Q2/2024

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Good morning everyone.

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Welcome to the second quarter market update.

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For those of you that don't know me, my name is Josh Nakesch.

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I'm a wealth counselor at Kinsted.

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This morning I'm joined by Brent Smith,

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our Chief Investment Officer.

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How are you doing this morning, Brent? Doing well, thanks, Josh.

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Excellent. I think for our conversation today, what Brent

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and I want to go through is, we want

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to give an update on the market.

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So what happened over the last quarter, as well

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as what's happened so far, year to date.

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Then we want to walk through

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and just give everyone a sense

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of what's happening within the investment pool.

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So we're going to give an update on performance.

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We're also going to talk about some

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of the individual investment strategies,

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and then we're going to give an indication of

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what we see going forward.

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And then finally,

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we want to provide a macroeconomic outlook.

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So Brent and I are just going have a conversation about

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what we're seeing from research, what we see and,

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and hear out there, and

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how we think markets are going to perform not only

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to the end of the year, but going forward over the next

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12 to 24 months.

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At the very end, we are going

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to leave some time for Q & A.

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If we don't have enough time to address your questions,

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we will reach out after the call today,

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and make sure that your questions are answered.

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Outside of that, I'm just going start right away

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with the market update, if that's okay with you, Brent.

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Yeah, please, Josh. Excellent.

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So to kick things off, just looking at performance

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for the second quarter, we have up here the MSCI ACWI

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So that's the All Country World Index represents 85%

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of the investment opportunity for publicly traded stocks.

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So it gives you a good indication

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of what's happening around the globe.

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That was up 3.8% over the quarter.

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Here at home, the TSX60, that represents the

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Canadian publicly traded stocks.

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That was down 1.4%.

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And then finally, probably, the most followed,

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is the S&P 500, which over the quarter,

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was up 4.2%,

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and so far this year, up 13.8%.

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So not to take away from Brent,

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we're going to talk a little bit more about the performance

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numbers further on in the presentation.

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What we want to highlight is underneath the numbers,

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we're seeing definitely a divergence between some industries

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and sectors performing better than others.

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And not all investors have been getting returns similar to

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that of the S&P 500.

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So we're going to dive into more details on that.

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Within the fixed income markets,

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that was up a little bit, 0.98% within the quarter.

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A lot of that activity is coming from Central Banks,

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cutting interest rates.

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We saw a cut yesterday from the Bank of Canada, 0.25.

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That's the second cut that we've seen this year.

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So they've already reduced interest rates by 0.25.

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The expectation is

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that we're probably going to see another cut, a 0.25

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before the end of the year.

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Where we've seen this change,

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by Central Bank strategy is they're taking a look at the

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inflation numbers and they're starting

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to see them come down.

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So, a couple things just about inflation.

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We all know that it's measured on a 12-month basis.

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So when we see the financial headlines

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and it says inflation is just over 2%,

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what they're doing is they're taking the price

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of the good or service today, measuring it against what

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that, good or service was priced at 12 months ago.

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And so, I don't think anyone is fooled.

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And, certainly, the Central Bank is paying attention

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to the fact that prices over a 4

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to 5 year period are certainly higher.

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So although the percentage

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of inflation has come back down, we still recognize,

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of course, that the cost

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of living has increased dramatically.

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And we've seen this, you know the price

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that we pay for groceries, has increased.

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The price we pay for gas at the pump has increased.

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And our, our debt payments, have gone up significantly

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as a result of interest rates increasing as well.

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And so that the kind of data

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that the central bank pays attention

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to when they're making decisions about cutting interest

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rates and helping stabilize that economic growth.

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Their goal is to keep an inflation rate of 2 to 3%

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over a 5 year average.

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So they're not looking at just

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what inflation is today.

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They're saying how has that inflation

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impacted consumers over the last 5 years?

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And that's what's leading their interest rate decision.

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One of the questions that we get quite frequently is,

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you know, we can see it's quite evident the

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consumers under some pressure.

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Like I mentioned, cost of living has gone up.

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interest increases have made our debt

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payments more expensive.

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And so why isn't Central Bank stepping in to,

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to help the consumer a little bit more?

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And I think, you know, one of the data points

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that's been holding them back is when they're looking

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at economic stability.

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They can see the economy is at full employment in North America.

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The story is very similar in the US compared to Canada.

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It seems like everyone has a job.

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And so the expectation is if you're drawing an income,

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you're going to be able to make payments on your mortgage.

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You're going to be able to, afford groceries

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to put on the kitchen table.

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And so until they see that inflection

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where unemployment increases, I think they're going

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to be very cautious in the interest rate decreases

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that we see over the following months.

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Finally, we've got a question here.

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Is the US consumer in trouble?

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You know, I think, again,

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This is probably bringing it back to cost of living.

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We're going to answer this question further on in the

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presentation when we go into more detail about, how some

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of these costs have increased,

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what debt payments have looked at.

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But I think, you know, probably

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the most important point

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to make here is we haven't seen income inflation keep up,

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with our costs and our expenses.

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And so that, that's really been

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what has caused a consumer to tighten their belt,

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a little bit in terms of spending.

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And we might see a little bit

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of slowing in the economy as a result.

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So with that, let's turn the page

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and let's start looking at each of the individual pools.

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Brent, I'm going to hand it over to you to walk

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through the Canadian Equity Pool first.

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Thanks Josh. And you've pretty well covered everything I was

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going to talk about, so, appreciate that.

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No, I really appreciate everyone,

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jumping on the call and listening to us.

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And this, this call is really for you.

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And there's, there's so much information that we can go

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through and we're just you know, and we will go

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through the pool performances, et cetera.

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And, and I think a lot of people really want to know what,

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what's your take on how things are going to unfold?

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And I think we are getting, as Josh talked,

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just talked about, is we are starting to get into

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that transition point where, you know,

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is the economy going to deteriorate

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or is it going to continue to do well?

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And we're going to get into that with a couple

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of slides near the end of the presentation.

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But we'll try to go through this relatively quickly

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because I do like having questions from clients.

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There's never a dumb question.

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Every question is a legitimate question.

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So if you do have anything on top of your head

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that you want to ask, please, please ask them.

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Because we're, that's what we're here for.

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So let's start with the Canadian Equity Pool.

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Canadian Equity Pool did underperform both the quarter

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and year to date versus its benchmark.

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It was up

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0.8 in a quarter

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and up 3.6 year to date, which slightly, slightly lagged

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Actually, for the quarter it outperformed,

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but year to date it's lagged.

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But I would point out over the, over the longer term, it's,

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Canadian Equity Pool is being in line with the,

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the TSX index, a bit underweight, energy,

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over the past year to date has had a bit

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of a negative impact on a relative basis.

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If we look at the Global Equity Pool again it,

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it has lagged, which is, is not surprising.

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And I'll get into that just shortly.

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But year to date was up one point,

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or sorry for the quarter up, 1.9 year to date up 10.1,

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Which does lag the benchmark,

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which was up 14.9%.

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Now, a couple of things were due to that, very similar

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to the last quarter when we chatted cash drag.

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We have about, about 13% cash in the portfolio

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because we are concerned,

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and we have been concerned about,

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the economic environment and,

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and the ultimate impact on stocks.

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And that's why we continue to hold a bit of

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a higher weighting to cash.

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We do have a bit lower allocation to US Equities,

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and, you know, it's not fully in the S&P 500.

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We do have a bit of a bit of overweight in value,

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which underperforms

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and has underperformed as technology has continued to rally.

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Now, if anyone's paid attention

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to the US Equity market the past couple of days,

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we're starting to see a bit of volatility there.

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I think the markets are starting to remind us all that,

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That there is volatility in the Equity Markets.

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I think the NASDAQ was down 3.6% yesterday,

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something that we haven't seen in quite some time.

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And also we have a slightly higher allocation

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to Asian equities, which we do believe over

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time will outperform.

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They did quite well.

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Last, year to date, I think they're up about 10%.

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But with that said, they have still lagged, US Equities.

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And let's put this into context.

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And we have, I know we've talked at, ad nauseam over this,

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Where, you know, if you look at the

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S&P 500, year

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to date was up 15.2 versus an equal weighted index.

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And the difference is the S&P 500 is made up of, of it.

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It's a cap-weighted, basically, the higher,

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the bigger the company is,

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the more impact it has on the index versus an equal weighted

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where all 500 companies have the same impact on the index.

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And that 15.2 versus five is all to do

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with the magnificent seven, which includes,

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which includes Tesla.

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But more importantly,

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even if you look at the All Country World Index, that

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Josh mentioned earlier, 20% of the,

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of the All Country World Index is made up

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of just six companies.

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And they all happen to be US Equity, US names.

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So not only have the Magnificent six

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or seven had a huge impact on the

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S&P 500, it's also having a huge impact on the All Country

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World Index as well.

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And here's an interesting chart that we,

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thought we’d throw in here, is that going back over 40 years,

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this is the first time in over 40 years that the,

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that only less than 25% of

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S&P 500 stocks, that's 500 stocks,

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less than 25% have actually outperformed the

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S&P 500 index, which just goes to show you how

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concentrated this index has been

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over the past couple of years.

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Taking a look at Strategic Income, this is our,

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you know, income-oriented pool,

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1.6% for the quarter, 4% year to date.

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We still think it's going to be on, on track for,

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for a really nice kind of 8 to 9% run,

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on an annualized basis here.

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Looking at some of the top-performing funds

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now we do have the Blackstone Secured Lending fund.

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We have that in the portfolio

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because it's a daily traded vehicle,

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it just trades like a stock did quite

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well to the end of June.

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And, its underlying assets are

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private loans.

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So it is a private credit loan,

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but happens to trade on a daily basis.

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The minute that you do introduce anything that's,

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that's daily traded, that it does add an element

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of volatility in into the portfolio.

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That said it did really, really well.

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But past couple of past week we've seen a bit

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of volatility and just

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because markets have been volatile,

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another really stellar performance was the

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Aries Pathfinder Fund.

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It is an alternative credit

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strategy up 12.2% year to date.

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Some of our middle

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or our, what we call middle-market senior credit funds,

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have done really, really well over the past,

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year in fact, year to date.

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And they continue to deliver quite a bit

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of return for the portfolio.

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Some of the underlying, underperforming funds we do,

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you know, we have this, diversified credit fund.

00:13:44.935 --> 00:13:46.225

It's a daily traded.

00:13:46.365 --> 00:13:50.625

We always have maybe 10 to 12% in,

00:13:50.765 --> 00:13:52.305

in liquid strategies

00:13:52.305 --> 00:13:55.585

that will provide some liquidity if our clients need it.

