What's Happening: Q3 2024

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All right.

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Hey, everyone. , we want to thank, ,

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everyone who's joined and just giving everyone a second to

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jump on the third quarter webinar for Kinsted Wealth Here.

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, first and foremost, happy Halloween.

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As you can see, Brent has gone as his usual scary self,

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so something that we always get to look forward

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to on a day-to-day basis.

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, but, , lot's happening in, , the world of finance,

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, markets and in the economy in general.

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So, , you know, between the US election

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that's coming up here pretty quick, , we just had a recent

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announcement on the Bank of Canada rate cut.

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, so we'll talk a little bit about that.

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, and then just markets in general, they've, they've had,

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, pretty crazy years continuing

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to reach new all time highs.

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A couple reasons for that where we see things headed, ,

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and just everything else in general.

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Then, , that'll be followed up by, , a q

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and a session at the, the end.

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So, , we'll be sure to go through, , just our views,

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talk a little bit about each, , individual pool fund

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and, , and provide some detail on that.

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So, , without further ado, , Brent,

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I'm gonna pass it over to you

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and maybe you can chat a little bit about what's happened

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over the past couple of months.

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Yeah, thanks Mike. And, , thanks for that, , shot, ,

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on my Halloween outlook or outfit.

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, yeah, 2000, as you mentioned, ,

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the past year has, has been pretty, pretty phenomenal for,

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for, especially for public equities.

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, you know, we, we've certainly seen, ,

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this past quarter, another really strong quarter for,

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for global equities.

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I think it's, , you know, a lot of it has been fueled by,

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by optimism, ,

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or has, has, , fueled optimism in the markets.

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You know, a couple of, , factors behind this, ,

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this improvement has,

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there's been obviously more

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accommodative stance from central banks.

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As you mentioned, the Bank of Canada cut by, ,

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50 basis points just a week or two ago.

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, the Fed in the US cut by 50 basis points.

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So I think that that's really,

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central banks obviously are shifting away from a more

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aggressive rate hike, , environment that we, that we,

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we saw since probably 2021.

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And this has certainly provided a boost of, ,

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to investor confidence.

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I think one of the standout stories from this past quarter

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ending September, things have changed recently,

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but to the end of the end

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of September was the resurgence in Chinese stock.

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I think stocks at the end of the last week in September,

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I think they were up about 25%.

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, so, you know, following a, a really challenging, ,

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challenging period, so hopefully this signals a, a bit

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of a potential recovery in in that region.

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However, it wasn't obviously all smooth sailing.

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, during the quarter, the volatility index

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or vol, , volatility reached its highest level, ,

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since the pandemic that reminds us that,

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and on certain tee is still very, , very much, ,

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present in, in, in the markets.

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In particular, we, we, we did experience a rotation

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in market leadership, ,

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with investors moving away from technology stocks,

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which had been dominant for so long, ,

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on the fixed income side, combination of falling inflation,

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central banks beginning to cut rates certainly

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provided a tailwind for, for the bond market.

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And this has created a strong environment for,

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for fixed income assets.

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, even though, you know,

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the past year fixed income has done exceptionally well,

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if you look over a five year period, fixed income is still,

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i, I believe, negative.

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, so all in all, I think it's been a, the quarter, ,

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was marked by both risk

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and opportunity as markets continue to adapt to a more, ,

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to shifting economic economic signals.

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Yeah, Brett, so, you know, the, the last point there on

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inflation, you know, I get a lot of questions, ,

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because everyone's seeing the news that inflation continues

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to go down, and that's good news, , you know,

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falling prices and all that,

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but everyone seems to feel the, the pressure of, ,

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prices compared to where they once were.

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So is it really the case that inflation is coming down to,

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you know, levels that, that we saw, , you know, former

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to the, the, the, , or previous to the, the pandemic?

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, do and what direction do you see inflation

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conti continue to go?

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I think if, if we look at Canada, ,

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the official inflation numbers have certainly come down.

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I think they're below 2% today.

