Beyond Stocks and Bonds
Amidst volatile markets, skyrocketing inflation and an unstable geopolitical landscape, Nicola Wealth’s Core Portfolio Fund returns are up 8% year-to-date (as of Nov. 30, 2022).
With the highest inflation in 40 years and a potential recession looming, to grow your wealth in these uncertain times, we feel it is important to look beyond the standard “60/40” investment approach of stocks and bonds that is most commonly offered to retail investors. Aside from limiting the possible investments available to investors, the “60/40” approach of stocks and bonds is anchored to the volatility of public markets.
Go beyond the public markets
At Nicola Wealth, we have a diversified investment approach that goes beyond stocks and bonds. Greater diversification includes allocation to a diverse set of non-traditional asset classes including hard asset real estate, private equity, mortgages, private debt, and infrastructure which provide greater diversification regardless of market environment.
Nicola Wealth’s investment strategy follows an institutional approach that provides our clients with access to private investments not usually available to the retail investor.
Reduce risk with diversification across managers, regions and strategies
We reduce risk through diversification across managers, regions, and strategies, which also increases our coverage of the investment universe. Also, by including private investments, our clients have access to these additional investments that will help build their wealth.
Our portfolio managers use tactical allocation and view investments holistically while patiently waiting for opportunities to present themselves. They are active managers that reduce exposure to markets that are unattractive and opportunistically take advantage of market mispricing.
Access to assets and managers not usually available to retail investors allows us to be in a better position tactically by having a broader perspective than traditional managers. We have a capital preservation approach with a focus on quality assets at a reasonable price.
Historically consistent returns
This approach has allowed us to produce historically consistent returns during a variety of environments, including during more volatile and uncertain times. We focus on cash flows to reduce reliance on the unpredictability of capital gains.
What are these private investments and how do they work?
156 Second Street Office Building, San Francisco, California. Purchased by Nicola Wealth in 2012
Hard Asset Real Estate
Nicola Wealth has been investing privately in real estate for over 15 years, helping clients build wealth through multi-family and commercial-grade properties across North America. Our in-house division of experienced real estate and asset management professionals oversee over $4 billion of income-producing real estate in Canada and the United States.
Our in-house division of experienced real estate asset management professionals oversee over $8 billion of income-producing and development real estate in Canada and the United States. We pursue acquisition opportunities across multiple asset classes in major markets across North America. Our acquisitions include opportunities we source directly as well as through relationships with partners, and we focus on off-market or unlisted opportunities.
Private Equity & Private Debt
Until recently, private equity investments have been limited to either large institutional investors (such as most of Canada’s largest pension funds) or ultra-high-net-worth individuals and families. Minimum investments in pools are often $5 million or more.
Individual investors are often precluded from investing in this desirable asset class due to the high minimums required by private equity managers and the preference of many managers to deal primarily with institutional investors.
Our in-house portfolio management team’s strategy is to create an investment opportunity for clients where they can have a portfolio similar to family offices and institutional investors but with a lower minimum.
The structure of our investments allows our clients to participate in a diversified selection of private equity and debt without experiencing the performance drag of extended draw-down and pay-out timelines.
Infrastructure & Renewable Resources
Unlike financial assets which derive their value from a contractual claim or intangible assets (such as patents or brand value), Real Assets are physical assets that have an intrinsic value. Infrastructure (e.g. highways, telecommunication towers, water filtration plants), renewable energy (e.g. wind farms, solar), and renewable resources (e.g. farmland, timberland) are assets that form the foundation of society’s ability to function by providing goods and services which are essential to the wider economy.
Agriculture and Timber historically have a high correlation to inflation, providing us with an investment hedge. As the general level of prices and goods rise, so does the value of farmland and timberland. Additionally, infrastructure contracts often dictate that consumer prices rise in relation to inflation; therefore, infrastructure revenues are also linked to inflation.
As noted above, demand for essential goods and services related to Real Assets are historically stable, and, as such, Real Assets can provide a means of cash flow, potentially making the asset class a defensive position. In the case of infrastructure, often there are few substitutes for the services provided, thus creating a monopolistic environment (i.e. airports). Lack of competition and the essential nature of the service potentially provide investors with returns in both economic expansions and contractions.
This investment is generally intended for tax residents of Canada who are accredited investors. Some residency restrictions may apply. Please read the relevant documentation for additional details and important disclosure information, including terms of redemption and limited liquidity. All investments contain risk and may gain or lose value. Please speak to your Nicola Wealth advisor for advice based on your unique circumstances. Investments in alternative funds are highly illiquid and carry a related degree of risk of financial loss. Investors should consult the relevant disclosure and subscription documents for a full listing of risks associated with an investment in alternative assets and consult their Nicola Wealth advisor and relevant professionals regarding any tax, accounting, legal or financial considerations. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required securities commissions.