00:13:56.515 --> 00:13:58.775

And thats why, that's why it's in there.

00:13:59.485 --> 00:14:02.015

Mesa West, it's a real estate income fund,

00:14:02.195 --> 00:14:04.935

was down slightly negative 0.5.

00:14:05.095 --> 00:14:07.335

I think that was the worst-performing fund year

00:14:07.335 --> 00:14:08.535

to date in the portfolio.

00:14:08.715 --> 00:14:11.255

It just has, I think there's still continued being a,

00:14:11.455 --> 00:14:13.335

a couple of challenges with Real Estate

00:14:13.955 --> 00:14:17.855

and Theorem Fund, which had a big negative impact last year.

00:14:18.425 --> 00:14:19.535

While it hasn't,

00:14:19.595 --> 00:14:21.775

and I know that at the end of the year, I said

00:14:21.935 --> 00:14:25.815

I do believe that that theorem,

00:14:25.835 --> 00:14:28.535

The headwinds it faced last year was slowly

00:14:28.535 --> 00:14:29.815

turning into tailwinds.

00:14:30.235 --> 00:14:34.415

While 0.17, end of June is not that great of return.

00:14:34.635 --> 00:14:36.655

We did get the, I think it was the May

00:14:36.655 --> 00:14:38.255

or June performance,

00:14:38.555 --> 00:14:41.575

and it, it's start, we're starting to see it come back.

00:14:41.655 --> 00:14:43.815

I think it was up about 60 basis points

00:14:43.875 --> 00:14:46.415

or 0.6% in that month.

00:14:46.515 --> 00:14:49.815

So we're starting to see something that was really had a,

00:14:49.995 --> 00:14:51.735

had a drag on performance starting

00:14:51.795 --> 00:14:54.215

to slowly add value going forward.

00:14:54.955 --> 00:14:58.575

So overall you know, I think the secured lending,

00:14:58.635 --> 00:15:01.935

the private credit, the alternative credit add huge

00:15:02.295 --> 00:15:04.295

contributions to the portfolio,

00:15:04.295 --> 00:15:07.295

or to, to this particular pool, year to year to date.

00:15:07.295 --> 00:15:10.535

And we continue to see private credit will continue

00:15:10.535 --> 00:15:12.655

to do well for the foreseeable future.

00:15:13.805 --> 00:15:17.765

A real asset, 1.2% return,

00:15:17.985 --> 00:15:20.365

for the quarter 3.2 year to date.

00:15:20.785 --> 00:15:23.525

You know, I don't think that those performances,

00:15:23.525 --> 00:15:26.925

especially the year to date of 3.2 is reflective of

00:15:26.985 --> 00:15:30.525

how we believe this will, this pool will deliver

00:15:31.075 --> 00:15:32.485

over the next couple of years.

00:15:32.505 --> 00:15:34.805

And the reason I say that is

00:15:34.805 --> 00:15:39.645

because we do have a lot of exposure to funds that,

00:15:39.985 --> 00:15:42.685

We had committed to a couple of years ago,

00:15:42.685 --> 00:15:44.845

that we will start to see

00:15:45.595 --> 00:15:48.645

significant value being extracted from these,

00:15:49.155 --> 00:15:51.925

Funds as they start to sell off

00:15:51.925 --> 00:15:54.085

or as they say in the industry, as they start

00:15:54.085 --> 00:15:55.525

to harvest some of their value.

00:15:55.985 --> 00:15:58.365

You know, one of the things I would point out is that

00:15:59.125 --> 00:16:02.365

historically, both for Private Equity and,

00:16:02.545 --> 00:16:07.375

and private infrastructure on average, when these assets

00:16:08.165 --> 00:16:13.015

tend to be sold, as the manager starts to

00:16:13.495 --> 00:16:16.735

Monetize or sell some of their assets, they tend

00:16:16.735 --> 00:16:20.695

To do them at about a 25 to 30% premium over,

00:16:20.795 --> 00:16:25.655

or sell them at a 25 to 30% premium over what the last,

00:16:26.195 --> 00:16:27.935

The last valuation was.

00:16:27.955 --> 00:16:30.975

So we, we believe there's a lot of embedded value

00:16:31.005 --> 00:16:32.775

that will eventually,

00:16:33.435 --> 00:16:36.375

be realized once these assets are sold.

00:16:36.755 --> 00:16:39.255

You know infrastructure had a pretty good

00:16:40.315 --> 00:16:41.855

return year to date.

00:16:42.155 --> 00:16:44.735

Some of the Canadian real estate funds we

00:16:44.735 --> 00:16:46.095

have did quite well.

00:16:46.735 --> 00:16:48.615

Saskatchewan farmland did well.

00:16:48.655 --> 00:16:51.135

I think it was up about 8% year to date.

00:16:51.355 --> 00:16:55.415

But on the flip side, we had a couple of

00:16:55.555 --> 00:16:57.455

Our real estate or,

00:16:57.965 --> 00:17:02.055

agriculture funds like Nuveen Global Farmland continues

00:17:02.055 --> 00:17:06.655

to underperform, Shire Farms, which as a holding

00:17:06.675 --> 00:17:10.135

of ours was down 6.3% year to date.

00:17:10.235 --> 00:17:14.695

One of the reasons for that is that at the end

00:17:14.695 --> 00:17:16.775

of 2022, they had a big uplift

00:17:16.775 --> 00:17:20.215

because their auditors told them that they had to

00:17:21.215 --> 00:17:23.695

increase the value of the portfolio

00:17:23.755 --> 00:17:26.655

to be in line with how most agriculture funds

00:17:27.305 --> 00:17:28.815

value their strategies.

00:17:29.195 --> 00:17:34.015

And then in 2023, the harvest in blueberries, especially

00:17:34.045 --> 00:17:37.895

with mostly in BC, was a lot lower than expected, which

00:17:38.455 --> 00:17:40.375

resulted in, in a bit of a write-down there,

00:17:40.875 --> 00:17:42.015

top performing funds.

00:17:42.355 --> 00:17:44.975

We had a infrastructure, ETF,

00:17:45.255 --> 00:17:47.975

whenever you see ETFs are there to provide us with

00:17:47.975 --> 00:17:49.095

that daily liquidity.

00:17:49.425 --> 00:17:51.685

Had a very strong year to date up 10%.

00:17:51.745 --> 00:17:55.325

But I could tell you as volatility increases in,

00:17:55.425 --> 00:17:57.365

in the stock market, we'll see a bit

00:17:57.365 --> 00:17:59.485

of a volatility there as well.

00:18:00.145 --> 00:18:03.765

Something we're very pleased with both

00:18:03.765 --> 00:18:08.205

of our Brookfield funds, especially the super core in,

00:18:08.305 --> 00:18:10.365

in Infrastructure Partners fund,

00:18:10.365 --> 00:18:14.045

which invest in basically core infrastructure was up

00:18:14.075 --> 00:18:15.885

5.7% year to date.

00:18:16.425 --> 00:18:17.485

Put that into perspective.

00:18:17.755 --> 00:18:21.525

When we initially committed to this fund about 3

00:18:21.525 --> 00:18:24.685

and a half years ago, their targeted return

00:18:24.745 --> 00:18:26.645

for this fund was 8%.

00:18:27.685 --> 00:18:30.065

And then, all of a sudden we get our first quarterly

00:18:30.065 --> 00:18:33.315

statement and it was up, I think about 3.5%

00:18:33.315 --> 00:18:35.595

For the quarter the first quarter.

00:18:36.095 --> 00:18:39.775

And a big reason for that was

00:18:39.775 --> 00:18:43.055

because core infrastructure tends

00:18:43.055 --> 00:18:46.135

to have these inflation accelerators built into the

00:18:46.135 --> 00:18:47.775

perform in, into the fund.

00:18:47.835 --> 00:18:51.455

So as, or into their contracts.

00:18:51.555 --> 00:18:53.855

And as, you get to the end of the year

00:18:54.115 --> 00:18:57.095

and these inflation accelerators start getting kicked,

00:18:57.095 --> 00:18:59.095

In, and that's what happened.

00:18:59.215 --> 00:19:02.575

A lot of their holdings, this inflation part of the,

00:19:02.575 --> 00:19:06.015

of the contracts got kicked in, and,

00:19:06.035 --> 00:19:07.455

and then we started to see

00:19:07.925 --> 00:19:09.615

that flow through the performance.

00:19:09.615 --> 00:19:11.935

So I suspect we'll that,

00:19:11.935 --> 00:19:16.415

that the Super core fund will probably get closer to

00:19:16.415 --> 00:19:19.015

that 9 to 10% on a forward-looking basis.

00:19:19.115 --> 00:19:21.855

So very, very pleased with that performance.

00:19:22.595 --> 00:19:24.575

I'm just going to kind of try to go

00:19:24.575 --> 00:19:25.575

through this a bit quicker.

00:19:25.795 --> 00:19:27.575

Our Strategic Growth portfolio,

00:19:27.625 --> 00:19:31.015

which is our highest growth pool, it's not going to be in line

00:19:31.605 --> 00:19:33.455

with the, the S&P 500.

00:19:34.045 --> 00:19:36.615

It's got a very low correlation with,

00:19:36.615 --> 00:19:38.095

with the Public Equity markets.

00:19:38.115 --> 00:19:40.255

So if Public Equity markets are up 20,

00:19:40.835 --> 00:19:42.935

we should not expect this to be up 20.

00:19:43.435 --> 00:19:47.015

But over the long term, there's no doubt in our minds

00:19:47.015 --> 00:19:50.855

that this will outperform, the Public Equity markets

00:19:50.965 --> 00:19:53.135

with significantly less volatility.

00:19:53.715 --> 00:19:56.655

Year to date, at the end of June was up 8%.

00:19:56.815 --> 00:20:00.115

I think, I think as of, you know,

00:20:00.215 --> 00:20:02.915

the other day it's up close to 10% year to date.

00:20:03.055 --> 00:20:06.705

So with very little volatility, there's a lot

00:20:06.705 --> 00:20:10.265

of strategies in there that contributed positively,

00:20:11.455 --> 00:20:15.315

Legal opportunities, which I'll get

00:20:15.315 --> 00:20:18.115

in a moment was an underperformer

00:20:18.175 --> 00:20:19.755

and I'll comment on that.

00:20:20.335 --> 00:20:24.475

But some of the higher performers is like the EFM,

00:20:24.895 --> 00:20:26.115

Global Growth.

00:20:26.295 --> 00:20:27.595

It's a feeder fund out of.