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That said, over the past, since, since the pandemic, ,

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inflation is up, you know, the cost

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of living is up about 25%.

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, so it, it's, it's,

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it's still relatively high when you compare pricing

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versus four years ago.

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But, , if you look at the US I think inflation is still

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relatively sticky.

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Their economy continues to do, to do quite well.

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, I think it's gonna be a tale of two countries.

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, you know, Canada's, , I, I do think inflation is going

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to continue to, to, to recede in Canada, not

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so sure about the us,

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but, , you know, it's, , I guess it's a wait

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and see, you know, you either believe in the official

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numbers or, or you don't.

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And, , we have, that's what we've gotta rely on.

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And, and it's the, the, , the Canadian, ,

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central bank is reliant on official inflation numbers when

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they're deciding what to do from, from a,

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from a policy standpoint.

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So, , we do think, you know, not to ask this question,

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but I think that the, in December, everything points

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to about another 50 basis points cut in the Bank

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of Canada rate, which should be very good for,

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for, for Canadians. So

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Good news if you're renewing

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your mortgage here soon as well.

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Yeah, yeah, absolutely.

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So why don't we, , just talk, you know, in, in prior, ,

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prior webinars,

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we always kept the macro envir our outlook to the end.

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And, and, , you know, we did have a survey recently

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that showed that, you know, that our outlook was more, ,

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a lot of, a lot of listeners

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or like to hear, , what our outlook was.

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So rather than keeping it to the end, we decided to keep,

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to, to do it, , right now, , right, right

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after the, what happened in, in the quarter.

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So let's talk about the economic outlook.

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, you know, jobs growth in September,

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and what we are, we're, we're focusing on, I, I know we,

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we tend to focus on the US as opposed to Canada or Europe.

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And the main reason for that is that, , there used

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to be an old, old saying,

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and I think it's still, it still holds true, is that,

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you know, when the US sneezes, everyone else catches a cold.

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So I think very important to, to understand what's going on

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to the on in the US

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because the, the, the,

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the US has a huge impact.

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I think about 70% of global equities are, are,

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, are from the us.

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So, so that's why we tend to focus on the US

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and what's, what's driving the US economy.

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, obviously the US economy is 70% driven by the consumer,

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so understanding what's going on to the con on

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with the consumer drives what's going on in the,

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the overall US economy,

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and ultimately the impact on, , on the stock market.

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So job growth in September was, ,

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surprisingly strong, very strong, ,

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which helped boost optimism that the US economy

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might be heading for more of a soft landing, ,

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where growth slows gradually rather than this

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sharp drop off.

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And this, the robust market, ,

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labor market performance is,

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is really building confidence in the, in the resilience

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of the US economy.

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And that's translating into a,

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to a brighter near term market

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outlook. Yeah, it's

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Important to note too, Brent, on the soft landing, ,

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some of the research that, that we look into,

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and you can see that just the source of this is,

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is from PCA, they usually pro provide a number of, ,

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you know, possibilities, ,

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and probabilities as to, you know,

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what the, the spans might look like.

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And I think their, the likelihood

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of a soft landing went from

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maybe about 20% to 30%.

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So it's, it's still, they're still expecting, ,

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a little bit more of a recession type scenario.

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Mm-Hmm. Although the unlikelihood, , as, as you mentioned,

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has, has increased of soft landing.

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So some, some good news there,

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but I wouldn't say we're out of the woods yet.

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Yeah. We're, we're touch, you know, a lot of the, it's,

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it's surprising a lot of the economic data

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that's still coming out

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of the US shows it's still relatively robust,

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, economy.

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And, , you know, and,

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and actually I was reading a report yesterday

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where they've increased their,

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their recession probability from 60% to 65%.

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So they're still, you know, , take it

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what it is, , for what it is.

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But, , we still think there may be, , at, at,

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at some point over the next six months, the US economy will,

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will potentially dip into a recession, even,

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even if it doesn't dip into a recession.

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We still think that

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that equities could be under some pressure and all,

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and I'll, I'll show you why, , momentarily.

