicle known as Rockridge Private Debt & Real Estate Pool, will offer 30 day liquidity.
• To our knowledge, there are no other providers of a complete Private Debt & Real Estate solution today, and this will be the first vehicle of its kind in Canada, offered exclusively to Harbourfront Wealth Management clients.
If you’d like to be notified when the investment vehicle becomes available, email Wes Ashton at firstname.lastname@example.org
Have a great weekend,
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Daniel Popescu CFP, CIM, FMA, FCSI
President & CEO
MNP Tower, 3100-1021 West Hastings St.
Vancouver, BC V6E 0C3
T: 604-558-6830/1(877) 588-6822
For additional comments and info go to: www.harbourfrontwealth.com
“I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of Harbourfront Wealth Management. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.”
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