00:20:27.595 --> 00:20:31.275

The Cayman Islands was up 31.7%,

00:20:31.415 --> 00:20:33.755

did contribute significantly to some,

00:20:33.755 --> 00:20:35.875

of the pools overall positive performance.

00:20:36.345 --> 00:20:41.115

Another one is this PLC, was up 31%

00:20:41.115 --> 00:20:43.435

because of one of their big holdings.

00:20:43.945 --> 00:20:48.205

It's a, it's a Private Asset that we'll be looking

00:20:48.345 --> 00:20:50.205

to IPO later this year.

00:20:50.225 --> 00:20:54.245

And we're very optimistic about the potential impact on

00:20:55.405 --> 00:20:58.845

Strategic Growth over the next probably six to nine months

00:20:58.945 --> 00:21:03.515

as that thing, as that holding eventually IPO’s

00:21:03.615 --> 00:21:04.795

we had a, you know,

00:21:04.985 --> 00:21:08.155

Overbay Technology Leaders fund was up 21%.

00:21:08.375 --> 00:21:11.635

That's most of the, actually not most, almost all

00:21:11.635 --> 00:21:13.755

of the holdings are AI related.

00:21:13.995 --> 00:21:15.555

I know that there's one

00:21:15.555 --> 00:21:19.195

of the biggest holdings is Open AI, which many of you

00:21:19.755 --> 00:21:22.395

probably recognize

00:21:23.345 --> 00:21:27.635

Open AI is the developer of Chat GPT.

00:21:27.655 --> 00:21:30.955

And there's been a lot of talk about Chat GPT recently, so

00:21:30.955 --> 00:21:32.675

That did exceptionally well.

00:21:33.095 --> 00:21:34.835

If you look at the areas of weakness,

00:21:35.945 --> 00:21:39.485

Pender Technology Fund, very small holding was down 13%.

00:21:39.995 --> 00:21:44.005

That is really what we call in the industry is the J curve.

00:21:44.185 --> 00:21:46.885

The fees have eaten into a lot of the,

00:21:46.905 --> 00:21:48.485

returns.

00:21:48.485 --> 00:21:50.685

Nothing wrong with the underlying holdings,

00:21:51.115 --> 00:21:53.525

it's just the fees right now are overwhelming.

00:21:53.865 --> 00:21:56.805

Anything positive

00:21:56.805 --> 00:21:59.805

on the underlying holding side one

00:21:59.805 --> 00:22:03.125

of our Overbay funds was down 9.2%.

00:22:03.665 --> 00:22:06.445

Not a big concern there.

00:22:06.825 --> 00:22:11.445

And because as we get going forward, I think the,

00:22:11.665 --> 00:22:14.565

One of the things about Private Equity is

00:22:14.565 --> 00:22:17.645

that the performances that you're getting kind of reflect

00:22:17.715 --> 00:22:20.965

what happened in the public markets two to three,

00:22:21.105 --> 00:22:22.285

one to two quarters ago.

00:22:22.345 --> 00:22:26.365

So as we start getting, our Q3 statements are going to reflect,

00:22:27.145 --> 00:22:29.005

More of the positive returns

00:22:29.005 --> 00:22:30.685

that happened in the second quarter

00:22:30.905 --> 00:22:32.285

of this year in the public markets.

00:22:32.345 --> 00:22:35.165

So there is a correlation between public

00:22:35.165 --> 00:22:37.165

and Private Equity, but with a lag.

00:22:37.545 --> 00:22:41.365

And then the premium, Pretium Legal Opportunities

00:22:41.475 --> 00:22:46.245

Fund was down 8.3 that had everything to do with, with fees.

00:22:46.585 --> 00:22:50.925

The J curve I recently chatted with Pretium and,

00:22:50.985 --> 00:22:53.805

and we should see a very nice bump in returns.

00:22:54.225 --> 00:22:56.245

Some of the,

00:22:57.095 --> 00:23:01.285

legal cases they worked on have panned out,

00:23:01.625 --> 00:23:03.965

and we're going to see that flow through

00:23:04.025 --> 00:23:07.765

as we get our Q2 statement probably in August.

00:23:07.905 --> 00:23:11.125

So it's a very, very well diversified,

00:23:11.505 --> 00:23:12.565

strategy.

00:23:12.755 --> 00:23:14.405

It's not just Private Equity.

00:23:15.365 --> 00:23:18.395

There are other things in there like legal opportunities

00:23:18.695 --> 00:23:20.955

and collateralized loan obligations

00:23:21.655 --> 00:23:24.555

and you know,

00:23:24.555 --> 00:23:28.795

special situations which are performing very, very well.

00:23:28.895 --> 00:23:30.835

And, there's no doubt in my mind

00:23:30.835 --> 00:23:33.275

that this fund will continue to do very well,

00:23:33.535 --> 00:23:34.875

Over the balance of the year.

00:23:36.475 --> 00:23:39.295

So let's, Josh, I'm going to pause because

00:23:39.315 --> 00:23:41.655

and see if you've got any questions.

00:23:41.775 --> 00:23:44.975

I apologize, I should have paused if you have any comments.

00:23:45.545 --> 00:23:48.005

No, that's okay. You were on a roll, so I,

00:23:48.425 --> 00:23:49.645

didn't want to interrupt, didn't stop.

00:23:49.795 --> 00:23:50.805

Yeah, exactly. Alright.

00:23:50.905 --> 00:23:53.605

The only thing I noticed, though, Brent, that I,

00:23:53.765 --> 00:23:54.965

I maybe just want to highlight.

00:23:55.305 --> 00:23:57.605

You know, we take a look at the performance of some

00:23:57.605 --> 00:23:59.405

of these funds, and we're highlighting some

00:23:59.405 --> 00:24:00.445

of the high performers.

00:24:00.855 --> 00:24:02.565

We're looking at areas of weakness.

00:24:03.025 --> 00:24:05.245

But for some of these funds, you know,

00:24:05.245 --> 00:24:07.765

we're measuring performance here over a very, very,

00:24:08.185 --> 00:24:09.325

short time horizon.

00:24:09.465 --> 00:24:11.445

So we're just looking at the last six

00:24:11.445 --> 00:24:12.725

or seven months of performance.

00:24:13.145 --> 00:24:15.565

And realistically, a lot of these funds

00:24:15.565 --> 00:24:18.965

that you see under areas of weakness, in fact, have

00:24:19.605 --> 00:24:22.845

positive investment performance since inception

00:24:22.905 --> 00:24:26.365

or since we initially invested capital into that strategy.

00:24:26.985 --> 00:24:29.565

And so it's, it's not to say that, you know,

00:24:29.565 --> 00:24:31.925

these particular funds have been underperforming

00:24:31.985 --> 00:24:34.045

and have always underperformed.

00:24:34.385 --> 00:24:35.525

I'm thinking back

00:24:35.525 --> 00:24:37.805

to Shire Farms within the Real Asset Pool.

00:24:38.265 --> 00:24:43.005

We got a significant bump in 2022 as a result of

00:24:43.005 --> 00:24:44.725

that revaluation that you mentioned.

00:24:45.145 --> 00:24:47.965

And then we saw as a result of,

00:24:47.995 --> 00:24:50.805

weak harvest last year in the blueberries,

00:24:51.145 --> 00:24:52.845

we saw a little bit of negative

00:24:52.845 --> 00:24:54.205

performance so far, year to date.

00:24:54.205 --> 00:24:57.805

But overall, we have a positive investment return

00:24:58.075 --> 00:25:01.285

with Shire Farms since we initially invested capital.

00:25:02.095 --> 00:25:04.465

Yeah, no, that's a really good point,

00:25:04.465 --> 00:25:07.065

especially when you're dealing with private assets.

00:25:07.505 --> 00:25:08.585

I don't think it's really fair

00:25:08.685 --> 00:25:11.625

to measure private assets on a quarter to quarter or,

00:25:11.645 --> 00:25:13.785

or, to be honest, even over a one-year period.

00:25:13.965 --> 00:25:16.985

Now, I'll look at the, for example, the areas

00:25:17.045 --> 00:25:18.185

of weakness right here.

00:25:18.285 --> 00:25:20.225

Pender Technology Fund, Pretium,

00:25:20.295 --> 00:25:22.505

they're both two very new funds.

00:25:23.085 --> 00:25:27.625

And usually in the initial

00:25:27.765 --> 00:25:31.905

or two of private assets, they tend to be kind

00:25:31.905 --> 00:25:33.385

of flat to slightly negative.

00:25:33.805 --> 00:25:35.945

The Pender Fund, that negative return

00:25:35.965 --> 00:25:37.425

is all due to fees.

00:25:37.895 --> 00:25:39.905

It's, it's basically called the J curve.

00:25:40.205 --> 00:25:42.505

And the Legal Opportunities fund is,

00:25:42.565 --> 00:25:44.225

is about a year and a half old.

00:25:44.885 --> 00:25:47.305

Again, that has to do with fees,

00:25:47.445 --> 00:25:51.225

but as we go forward as these assets kind

00:25:51.225 --> 00:25:53.945

of mature, as time goes by, you tend

00:25:53.945 --> 00:25:55.585

to get a more positive return.

00:25:55.885 --> 00:25:56.985

And the Overbay fund,

00:25:57.035 --> 00:26:00.025

we're probably up about 40% since inception on

00:26:00.025 --> 00:26:01.745

that one, it just hasn't happened.

00:26:01.745 --> 00:26:05.585

To have year to date is, has had a bit of a tough time,

00:26:06.245 --> 00:26:07.705

but one of the reasons for

00:26:07.705 --> 00:26:12.385

that is Private Equity in general, up to even

00:26:12.385 --> 00:26:14.545

to today for the most part.

00:26:14.965 --> 00:26:18.945

You know, Private Equity has had one

00:26:18.945 --> 00:26:22.345

of its worst environments in probably close to 20 years.

00:26:22.525 --> 00:26:25.625

So it's just like saying, you know

00:26:25.765 --> 00:26:29.545

if equities are down 25%, it's going to be very, very difficult

00:26:29.545 --> 00:26:30.905

to see, you know,

00:26:31.055 --> 00:26:33.625

have any holdings in public equities do well.

00:26:33.625 --> 00:26:34.985

And it's the same thing with

00:26:35.215 --> 00:26:36.865

Private Equity.

00:26:36.895 --> 00:26:38.545

It's just been a difficult environment,

00:26:38.605 --> 00:26:39.665

but we expect to see

00:26:39.665 --> 00:26:41.785

that gradually improve in the years to come.