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, but you have to understand, I is the labor market,

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which really drives, , the US economy.

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Is it really as robust as it seems?

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, for instance, the total hours worked,

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and this, this is, , end of September data,

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so the total hours worked, actually dropped by 0.1%

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in, in September,

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because the average work week actually got shorter.

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So this raises a question, would a truly strong

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labor market look like this?

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, there's also this, this issue of seasonal adjustments,

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which I'm, I'm not gonna get into the whole rationale around

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that, but which, that, those seasonal adjustments did make

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job numbers, , look much higher.

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And, and without these adjustments, September's payroll data

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would have been the lowest on record, plus survey

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response rates have been dropping over the years.

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So the data might not paint, paint the full picture.

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So are we really seeing a strong labor market

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or these numbers being skewed?

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And I should point out that, that, , surveys,

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so when, when, when we see this data on employment and,

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and so on, it's actually companies

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that provide surveys on, on,

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on hiring, et cetera.

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And that the chart on the, , right hand side, ,

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here shows that, that it's gone down over the past probably,

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, number of years from, ,

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the top one household surveys from 90%, ,

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to about 70%.

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And payroll surveys have gone down from over 60 down to

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around 40% now.

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So, so it's not representative of the whole economy,

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and that's why we see a lot of revisions, , as,

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as the months follow.

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Yeah, and I mean, that's, , definitely plays into some

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of the, the data that I'm seeing as well, Brent, and, ,

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and that we've talked about in the past.

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And, you know, BCA has come out with, ,

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other strong data points suggesting

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that the labor market isn't nearly as strong as, as

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what may, , appear just on the news. ,

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Yeah, it seems to be a bit of cracks

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underneath the surface. Yeah,

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There's, there's more, you know, there,

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or there's, there's less people quitting their jobs.

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I think there's just less confidence of being able

254
00:12:26.385 --> 00:12:28.185
to walk across the street and find another job.

255
00:12:28.185 --> 00:12:30.025
Mm-Hmm. There's also less com ,

256
00:12:30.345 --> 00:12:32.145
companies are hiring less people as well.

257
00:12:32.805 --> 00:12:34.705
, I guess the one thing though, you know,

258
00:12:34.705 --> 00:12:36.545
markets continue to make all time highs.

259
00:12:36.695 --> 00:12:38.985
They've been on a, on an absolute terror this year.

260
00:12:39.975 --> 00:12:43.715
, but you mentioned you expect markets to start to have

261
00:12:43.775 --> 00:12:44.915
or start to face some difficulty.

262
00:12:44.975 --> 00:12:46.795
Why, why is that? You

263
00:12:47.835 --> 00:12:49.915
Must have looked at this presentation, Mike.

264
00:12:52.395 --> 00:12:53.475
I might have some. Anyway,

265
00:12:53.475 --> 00:12:55.555
before I get into that, I, I, I, I, I,

266
00:12:55.735 --> 00:12:57.995
I'm gonna point out some, some, , you know,

267
00:12:58.065 --> 00:13:00.195
leading indicators, and they're leading

268
00:13:00.195 --> 00:13:01.875
because they lead the economy.

269
00:13:02.575 --> 00:13:05.395
And these, these indicators we use to gauge the,

270
00:13:05.415 --> 00:13:08.395
the US labor markets futures, they, they're somewhat mixed.

271
00:13:09.105 --> 00:13:12.435
Some data points, , that we're looking at here suggest,

272
00:13:12.975 --> 00:13:15.355
, a slowdown could be coming,

273
00:13:15.365 --> 00:13:18.035
especially in the manufacturing and

274
00:13:18.335 --> 00:13:22.075
and services area, which are often, , early indicators

275
00:13:22.095 --> 00:13:25.755
of economic or US economic health labor demand in these

276
00:13:26.165 --> 00:13:29.275
areas seems to be cooling, ,

277
00:13:29.285 --> 00:13:32.515
which might hint at some broader, ,

278
00:13:32.515 --> 00:13:34.755
broader changes in the overall job market.