00:26:42.235 --> 00:26:46.895

Right. So let's talk about the macro environment,

00:26:46.895 --> 00:26:50.705

and one of the questions we've had in the past is,

00:26:50.705 --> 00:26:51.865

where do you think inflation is

00:26:51.965 --> 00:26:53.185

Where are interest rates are going?

00:26:53.185 --> 00:26:55.145

And you really can't talk about

00:26:56.585 --> 00:26:59.625

interest rates without looking at the two most important

00:26:59.775 --> 00:27:02.425

aspects to drive the outlook for interest rates.

00:27:02.645 --> 00:27:06.745

And that is number one, inflation, which you addressed,

00:27:06.765 --> 00:27:09.865

in your initial comments and, and economic activity.

00:27:10.395 --> 00:27:13.865

Right? So why do Central Banks cut interest rates

00:27:14.805 --> 00:27:16.745

or why do Central Banks raise rates?

00:27:16.745 --> 00:27:18.545

Well, inflation is getting out of control,

00:27:18.805 --> 00:27:21.865

and economic activity is very, very strong.

00:27:21.865 --> 00:27:24.705

That could potentially lead to a rise in inflation.

00:27:24.885 --> 00:27:27.825

So what, and, and that's why Central Banks raise rates.

00:27:27.825 --> 00:27:29.625

Well, why do Central Banks cut rates?

00:27:29.655 --> 00:27:31.945

Well, it's because inflation is starting to come down,

00:27:32.745 --> 00:27:34.625

probably because economic activity is

00:27:34.625 --> 00:27:35.745

start starting to soften.

00:27:35.885 --> 00:27:37.545

So if you look at the chart on the left,

00:27:37.765 --> 00:27:40.625

you could see right across the developed world,

00:27:40.625 --> 00:27:44.785

inflation has certainly come down significantly in Canada,

00:27:45.295 --> 00:27:47.185

even more than the rest of the world.

00:27:47.325 --> 00:27:49.825

And that's why we've seen already Central Bank,

00:27:49.825 --> 00:27:52.305

the Canadian Central Bank cut rates twice.

00:27:53.045 --> 00:27:55.665

I think Switzerland is the other Central Cank,

00:27:55.665 --> 00:27:57.545

developed central bank to have cut rates.

00:27:59.015 --> 00:28:01.625

Look at the economic surprise index.

00:28:01.775 --> 00:28:06.505

This is an index that shows how is that

00:28:07.105 --> 00:28:09.705

economic activity starting to look.

00:28:10.165 --> 00:28:14.025

And anytime you get below zero with this index, it means

00:28:14.025 --> 00:28:18.625

that economic activity is softening, it's actually,

00:28:18.815 --> 00:28:19.865

turning negative.

00:28:20.585 --> 00:28:21.905

Anything above zero means

00:28:21.905 --> 00:28:24.545

that economic activity is starting to strengthen.

00:28:24.645 --> 00:28:26.665

So you put these two together

00:28:27.285 --> 00:28:31.225

and it leads to Central Banks starting

00:28:31.445 --> 00:28:32.665

to cut rates.

00:28:32.765 --> 00:28:33.985

Now, some Central Banks,

00:28:33.985 --> 00:28:38.185

especially in the US, say inflation is still a bit stickier.

00:28:38.205 --> 00:28:41.735

We want to see a bit more evidence

00:28:41.765 --> 00:28:44.855

that inflation's coming down before we cut rates.

00:28:45.035 --> 00:28:47.175

But, so this is the main, you know,

00:28:47.175 --> 00:28:50.495

looking at interest rates, this is really what's going

00:28:50.495 --> 00:28:54.015

to drive Central Bank decision-making.

00:28:54.395 --> 00:28:57.775

And because inflation in Canada has come down,

00:28:58.045 --> 00:29:00.855

significantly, the Bank

00:29:00.855 --> 00:29:02.255

of Canada felt comfortable

00:29:02.325 --> 00:29:05.855

that they could cut rates without having a, you know,

00:29:06.015 --> 00:29:08.095

a u-turn on inflation.

00:29:10.235 --> 00:29:11.815

I think you, you said how,

00:29:12.155 --> 00:29:15.475

or you had a question, Josh, about, you know,

00:29:15.495 --> 00:29:18.155

is the US consumer in trouble?

00:29:19.205 --> 00:29:20.895

Well, let's take a look at the, you know,

00:29:20.895 --> 00:29:23.255

and when you look at the headlines, it's like,

00:29:23.395 --> 00:29:25.415

US economy's doing great, right?

00:29:25.475 --> 00:29:26.895

Why would, why would the,

00:29:27.955 --> 00:29:29.855

why would you even need to cut rates?

00:29:29.955 --> 00:29:31.895

And, I agree with that assessment.

00:29:31.935 --> 00:29:35.775

I don't think, the US Federal Reserve is,

00:29:35.955 --> 00:29:38.455

is necessarily has to cut rates today.

00:29:38.835 --> 00:29:41.325

Economic, actually, the,

00:29:42.045 --> 00:29:45.125

GDP came out in the US this morning, quarter over quarter,

00:29:45.555 --> 00:29:46.645

much higher than expected.

00:29:47.185 --> 00:29:49.245

But I think there's things below the surface

00:29:49.395 --> 00:29:50.925

that are starting to percolate

00:29:51.155 --> 00:29:52.925

that I think everyone should be aware of.

00:29:53.145 --> 00:29:57.955

If you look at the right-hand side, credit card

00:29:58.635 --> 00:30:03.555

defaults or delinquencies have risen significantly since

00:30:03.875 --> 00:30:06.275

probably 2021. Auto loans.

00:30:06.695 --> 00:30:10.555

The delinquencies have,

00:30:10.695 --> 00:30:12.155

risen as well.

00:30:12.505 --> 00:30:16.435

They're actually getting close to where they were prior

00:30:16.535 --> 00:30:20.355

to the 2008 financial crisis.

00:30:21.135 --> 00:30:24.275

And if you look at the left-hand chart, these are

00:30:24.275 --> 00:30:27.835

what commercial bank interest rates are for credit cards,

00:30:28.155 --> 00:30:29.355

personal loans, and new car loans.

00:30:29.855 --> 00:30:32.915

So you've got a big part of the US economy,

00:30:33.135 --> 00:30:38.035

the consumer that is over-indebted,

00:30:38.035 --> 00:30:41.435

they're starting to default on credit card

00:30:41.455 --> 00:30:43.715

and auto loans and on the flip and,

00:30:43.715 --> 00:30:44.755

and on the other hand,

00:30:44.885 --> 00:30:46.795

their interest rates are starting to go up.

00:30:46.895 --> 00:30:50.515

So don't forget, one of the most important aspects

00:30:50.515 --> 00:30:52.995

of the US economy is that 70%

00:30:53.055 --> 00:30:55.595

of the US economy is driven

00:30:56.175 --> 00:30:58.395

by the consumer, right?

00:30:58.535 --> 00:31:03.195

So how the consumer goes is how the US economy is going to go.

00:31:03.535 --> 00:31:08.115

And if the rise

00:31:08.175 --> 00:31:09.955

in delinquencies and credit cards

00:31:09.975 --> 00:31:13.555

and auto loans is any indication of what's going on

00:31:13.555 --> 00:31:17.755

underneath the hood, I think,

00:31:18.355 --> 00:31:20.275

I would be a bit concerned about the US

00:31:20.275 --> 00:31:21.915

economy going forward.

00:31:23.145 --> 00:31:26.965

So here I say, you know, can the US avoid a recession?

00:31:27.585 --> 00:31:29.405

You know, actually

00:31:29.405 --> 00:31:33.445

before I touch on this, when you look at household deposits,

00:31:34.715 --> 00:31:38.895

you could see there's been a massive drop

00:31:38.895 --> 00:31:42.855

that this gray line here is around 2020.

00:31:43.875 --> 00:31:47.055

And then we went through this massive

00:31:47.575 --> 00:31:51.295

increase in household deposits due to the Covid and,

00:31:51.295 --> 00:31:55.535

and governments providing you know,

00:31:55.625 --> 00:31:57.455

money to households.

00:31:57.915 --> 00:32:01.215

But that has really come off, fallen off a cliff.

00:32:02.325 --> 00:32:06.385

And so a lot of those household deposits have now,

00:32:06.735 --> 00:32:09.345

many households have now run out of

00:32:09.345 --> 00:32:12.705

that Covid savings and they have no savings left.

00:32:13.565 --> 00:32:16.745

So that's going to have an impact on consumer spending.

00:32:16.765 --> 00:32:18.705

And on the left-hand chart, there's this,

00:32:19.015 --> 00:32:23.065

it's called the “MEL rule”, and it's based upon an economist.

00:32:23.065 --> 00:32:26.505

And basically what it says is the three-month moving

00:32:26.535 --> 00:32:30.835

average, if the three-month moving average

00:32:31.215 --> 00:32:35.795

of unemployment rises about point,

00:32:35.945 --> 00:32:40.205

5% above,

00:32:40.505 --> 00:32:44.205

an 18-month low, it's actually in the US is 0.25%

00:32:44.575 --> 00:32:46.045

above its 18-month low.

00:32:46.665 --> 00:32:50.165

You tend to see a recession occur.

00:32:50.545 --> 00:32:53.085

So if you look, then there's one that's called,

00:32:53.085 --> 00:32:56.005

the “SAHM rule”, very similar data.

00:32:56.545 --> 00:33:01.085

The “SAHM rule” is a three-month moving average of 0.5%

00:33:01.095 --> 00:33:02.445

above its 12 month low.

00:33:02.865 --> 00:33:05.085

So where you see these gray bars,

00:33:05.715 --> 00:33:07.685

that signifies a recession.

00:33:08.225 --> 00:33:12.125

And so anytime you see these things rise

00:33:12.735 --> 00:33:14.605

above here is 0.25

00:33:14.705 --> 00:33:18.885

and hear above 0.5, the “SAHM rule” 0.5, the “MEL Rule” it,

00:33:19.015 --> 00:33:22.285

we've always seen a recession occur.

00:33:23.835 --> 00:33:25.475

I mean, this is historic data.

00:33:26.215 --> 00:33:28.555

You can make up your mind on how the,

00:33:28.575 --> 00:33:32.595

the US economy is going to unfold.

00:33:32.915 --> 00:33:34.435

I tend not to want

00:33:34.455 --> 00:33:36.675

to say it's going to be different this time.

00:33:36.915 --> 00:33:40.035

I know that there's, the some of

00:33:40.175 --> 00:33:42.795

the worst, words you can use in,

00:33:42.815 --> 00:33:44.515

in finance, it's different this time.