279
00:13:34.755 --> 00:13:37.315
However, I, I think it's, it's important to take

280
00:13:38.295 --> 00:13:40.925
these numbers with, with some form of caution

281
00:13:41.025 --> 00:13:43.445
as they don't always tell the whole story,

282
00:13:43.825 --> 00:13:45.125
you know, on, on their own.

283
00:13:45.305 --> 00:13:48.005
But some of the things we're seeing are, are certainly

284
00:13:48.565 --> 00:13:52.565
pointing towards a cooling in, in, , in the labor market.

285
00:13:52.745 --> 00:13:56.565
So to answer your question about what, why we're, you know,

286
00:13:56.565 --> 00:13:58.245
even, even, let's listen,

287
00:13:58.595 --> 00:14:01.845
even if the US economy does not go into a recession

288
00:14:02.065 --> 00:14:06.645
or, , you know, it's a soft landing,

289
00:14:06.905 --> 00:14:11.005
we still think economic growth is going to slow somewhat.

290
00:14:11.785 --> 00:14:16.125
And why do we think that even with, in, in the absence of a,

291
00:14:16.305 --> 00:14:20.285
of a, a recession, why do we think that US equities

292
00:14:20.985 --> 00:14:24.765
may will, will probably not deliver the same kind of returns

293
00:14:24.835 --> 00:14:26.605
that they will, , over

294
00:14:26.755 --> 00:14:29.445
that they've done in over the past 10 to 15 years?

295
00:14:30.225 --> 00:14:33.685
Is, is take a look at PE ratios,

296
00:14:33.685 --> 00:14:36.445
the price earnings ratio of the s

297
00:14:36.445 --> 00:14:40.805
and p five 500, right now, this chart shows

298
00:14:40.875 --> 00:14:41.885
that the s

299
00:14:41.925 --> 00:14:45.645
and p five hundred's forward price to earnings ratio,

300
00:14:46.295 --> 00:14:50.125
which has reached high, it, it's reached high's last seen

301
00:14:50.865 --> 00:14:54.325
in the late 1990s, just be before the tech bubble.

302
00:14:54.465 --> 00:14:56.925
In other words, stocks are very,

303
00:14:57.515 --> 00:14:59.885
very expensive today.

304
00:15:00.465 --> 00:15:02.205
So that's, that's number one.

305
00:15:02.505 --> 00:15:04.525
Stocks are very, very expensive.

306
00:15:05.305 --> 00:15:08.645
And here, I know that this chart looks somewhat, ,

307
00:15:10.245 --> 00:15:13.685
somewhat complex, but let me, let me walk you through

308
00:15:13.685 --> 00:15:14.805
what this chart is saying.

309
00:15:15.935 --> 00:15:20.745
So if you look at the chart on the left, , it, it,

310
00:15:20.805 --> 00:15:23.185
and the, the, the current trailing, ,

311
00:15:23.325 --> 00:15:27.585
or forward PE is 21.5 times, and you,

312
00:15:27.645 --> 00:15:31.505
and it, there's a scattergram of showing with, with the, oh,

313
00:15:31.775 --> 00:15:34.945
looking back, , historically,

314
00:15:35.705 --> 00:15:38.185
a 21.5 multiple on the s

315
00:15:38.185 --> 00:15:42.985
and p 500 has very, very, , little predictability

316
00:15:43.805 --> 00:15:47.135
of the next 12 months rate of returns.

317
00:15:47.595 --> 00:15:50.015
So it, it really doesn't matter what the,

318
00:15:50.165 --> 00:15:52.135
what the current multiple on the s

319
00:15:52.135 --> 00:15:54.775
and p shows, it really doesn't predict

320
00:15:54.885 --> 00:15:57.135
what the next 12 month return is gonna do.