00:33:45.435 --> 00:33:47.355

I don't think it's going to be different this time.

00:33:47.495 --> 00:33:51.915

So if, if this isn't, is any indication of

00:33:52.015 --> 00:33:55.475

how the US economy is going to unfold,

00:33:55.975 --> 00:34:00.355

my money is on that, the US will, at some point,

00:34:00.495 --> 00:34:02.115

either the end of this year

00:34:02.175 --> 00:34:06.635

or into 2025 will eventually go into a recession.

00:34:06.655 --> 00:34:08.035

Not saying it's a deep recession,

00:34:08.495 --> 00:34:11.235

but it will probably be a recession.

00:34:12.335 --> 00:34:13.515

So how about Canada?

00:34:14.665 --> 00:34:18.235

Very same rules as in Canada.

00:34:18.505 --> 00:34:22.555

This one says that if the three-month moving average

00:34:22.735 --> 00:34:27.275

of the unemployment rate rises 0.65%

00:34:27.725 --> 00:34:29.395

above its 18-month low,

00:34:30.305 --> 00:34:32.515

then eventually it leads to a recession.

00:34:32.735 --> 00:34:35.155

And the top one is overall in Canada.

00:34:35.655 --> 00:34:38.555

The bottom one is just for provinces.

00:34:39.085 --> 00:34:42.675

There hasn't been a recession since over the past 40 years

00:34:43.265 --> 00:34:45.595

that where this rule that where the,

00:34:45.655 --> 00:34:50.315

the rise in the unemployment rate did not trigger a recession.

00:34:50.975 --> 00:34:54.355

So, you know, again,

00:34:54.585 --> 00:34:56.755

I'll let everyone else make up their mind,

00:34:56.895 --> 00:35:01.835

but I would say that Canada as well

00:35:02.105 --> 00:35:04.475

will eventually dip into a recession.

00:35:04.615 --> 00:35:08.715

How deep it is? I think it'll be deeper than,

00:35:08.865 --> 00:35:13.395

what the US economy will go into.

00:35:13.415 --> 00:35:17.415

And the reason I say that is Canada is so tied

00:35:17.755 --> 00:35:19.255

to the housing market,

00:35:19.395 --> 00:35:22.775

and if you just look at these three charts here, which is

00:35:23.435 --> 00:35:26.535

If you're not familiar with this, it might come

00:35:26.555 --> 00:35:30.345

As a shock to see that

00:35:30.525 --> 00:35:34.585

on the left-hand side, real height house prices since 2000.

00:35:34.725 --> 00:35:39.205

So 24 years, have risen close to 200% in Canada.

00:35:39.945 --> 00:35:44.685

Put that into context with the US 80% price to income

00:35:46.005 --> 00:35:47.795

homes in Canada are close

00:35:47.895 --> 00:35:52.875

to about 110% versus just about 25% in the US

00:35:53.375 --> 00:35:56.515

and price to rent in houses in Canada

00:35:57.215 --> 00:36:01.355

up almost 200% versus about 40% for, for the US.

00:36:01.535 --> 00:36:04.385

So I think that, you know,

00:36:04.525 --> 00:36:06.865

our economy is very tied

00:36:06.925 --> 00:36:08.865

and leveraged to the housing market.

00:36:09.005 --> 00:36:12.345

And if we do see a recession in Canada, I think we will,

00:36:12.525 --> 00:36:17.185

we will experience, a bit of a deeper recession than

00:36:17.375 --> 00:36:18.585

what the US will

00:36:18.585 --> 00:36:20.865

because they're not as tied

00:36:21.085 --> 00:36:24.945

to the housing market the way that Canada is.

00:36:25.995 --> 00:36:28.775

So next question would be, so what's going to be the impact

00:36:29.435 --> 00:36:31.015

On the stock market?

00:36:31.195 --> 00:36:34.995

So again, I'm going to let everyone else,

00:36:35.175 --> 00:36:37.995

I'm just going to throw some data out here to show

00:36:38.825 --> 00:36:40.155

what could potentially happen

00:36:40.215 --> 00:36:41.395

and I'll walk you through this.

00:36:41.495 --> 00:36:44.015

So on the left-hand side,

00:36:44.035 --> 00:36:46.695

you see these forward price earnings ratio.

00:36:46.695 --> 00:36:50.855

Right now the PE forward looking PE is in the

00:36:50.855 --> 00:36:54.365

S&P 500 is about 21, 22 times.

00:36:55.485 --> 00:36:59.325

Historically, over the past, you know, 10, 15 years,

00:36:59.435 --> 00:37:00.765

it's averaged about 16.

00:37:01.825 --> 00:37:03.565

So letS walk through this

00:37:03.625 --> 00:37:07.245

and say, well, yeah, I do think that if

00:37:07.365 --> 00:37:09.685

a recession occurs, we're going to see

00:37:10.665 --> 00:37:14.685

the forward per PE go to its long-term mean of

00:37:14.825 --> 00:37:15.965

around 16 times.

00:37:16.945 --> 00:37:18.925

But at the same time, we think that

00:37:18.925 --> 00:37:21.405

during a recession, we will see

00:37:22.125 --> 00:37:25.245

earnings estimate come down 10%.

00:37:25.785 --> 00:37:27.805

So if you do believe that it's,

00:37:27.805 --> 00:37:30.805

it's basically a matrix saying, okay, if we do see

00:37:31.485 --> 00:37:33.805

earnings estimate declined by 10%

00:37:34.185 --> 00:37:38.525

and the forward PE gets down to 16, we should see the

00:37:38.525 --> 00:37:41.445

S&P 500 at about a 3,700 reading.

00:37:42.075 --> 00:37:43.165

Well, what does that mean?

00:37:43.395 --> 00:37:46.605

Well, the, the S&P, I haven't checked recently, but the

00:37:46.605 --> 00:37:48.205

S&P was at about 5,200,

00:37:48.385 --> 00:37:50.405

and that would signify about a

00:37:51.035 --> 00:37:54.495

32% correction in the S&P 500

00:37:55.355 --> 00:37:56.735

So one thing I would point out,

00:37:56.755 --> 00:37:58.855

during the last three recessions,

00:37:59.495 --> 00:38:02.095

earnings estimates fell anywhere from 19%

00:38:02.095 --> 00:38:04.175

to 39%, not just 10%.

00:38:04.195 --> 00:38:05.575

So this could be conservative.

00:38:06.085 --> 00:38:09.575

I'll let everyone else determine you, you decide on your own

00:38:09.625 --> 00:38:13.135

where if you think that this is possible, if you don't think

00:38:13.135 --> 00:38:16.775

The PE is going to go back down to 16,

00:38:16.925 --> 00:38:18.855

it's going to stay at, at 21 times.

00:38:19.835 --> 00:38:24.015

If you look historically at a 21, 22 time PE ratio,

00:38:24.155 --> 00:38:26.055

the future 10-year returns tend

00:38:26.055 --> 00:38:27.895

to be in the 3 to 4% range.

00:38:28.395 --> 00:38:33.135

So where the current price earnings ratio is,

00:38:33.325 --> 00:38:37.725

does not point to robust returns, especially in the,

00:38:37.745 --> 00:38:39.685

for the S&P 500 going forward.

00:38:40.065 --> 00:38:41.525

Now that's for the broad

00:38:41.525 --> 00:38:45.785

S&P 500, you know, may be an equal weighted

00:38:45.785 --> 00:38:49.385

S&P 500is going to do better

00:38:49.855 --> 00:38:54.105

than the broad S&P 500 that's cap weighted.

00:38:54.205 --> 00:38:59.065

So just throwing some data out here

00:38:59.135 --> 00:39:03.265

that shows you historically, you know,

00:39:03.265 --> 00:39:05.065

showing you historical data

00:39:05.565 --> 00:39:07.745

and how markets tend

00:39:07.745 --> 00:39:10.105

to behave when some of these things happen.

00:39:10.325 --> 00:39:12.905

So do we think there's going to be a recession?

00:39:13.365 --> 00:39:15.065

Yes, we think there's going to be a recession.

00:39:15.165 --> 00:39:17.505

Do we think there there's going to be a sell off in the

00:39:17.505 --> 00:39:18.545

S&P 500?

00:39:19.005 --> 00:39:21.265

Yes, we do. Is it going to be 30%?

00:39:21.625 --> 00:39:23.585

We don't really know.

00:39:24.085 --> 00:39:25.465

Could it be more than that?

00:39:25.525 --> 00:39:26.825

It could be, could it be less than that?

00:39:26.885 --> 00:39:31.505

It could be, could the PE stay at 21?

00:39:31.665 --> 00:39:33.625

I just don't think it's going to remain at 20,

00:39:33.885 --> 00:39:35.865

at 21 times earnings.

00:39:36.025 --> 00:39:38.625

I think there's going to be an eventual, a reversion

00:39:38.625 --> 00:39:41.905

to the mean, which will take it down somewhere closer to 16,

00:39:42.345 --> 00:39:46.985

17 times, which will signify a correction in the,

00:39:47.045 --> 00:39:48.345

in the S&P 500.

00:39:48.445 --> 00:39:50.625

Now, luckily for most of our clients,

00:39:50.725 --> 00:39:53.585

we don't have 60% exposure to the stock,

00:39:53.605 --> 00:39:54.905

to the public stock market.

00:39:55.525 --> 00:39:57.785

We're much more diversified than that.

00:39:57.845 --> 00:40:00.665

And that's why you want to be,

00:40:00.665 --> 00:40:03.705

you don't want to be diversified when equities are up 25%,

00:40:03.725 --> 00:40:05.305

but you want to be diversified when,

00:40:05.305 --> 00:40:07.105

when equities go down 30%.

00:40:07.325 --> 00:40:10.785

And most of our clients

00:40:10.785 --> 00:40:12.905

should on a relative basis, do much,

00:40:12.905 --> 00:40:15.865

better than the traditional type of portfolio.

00:40:16.045 --> 00:40:17.665

So I'm going to stop there.

00:40:17.665 --> 00:40:20.545

Unfortunately, I've talked for 40 minutes or 35 minutes.

00:40:20.865 --> 00:40:23.065

I was trying to keep this down to 25

00:40:23.405 --> 00:40:26.665

and I'm going to hand it over to Josh now.

00:40:27.255 --> 00:40:29.545

Well I'm partly blame for that, Brent.

00:40:29.725 --> 00:40:31.945

I took all to blame. Little better. Yeah.

00:40:32.185 --> 00:40:34.745

Ultimate blame probably. Just

00:40:34.765 --> 00:40:36.145

to touch on your last point there.