321
00:15:57.995 --> 00:16:01.495
But as you start stretching out that time horizon

322
00:16:01.755 --> 00:16:03.175
to say three years, five years,

323
00:16:03.235 --> 00:16:07.655
and 10 years, the starting point today

324
00:16:08.435 --> 00:16:11.575
of the, the PE ratio on the, on the s

325
00:16:11.575 --> 00:16:15.655
and p 500 has, is very, very predictable of

326
00:16:15.725 --> 00:16:20.335
what future five year rate of returns, , look or, or,

327
00:16:20.335 --> 00:16:22.535
or the expected five year rate of return.

328
00:16:22.675 --> 00:16:27.495
So you could see historically, a starting point of 21

329
00:16:27.495 --> 00:16:29.335
and a half times on the s

330
00:16:29.335 --> 00:16:34.095
and p 500 has resulted in a return of

331
00:16:34.605 --> 00:16:37.575
very low single digit returns.

332
00:16:39.575 --> 00:16:41.905
Yeah. So the, the left hand side showing, you know,

333
00:16:42.205 --> 00:16:45.105
the lack of predictability in the evaluations

334
00:16:45.775 --> 00:16:47.865
just on a one year forward looking basis.

335
00:16:48.005 --> 00:16:51.345
And then, , of course the, the, , you know,

336
00:16:51.395 --> 00:16:53.345
chart on the right hand side, ,

337
00:16:53.485 --> 00:16:55.105
you can see the lack of returns.

338
00:16:55.125 --> 00:16:58.065
And I, I think that's, , is really demonstrated in a lot

339
00:16:58.065 --> 00:16:59.265
of the research that's coming out as well.

340
00:17:00.285 --> 00:17:02.265
And so anyone on the call, even if you google

341
00:17:03.125 --> 00:17:05.145
cap capital market assumptions, ,

342
00:17:05.285 --> 00:17:07.145
and you know, a couple that have come out lately,

343
00:17:07.455 --> 00:17:11.825
Goldman Sachs, JP Morgan, , bca, a as well as, , that,

344
00:17:11.825 --> 00:17:14.545
that we use, , from an in independent standpoint

345
00:17:15.205 --> 00:17:17.985
are all suggesting that the 10, next 10 years, the

346
00:17:18.705 --> 00:17:22.485
expected annualized rate of return for the, the US market

347
00:17:23.025 --> 00:17:25.885
is anywhere between three to maybe five

348
00:17:25.885 --> 00:17:27.085
and a half percent per year.

349
00:17:27.185 --> 00:17:29.245
Mm-Hmm. And so, you know, you might see the one-off years

350
00:17:29.245 --> 00:17:30.325
that we, we have this year.

351
00:17:30.945 --> 00:17:34.405
, but if you fast forward, it's not looking all too good.

352
00:17:34.745 --> 00:17:37.205
And so to answer the question, do valuations still matter?

353
00:17:37.425 --> 00:17:39.005
You know, I certainly think that they do.

354
00:17:39.705 --> 00:17:40.765
, Brent, maybe just

355
00:17:40.765 --> 00:17:43.245
before moving on to the, the next mm-Hmm, , couple

356
00:17:43.245 --> 00:17:45.285
of slides, could you just provide a quick explanation on

357
00:17:45.285 --> 00:17:47.285
what is meant by the, the, the PE

358
00:17:47.505 --> 00:17:48.765
or the price earnings ratio?

359
00:17:49.715 --> 00:17:53.685
Yeah. Basically it's, , the PE ratio is, is the price

360
00:17:53.905 --> 00:17:57.045
of the s and p 500 or any index,

361
00:17:57.105 --> 00:18:01.625
and I think it's at about, I'm not sure, 50 odd hundred.

362
00:18:02.565 --> 00:18:05.745
, and you, , you divide that

363
00:18:06.445 --> 00:18:08.385
by the earnings estimate.

364
00:18:08.895 --> 00:18:12.775
Basically all 500 companies in the s

365
00:18:12.775 --> 00:18:16.455
and p 500, you amalgamate their earnings,

366
00:18:16.955 --> 00:18:18.655
and that is the denominator.