00:40:36.345 --> 00:40:38.105

Because I think it's important to highlight,

00:40:38.165 --> 00:40:41.385

and I suspect we're going to get a lot of questions in regards

00:40:41.405 --> 00:40:43.705

to where the economy's heading

00:40:44.045 --> 00:40:45.545

and what that means for markets.

00:40:45.925 --> 00:40:49.905

Because we often, we don't see the stock market

00:40:50.005 --> 00:40:52.385

and the economy move perfectly in tandem.

00:40:52.725 --> 00:40:55.825

And sometimes the investor reaction to some of

00:40:55.825 --> 00:40:59.825

that economic data goes in the opposite direction,

00:40:59.925 --> 00:41:01.105

as to what we would think.

00:41:01.565 --> 00:41:03.585

And so when we take a look at the

00:41:03.585 --> 00:41:07.465

S&P 500, you were just showing us, that chart

00:41:07.465 --> 00:41:10.185

that gave an indication of the price to earnings.

00:41:10.445 --> 00:41:11.665

What's interesting there, you

00:41:11.665 --> 00:41:14.345

and I were chatting about this earlier,

00:41:14.345 --> 00:41:18.785

S&P 500 equal weight, price to earnings is 18

00:41:18.805 --> 00:41:21.105

to 19 times versus the

00:41:21.105 --> 00:41:24.825

S&P 500, is sitting over 25.

00:41:25.445 --> 00:41:28.665

And so what that tells me is that

00:41:29.325 --> 00:41:32.985

the outperformance we're seeing from some

00:41:33.085 --> 00:41:35.765

of those technology companies is we're,

00:41:35.765 --> 00:41:37.685

Seeing a valuation that's at a premium.

00:41:38.265 --> 00:41:39.525

And investors seem

00:41:39.525 --> 00:41:42.605

to be optimistic about those particular companies

00:41:42.865 --> 00:41:44.365

for a variety of different reasons.

00:41:44.965 --> 00:41:48.685

I think some of that is passive investment vehicles gaining

00:41:48.815 --> 00:41:51.085

popularity amongst retail investors.

00:41:51.385 --> 00:41:54.005

So individuals simply putting money into the market

00:41:54.145 --> 00:41:56.365

to mirror the S&P 500

00:41:56.415 --> 00:41:59.285

those investment vehicles are buying the companies within

00:41:59.345 --> 00:42:01.405

the index to the weighting of the index

00:42:01.405 --> 00:42:02.685

with no regard for price.

00:42:03.105 --> 00:42:04.365

And so simply as a result

00:42:04.365 --> 00:42:06.005

of seeing capital come into the markets,

00:42:06.525 --> 00:42:08.405

I think you're seeing some of those prices go up.

00:42:08.885 --> 00:42:11.005

I think a lot of the optimism has been

00:42:11.005 --> 00:42:13.325

that these technology companies are going to be able

00:42:13.325 --> 00:42:16.045

to grow their revenue exponentially over the

00:42:16.045 --> 00:42:17.205

next 5 years, 10 years

00:42:17.465 --> 00:42:19.645

Some of that is going to be leveraging AI

00:42:19.645 --> 00:42:20.805

technology and the like.

00:42:21.265 --> 00:42:24.565

And you know, from what I'm hearing from you is we,

00:42:24.565 --> 00:42:27.205

might see a slowdown in some of the economic activity

00:42:27.785 --> 00:42:31.445

and investors might have less optimism and

00:42:31.445 --> 00:42:34.245

therefore we might see the valuations, particularly

00:42:34.505 --> 00:42:36.885

for those companies come down.

00:42:37.465 --> 00:42:40.845

But across the board, relatively speaking

00:42:41.085 --> 00:42:43.445

Because we know that the market trades within a range

00:42:43.705 --> 00:42:47.085

of these price-to-earnings ratios, the general

00:42:47.285 --> 00:42:50.645

S&P 500 seems to be within a normal range currently.

00:42:51.105 --> 00:42:52.525

And so it could be the case that

00:42:53.355 --> 00:42:55.055

we don't see other industries

00:42:55.075 --> 00:42:58.575

and sectors like healthcare utility have the,

00:42:58.635 --> 00:43:00.655

the same price decrease if we were

00:43:00.655 --> 00:43:02.015

to see an economic recession.

00:43:02.555 --> 00:43:04.415

And so my question to you is

00:43:04.915 --> 00:43:07.415

how have we changed the Global Equity Pool

00:43:07.755 --> 00:43:11.175

to reflect this outlook, that both the Canadian

00:43:11.275 --> 00:43:13.135

and US consumer are under pressure and

00:43:13.135 --> 00:43:15.735

therefore we might see an economic slowdown.

00:43:16.215 --> 00:43:17.895

How have we changed the composition of

00:43:17.895 --> 00:43:19.855

that Global Equity pool to make sure

00:43:19.855 --> 00:43:21.575

that we are going to maintain performance?

00:43:22.045 --> 00:43:24.295

That's a great question.

00:43:24.355 --> 00:43:26.375

And you know, we started

00:43:27.135 --> 00:43:29.775

actually about a year ago making some pretty significant

00:43:29.775 --> 00:43:33.415

changes to the Global Equity Pool.

00:43:33.875 --> 00:43:37.895

Bringing in more manager diversification.

00:43:38.395 --> 00:43:42.255

You know, one of the big ones that we, one

00:43:42.255 --> 00:43:46.055

of the big changes was bringing in more of a value

00:43:46.575 --> 00:43:49.735

oriented manager that, over the long term has done

00:43:49.735 --> 00:43:50.735

exceptionally well,

00:43:51.155 --> 00:43:55.855

but in a growth-oriented market, just didn't participate

00:43:55.855 --> 00:43:57.735

to the same degree that just a,

00:43:58.055 --> 00:44:01.015

a technology-oriented strategy.

00:44:01.315 --> 00:44:04.415

So that was a big change.

00:44:04.675 --> 00:44:08.015

And you know it's great to see that when,

00:44:08.245 --> 00:44:10.575

the S&P 500

00:44:10.635 --> 00:44:14.495

or the NASDAQ is down this fund is actually up.

00:44:14.875 --> 00:44:19.055

So it's doing exactly what we want it to do

00:44:19.055 --> 00:44:22.895

to provide some correlation benefits that as the bigger

00:44:23.765 --> 00:44:27.055

magnificent sell off, seven are, are doing more poorly,

00:44:27.405 --> 00:44:28.935

this is actually doing quite well.

00:44:28.995 --> 00:44:30.095

So its helping

00:44:30.195 --> 00:44:32.405

to minimize the volatility in the portfolio.

00:44:32.865 --> 00:44:36.605

And I do, it's got a lot of exposure to those areas

00:44:36.635 --> 00:44:40.845

that you just talked about areas like

00:44:41.825 --> 00:44:43.765

like financials and,

00:44:43.765 --> 00:44:47.485

some of these less discretionary-oriented,

00:44:48.025 --> 00:44:49.605

sectors.

00:44:50.225 --> 00:44:54.765

even in an economic slowdown will do okay,

00:44:55.155 --> 00:44:57.325

like consumer staples, it's got a lot

00:44:57.325 --> 00:44:58.965

of consumer staples exposure.

00:44:59.645 --> 00:45:03.925

Consumer staples tend to uphold either value

00:45:03.945 --> 00:45:06.525

during tough economic times or healthcare.

00:45:06.775 --> 00:45:09.245

Those are the sectors that will continue

00:45:09.305 --> 00:45:11.085

to uphold their value

00:45:11.105 --> 00:45:13.205

in more difficult market environments

00:45:13.225 --> 00:45:14.525

or economic environment.

00:45:14.585 --> 00:45:17.565

So, you know, we've made a lot of changes to the portfolio.

00:45:18.105 --> 00:45:21.325

but you know as long

00:45:21.325 --> 00:45:24.725

as the magnificent seven continue to rally to

00:45:24.785 --> 00:45:27.965

new heights it's obviously going to lag,

00:45:27.965 --> 00:45:30.565

but that's not our base case.

00:45:30.585 --> 00:45:32.805

And I think that the Global Equity Pool

00:45:32.805 --> 00:45:34.885

will certainly add value in a more

00:45:34.885 --> 00:45:36.445

difficult market environment.

00:45:37.305 --> 00:45:39.725

again, we were talking earlier, just

00:45:39.725 --> 00:45:42.805

to bring this back to the consumer again

00:45:42.865 --> 00:45:45.205

how do you focus on some of these industries

00:45:45.225 --> 00:45:48.245

and sectors that can perform well relative,

00:45:48.665 --> 00:45:51.125

if we do see the economy start to slow down

00:45:51.345 --> 00:45:53.845

and it's back to the staples, like you mentioned.

00:45:53.905 --> 00:45:57.365

So focusing on the necessities you know, a lot

00:45:57.365 --> 00:46:00.245

of consumers are probably going to slow down on some

00:46:00.245 --> 00:46:03.685

of the spending where when you have access savings

00:46:03.855 --> 00:46:06.125

after your paycheck takes care of the mortgage

00:46:06.125 --> 00:46:07.405

and the car payment

00:46:07.625 --> 00:46:10.165

and groceries, et cetera

00:46:10.325 --> 00:46:12.005

I think you're going to see a slowdown

00:46:12.005 --> 00:46:13.085

in some of those businesses.

00:46:13.085 --> 00:46:14.685

They're not going to get the same type

00:46:14.685 --> 00:46:16.125

of profit margins that they were.

00:46:16.545 --> 00:46:18.525

And we want to focus on the businesses.

00:46:18.825 --> 00:46:21.045

we want to focus on healthcare, utilities, some

00:46:21.045 --> 00:46:22.325

of those industries and sectors

00:46:22.525 --> 00:46:24.085

where the consumer doesn't have a choice.

00:46:24.505 --> 00:46:27.125

We have to continue that spending regardless

00:46:27.185 --> 00:46:28.325

of the economic cycle.

00:46:28.745 --> 00:46:30.285

And those types of industries

00:46:30.285 --> 00:46:32.925

and sectors outperform some

00:46:32.925 --> 00:46:34.925

of these growth-oriented businesses when

00:46:34.925 --> 00:46:36.085

we do see that slowdown.

00:46:36.545 --> 00:46:38.965

Shifting gears a little bit, Brent,

00:46:38.965 --> 00:46:40.485

because we did get a question.

00:46:40.945 --> 00:46:44.325

So on the Real Asset Pool

00:46:44.735 --> 00:46:48.165

since we're talking about composition within the pools,

00:46:48.425 --> 00:46:51.845

The question here is

00:46:51.865 --> 00:46:54.605

how do we rebalance

00:46:54.605 --> 00:46:58.965

within the Real Asset Pool to some of those stronger

00:46:59.215 --> 00:47:00.845

performing investment funds

00:47:01.185 --> 00:47:03.005

and how do we make decisions about the

00:47:03.005 --> 00:47:04.245

weighting within that pool?

00:47:04.745 --> 00:47:06.685

because it is quite dynamic.

00:47:06.985 --> 00:47:09.085

We have three distinct asset classes.

00:47:09.695 --> 00:47:11.045

Again, we have infrastructure,

00:47:11.345 --> 00:47:12.925

we have investment into real estate,

00:47:13.185 --> 00:47:14.885

and then, finally, agriculture.

00:47:15.345 --> 00:47:18.645

and all three of those categories are well diversified.

00:47:19.035 --> 00:47:20.765

It's a global portfolio.

00:47:21.305 --> 00:47:24.765

And so when we take a look at how we should invest

00:47:24.765 --> 00:47:26.565

between those three investment categories

00:47:26.565 --> 00:47:27.845

and then underneath that

00:47:27.865 --> 00:47:30.925

how we invest into each individual manager

00:47:30.925 --> 00:47:32.805

could you maybe speak to the strategy there

00:47:33.105 --> 00:47:35.965

and if you do see opportunity for us to rebalance to some

00:47:35.965 --> 00:47:37.125

of the stronger performers?

00:47:37.745 --> 00:47:40.285

that's a great question.

00:47:40.505 --> 00:47:42.505

And

00:47:44.045 --> 00:47:48.225

we are looking at making, we have made changes

00:47:48.225 --> 00:47:49.785

and I actually was going to

00:47:50.315 --> 00:47:52.505

comment when you were talking about Global Equity

00:47:52.505 --> 00:47:54.105

Pool, and I was going to say, you know, in fact,

00:47:54.165 --> 00:47:57.305

if you look at our infrastructure exposure,

00:47:57.635 --> 00:48:01.465

we've got a lot of infrastructure exposure in very

00:48:02.015 --> 00:48:05.585

core types of assets that will do well regardless

00:48:05.605 --> 00:48:07.265

of the economic environment.

00:48:07.455 --> 00:48:09.945

When you think of data centers, like

00:48:10.645 --> 00:48:12.225

no one is cutting

00:48:12.225 --> 00:48:13.945

their internet access, right?

00:48:14.325 --> 00:48:17.745

And so there's a lot of sectors within infrastructure

00:48:17.745 --> 00:48:19.345

that will continue to do well

00:48:19.345 --> 00:48:21.225

and we've got quite a bit of exposure

00:48:21.225 --> 00:48:22.345

in infrastructure there,

00:48:22.845 --> 00:48:25.625

but that, you know

00:48:25.625 --> 00:48:29.545

to answer your question in 10 minutes there are a lot

00:48:29.545 --> 00:48:33.345

of sectors that we like that I think that we're going to be,

00:48:33.765 --> 00:48:34.785

over.

00:48:34.885 --> 00:48:37.145

And it does take time to make these changes.

00:48:37.325 --> 00:48:39.145

You can't do it, you know, in

00:48:39.145 --> 00:48:41.065

in a two-day period.

00:48:41.685 --> 00:48:43.665

you have to look

00:48:43.765 --> 00:48:45.505

for the opportunities out there.

00:48:46.045 --> 00:48:48.465

we do like infrastructure right now

00:48:48.645 --> 00:48:50.345

and not just today, but going forward.

00:48:50.525 --> 00:48:55.185

So I think that we will see more infrastructure exposure,

00:48:56.325 --> 00:48:58.665

we'll probably see more real estate exposure.

00:48:58.725 --> 00:49:02.705

In fact, I had a great meeting with a firm yesterday,

00:49:03.365 --> 00:49:07.585

that's got a US kind of core plus

00:49:07.675 --> 00:49:09.385

open-ended real estate fund.

00:49:09.405 --> 00:49:12.425

And, and I was just asking her about, geez, you know,

00:49:12.495 --> 00:49:14.705

real estate is being pretty tough environment,

00:49:14.805 --> 00:49:17.905

but you know the point she was making is

00:49:17.905 --> 00:49:21.625

that is in it's very sector-specific and,

00:49:21.685 --> 00:49:24.745

you know, as Onshoring

00:49:25.365 --> 00:49:29.145

is coming back into the US there's going to be demand

00:49:29.245 --> 00:49:30.305

for cold storage.

00:49:31.045 --> 00:49:33.665

And, you know, what is cold storage that's for,

00:49:33.765 --> 00:49:37.825

you know, cold storage is for, you know,

00:49:37.925 --> 00:49:42.065

your shipping produce from one area

00:49:42.125 --> 00:49:44.065

to another, you need coal storage.

00:49:44.125 --> 00:49:46.825

And that's a big growth area

00:49:46.885 --> 00:49:51.545

in the US data is another big area in the US for.

00:49:51.725 --> 00:49:55.585

So I think that while agriculture

00:49:57.205 --> 00:49:59.185

is always going to be, you know,

00:49:59.185 --> 00:50:00.825

you're never going to look at agriculture

00:50:00.825 --> 00:50:03.945

and go I think there's great opportunities

00:50:04.125 --> 00:50:05.425

in this sector

00:50:05.655 --> 00:50:10.345

it's always going to be a core holding global, agriculture.

00:50:10.565 --> 00:50:15.065

But I think there's specific areas within infrastructure

00:50:15.365 --> 00:50:19.625

and real estate that we will look to tilt our portfolios to

00:50:19.645 --> 00:50:22.905

as those opportunities arise is, you know, one of the areas,

00:50:22.925 --> 00:50:26.365

and I should mention, we made a commitment

00:50:26.505 --> 00:50:28.575

to at the end of, I think it was in May

00:50:28.575 --> 00:50:31.495

or June to a US

00:50:31.995 --> 00:50:34.495

single-family rental strategy.

00:50:35.725 --> 00:50:40.225

Single-family homes have been underbuilt in the US

00:50:40.325 --> 00:50:42.945

for about 15 years, there is massive demand

00:50:42.945 --> 00:50:44.225

for single-family homes.

00:50:44.925 --> 00:50:47.545

So we made a very large commitment

00:50:47.605 --> 00:50:51.225

to a US single-family rental strategy.

00:50:51.405 --> 00:50:53.945

So that's a sector that will continue to do well.

00:50:53.945 --> 00:50:56.145

And I think that they're, if I'm not mistaken,

00:50:56.145 --> 00:50:59.745

they're targeting something like a high teen type of return.

00:51:00.125 --> 00:51:02.345

So we just added that to the portfolio.

00:51:02.985 --> 00:51:06.185

I think we had about 35% of our,

00:51:06.285 --> 00:51:08.865

$10 million commitment called.

00:51:09.005 --> 00:51:12.825

So over the next probably two years that will be fully

00:51:13.345 --> 00:51:16.865

invested and we'll start to add a lot of,

00:51:16.985 --> 00:51:18.465

a lot of value to the portfolio.

00:51:18.765 --> 00:51:21.265

You know, you look at things like core infrastructure,

00:51:21.845 --> 00:51:24.825

things like airports that we now have exposure to.

00:51:25.125 --> 00:51:27.505

I think that's, so there's a lot of areas

00:51:27.615 --> 00:51:29.945

that we've been focusing on

00:51:29.945 --> 00:51:32.625

that will add value in the years to come.

00:51:33.335 --> 00:51:35.745

Well, and I think when it comes down to

00:51:36.085 --> 00:51:37.385

our rebalance strategy,

00:51:37.725 --> 00:51:40.825

so specifically when we identify under performance

00:51:41.405 --> 00:51:43.265

of an investment manager,

00:51:43.265 --> 00:51:44.785

there's a few things that we're looking at.

00:51:45.165 --> 00:51:47.145

performance is obviously one of them.

00:51:47.365 --> 00:51:50.105

we're not measuring performance over the short term,

00:51:50.615 --> 00:51:53.385

like I mentioned with some of the investment funds

00:51:53.385 --> 00:51:56.185

that we highlighted today that have shown weak performance

00:51:56.205 --> 00:51:58.425

so far this year, that hasn't been the case

00:51:58.485 --> 00:52:00.025

for the lifetime of the investment.

00:52:00.525 --> 00:52:02.665

We're being cognizant of

00:52:03.265 --> 00:52:05.505

a longer-term investment horizon.

00:52:06.085 --> 00:52:08.265

Some of the other things that we're going to

00:52:08.455 --> 00:52:11.265

look at, is has the management team changed?

00:52:11.685 --> 00:52:14.185

has there been a change to the investment strategy

00:52:14.605 --> 00:52:17.945

or are there economic variables that are impacting

00:52:18.575 --> 00:52:20.345

that particular investment strategy

00:52:20.375 --> 00:52:22.905

that is now going to change our outlook in terms

00:52:22.905 --> 00:52:24.145

of return going forward?

00:52:24.525 --> 00:52:27.905

And so we know over the short term we are going to see

00:52:28.215 --> 00:52:29.905

performance that fluctuates.

00:52:30.245 --> 00:52:32.145

we're going to see a little bit of volatility,

00:52:32.325 --> 00:52:33.865

but generally speaking

00:52:34.195 --> 00:52:38.225

we're not making knee-jerk reactions to move

00:52:38.285 --> 00:52:41.745

to investment funds that have demonstrated short-term

00:52:42.005 --> 00:52:43.065

strong performance.

00:52:43.325 --> 00:52:46.465

if nothing has changed to the underlying strategy

00:52:47.045 --> 00:52:50.145

or, the reason behind our initial investment

00:52:50.145 --> 00:52:52.185

of course having that discipline is what's going to yield

00:52:52.245 --> 00:52:54.385

strong results over the long term.

00:52:55.405 --> 00:52:56.625

Brent,

00:52:56.685 --> 00:52:59.025

we talked a little bit here about the composition

00:52:59.025 --> 00:53:00.665

of the Real Asset Pool, the composition

00:53:00.665 --> 00:53:01.865

of the Global Equity Pool.

00:53:02.385 --> 00:53:04.145

I want to bring the conversation to the surface

00:53:04.285 --> 00:53:06.785

for a second here and just talk about over all

00:53:06.785 --> 00:53:08.065

portfolio construction.

00:53:08.445 --> 00:53:11.945

So if you know, our expectation is that again,

00:53:12.125 --> 00:53:15.785

we might see a slow down in the economy, your words not mine

00:53:15.985 --> 00:53:17.545

Because I'm not going to forecast here today.

00:53:18.125 --> 00:53:19.705

what does that mean

00:53:19.765 --> 00:53:21.905

for portfolio allocation for our clients?

00:53:22.285 --> 00:53:25.405

Is there the opportunity to move between the Global Equity,

00:53:25.905 --> 00:53:30.565

Pool to have more exposure to maybe some of the

00:53:30.675 --> 00:53:33.525

private asset classes that we have within the portfolio?

00:53:34.025 --> 00:53:37.125

do you see any changes in that regard?

00:53:39.055 --> 00:53:43.465

You know, all of our clients' portfolios

00:53:44.045 --> 00:53:47.945

are constructed with a very long-term view.

00:53:48.125 --> 00:53:51.725

So, you know, if you've got 25% exposure

00:53:51.825 --> 00:53:55.405

or whatever it is to public equities, you know

00:53:55.425 --> 00:53:57.885

we believe that over a long period of time

00:53:58.155 --> 00:53:59.605

that is an appropriate mix.

00:53:59.605 --> 00:54:03.085

There's going to be times where we wish

00:54:03.125 --> 00:54:04.245

that we would've had 50,

00:54:04.385 --> 00:54:07.325

but you know, when we're building these portfolios, it's

00:54:07.325 --> 00:54:08.725

with a long-term view.

00:54:08.825 --> 00:54:13.485

So these are strategic asset mixes that we don't change,

00:54:14.065 --> 00:54:17.405

you know, we don't make significant changes to just

00:54:17.405 --> 00:54:19.485

because of what's happening in the environment.

00:54:19.825 --> 00:54:21.285

Now that said, you know,

00:54:21.345 --> 00:54:23.445

as the investment committee gets together

00:54:23.505 --> 00:54:25.365

and say, look, does everyone agree

00:54:25.365 --> 00:54:28.005

that there's going to be a sell off in

00:54:28.145 --> 00:54:29.245

in public equities?

00:54:29.305 --> 00:54:32.045

And if we do believe, you know, with a high,

00:54:32.475 --> 00:54:35.125

high probability that,

00:54:35.155 --> 00:54:37.125

that public equities will sell off, then,

00:54:37.125 --> 00:54:39.645

there's a possibility that we take a bit out

00:54:39.645 --> 00:54:40.725

of public equities

00:54:41.105 --> 00:54:45.485

and add it to something that's less susceptible if

00:54:45.785 --> 00:54:47.565

to an economic slowdown.

00:54:47.585 --> 00:54:49.965

So yeah, I mean we always explore those,

00:54:50.025 --> 00:54:52.965

we always visit those on a, you know,

00:54:53.365 --> 00:54:55.445

whenever we have our investment committee meeting.

00:54:55.545 --> 00:54:57.725

So is that a possibility? Sure.

00:54:58.185 --> 00:55:00.325

You know, one of the things we're looking at is we,

00:55:00.325 --> 00:55:03.445

we gradually are we resurrected our global,

00:55:03.665 --> 00:55:07.085

Our Fixed Income Pool we're going to be adding more

00:55:07.085 --> 00:55:10.445

to Fixed Income over the next month or so

00:55:11.105 --> 00:55:13.365

and it's going to be funded from one of the other pools.

00:55:13.585 --> 00:55:15.965

Why is that? Because in the,

00:55:15.965 --> 00:55:19.485

because we do see more

00:55:19.515 --> 00:55:23.965

more value in Canadian government bonds today.

00:55:24.705 --> 00:55:28.685

because if again I think Canada will,

00:55:28.755 --> 00:55:30.605

will slide into a recession.

00:55:31.365 --> 00:55:34.525

Canadian government bonds tend to do much better in

00:55:34.555 --> 00:55:35.925

that type of environment.

00:55:35.945 --> 00:55:37.885

So we are starting to see a bit more,

00:55:38.195 --> 00:55:40.325

more opportunities in fixed income.

00:55:40.345 --> 00:55:43.565

So we're going to allocate a bit more to the fixed income.

00:55:43.745 --> 00:55:47.125

But you know, and it's the same reason why we got rid

00:55:47.125 --> 00:55:50.885

of fixed income back in 2020 is, you know,

00:55:50.885 --> 00:55:53.805

you looked at the Canadian 10-year government bond was

00:55:53.805 --> 00:55:55.485

yielding 0.9%.

00:55:56.475 --> 00:55:58.645

Well there was very little value there,

00:55:58.665 --> 00:56:01.045

but if we get back into government bonds today

00:56:01.225 --> 00:56:04.165

and in two years they're back down to one or one

00:56:04.165 --> 00:56:06.725

and a half percent yield, then we're going to look at that

00:56:06.725 --> 00:56:09.965

and go, there's probably better value in some

00:56:09.965 --> 00:56:10.965

of these other asset classes.

00:56:11.145 --> 00:56:15.165

So we're always visiting relative return,

00:56:15.505 --> 00:56:18.245

you know, are there assets that offer a better

00:56:18.765 --> 00:56:21.805

relative return than we're currently, than some

00:56:21.805 --> 00:56:22.925

of the pools we're currently in?

00:56:22.965 --> 00:56:25.285

So we're, that's just an ongoing

00:56:25.995 --> 00:56:28.245

process the portfolio management goes

00:56:28.245 --> 00:56:29.245

through on a daily basis.

00:56:30.105 --> 00:56:32.205

And I think that was a significant change

00:56:32.205 --> 00:56:35.805

that we saw in the second quarter was our decision

00:56:35.905 --> 00:56:38.045

to add bonds back into the portfolio.

00:56:38.625 --> 00:56:42.845

Now that sits, if we draw risk spectrum bonds

00:56:43.105 --> 00:56:46.405

are typically regarded as low-risk investments, we all know

00:56:46.405 --> 00:56:47.605

that that's simply debt.

00:56:47.905 --> 00:56:50.445

And so we don't see the same level of volatility

00:56:50.475 --> 00:56:51.885

that we do in the stock market.

00:56:52.305 --> 00:56:54.005

And so for our client portfolios

00:56:54.005 --> 00:56:56.085

that have maybe a more conservative approach,

00:56:56.475 --> 00:56:58.085

what we did is we decided

00:56:58.105 --> 00:57:02.045

to complement the Strategic Income Pool, which again,

00:57:02.135 --> 00:57:05.085

holds mainly private debt with some of the,

00:57:05.085 --> 00:57:07.805

these public debt offerings in the bond market.

00:57:08.345 --> 00:57:09.685

and so we're able

00:57:09.685 --> 00:57:12.285

to get a little bit more diversification where

00:57:12.285 --> 00:57:14.485

that opportunity has now presented itself

00:57:14.715 --> 00:57:16.525

that didn't exist 3, 4 years ago

00:57:16.665 --> 00:57:21.085

and was the opposite reason of why

00:57:21.265 --> 00:57:24.245

we left bonds in 2019, 2020.

00:57:24.785 --> 00:57:27.325

so that was a change for our clients

00:57:27.325 --> 00:57:29.045

that have more conservative investment

00:57:29.295 --> 00:57:30.885

mixes at Kinsted Wealth.

00:57:31.585 --> 00:57:33.485

we only have a couple minutes,

00:57:33.485 --> 00:57:35.045

to finish things off here, Brent,

00:57:35.145 --> 00:57:36.445

was there any final comments

00:57:36.625 --> 00:57:38.845

or conclusions that you would make for our listeners?

00:57:40.445 --> 00:57:41.745

You got to talk at length.

00:57:41.935 --> 00:57:44.945

They're probably sick of us talking, but you

00:57:44.945 --> 00:57:49.545

and I both, you know, all I would say is that,

00:57:49.605 --> 00:57:51.785

you know, every client's portfolio is,

00:57:51.845 --> 00:57:56.005

is really regardless of the economic environment

00:57:56.105 --> 00:57:59.205

and we could be completely off base and,

00:57:59.225 --> 00:58:02.365

the economies of the global economies continue

00:58:02.385 --> 00:58:03.885

to fire in all cylinders.

00:58:04.665 --> 00:58:08.005

but regardless of the economic environment, that's one

00:58:08.005 --> 00:58:10.525

of the things that we're very cognizant about is,

00:58:10.525 --> 00:58:13.045

is structuring client portfolios

00:58:13.705 --> 00:58:17.045

to do well in every economic environment, right?

00:58:17.305 --> 00:58:21.525

Yes. In a strong, strong economy when equities are up 40%,

00:58:21.535 --> 00:58:22.765

we're just not going to keep pace.

00:58:22.835 --> 00:58:26.765

It's just, you know, 70% of our

00:58:26.825 --> 00:58:29.285

of our assets are not built to do 40%.

00:58:29.285 --> 00:58:32.565

Because if you got a hundred percent

00:58:32.585 --> 00:58:35.645

of your portfolio in something that's going to go up 40%,

00:58:35.665 --> 00:58:37.245

you got a hundred percent of your portfolio,

00:58:37.245 --> 00:58:38.845

that can also go down 40%.

00:58:38.845 --> 00:58:41.085

That's just, that's just not

00:58:41.185 --> 00:58:42.845

proper portfolio management.

00:58:42.845 --> 00:58:44.205

So I would just say regardless

00:58:44.265 --> 00:58:46.685

of the economic environments, rest assured

00:58:47.075 --> 00:58:49.805

that your portfolios will continue to do,

00:58:50.065 --> 00:58:52.925

very well and will with,

00:58:53.225 --> 00:58:57.005

and will hold up value even if public equity sell off

00:58:57.385 --> 00:58:58.845

25 or 30%.

00:59:00.245 --> 00:59:01.375

Well that's excellent, Brent.

00:59:01.675 --> 00:59:02.935

thank you for the comments.

00:59:03.025 --> 00:59:04.975

Thank you for the time today. Appreciate it.

00:59:05.355 --> 00:59:08.335

for our listeners, if we did not address,

00:59:08.405 --> 00:59:12.695

your question during the call today we will get back

00:59:12.695 --> 00:59:14.575

to you after the call.

00:59:15.035 --> 00:59:18.615

Brent, thanks again. Appreciate your time.

00:59:19.155 --> 00:59:21.325

thanks everyone for tuning in today.

00:59:21.705 --> 00:59:24.985

enjoy the rest of your Thursday.

00:59:25.965 --> 00:59:28.225

All right, thanks everyone. Thanks. Josh, thanks.

00:59:28.415 --> 00:59:29.785

Alright, take care.