367
00:18:18.755 --> 00:18:20.575
So if the price is 5,000

368
00:18:21.075 --> 00:18:23.775
and the, you know, the earnings is whatever,

369
00:18:23.915 --> 00:18:27.455
you divide those and you come up to a PE multiple,

370
00:18:27.835 --> 00:18:32.765
and it, like I said, if, if I actually go back to here,

371
00:18:33.225 --> 00:18:37.865
to this slide here, the 12 month forward pe, right?

372
00:18:38.145 --> 00:18:42.545
I, I, I tend to take out the anomaly in 2020 during COVID.

373
00:18:42.825 --> 00:18:45.425
I don't think it's really representative of, of a true

374
00:18:46.005 --> 00:18:48.985
PE ratio because of a lot of anomalies

375
00:18:48.985 --> 00:18:50.065
that we're very aware of.

376
00:18:50.525 --> 00:18:53.345
But if you look at the PE ratio forward,

377
00:18:53.565 --> 00:18:58.225
and by the way forward is, is, is based upon analysts

378
00:18:58.905 --> 00:19:02.385
expected earnings, which are never in line with, with

379
00:19:02.535 --> 00:19:04.025
what their expectations are.

380
00:19:04.185 --> 00:19:05.905
Analysts have historically

381
00:19:06.055 --> 00:19:08.305
overestimated earnings expectations.

382
00:19:08.365 --> 00:19:11.985
But if you, you know, take away this part to 2020,

383
00:19:12.565 --> 00:19:17.225
the PE ratio is, , I, gee, I don't have the, the, the, ,

384
00:19:17.635 --> 00:19:20.705
years down here, but this was around 2008,

385
00:19:21.285 --> 00:19:24.025
so it's much higher than 2008 just

386
00:19:24.025 --> 00:19:25.305
before the financial crisis.

387
00:19:25.805 --> 00:19:30.625
And it's, it's, , around the 1999 area just

388
00:19:30.625 --> 00:19:32.625
before the, , fin, ,

389
00:19:32.625 --> 00:19:35.865
before the, the meltdown due to technology stock.

390
00:19:36.005 --> 00:19:37.785
So anyway, historic,

391
00:19:37.785 --> 00:19:40.585
you look at the PE ratio from a historic perspective,

392
00:19:40.985 --> 00:19:44.505
and it's extremely, extremely richly priced.

393
00:19:44.935 --> 00:19:47.465
Yeah. And, and a way I like to, to think about it

394
00:19:47.485 --> 00:19:50.505
as well is that if, like you said, if all the earnings

395
00:19:51.205 --> 00:19:54.105
and aggregates for, you know, the 500 companies in the s

396
00:19:54.105 --> 00:19:57.785
and p, if, if all of those companies paid out the entirety

397
00:19:57.785 --> 00:20:00.065
of their earnings, it would take you roughly,

398
00:20:00.315 --> 00:20:03.625
let's say 22, 23 years to, to, ,

399
00:20:03.905 --> 00:20:04.945
recoup your entire investment.

400
00:20:05.255 --> 00:20:07.145
Yeah. And so that's a pretty significant amount.

401
00:20:07.145 --> 00:20:08.665
And so that's, , assuming that all

402
00:20:08.665 --> 00:20:09.865
of the earnings would be paid out,

403
00:20:09.865 --> 00:20:11.945
they're not reinvesting into projects

404
00:20:12.005 --> 00:20:14.585
or, , other expenditures of that nature as well.

405
00:20:14.685 --> 00:20:18.225
So, , maybe it's a good opportunity with, , with

406
00:20:18.225 --> 00:20:22.545
that in mind to jump into, , the kin bull funds

407
00:20:22.545 --> 00:20:24.745
and maybe talk a little bit about what we're doing

408
00:20:24.745 --> 00:20:26.985
to manage, , for some of these things going on.

409
00:20:27.575 --> 00:20:30.265
Sure. Let's, , let's take a look at the, the,

410
00:20:30.365 --> 00:20:31.465
the pool reviews.

411
00:20:32.165 --> 00:20:36.895
, you know, Canadian

412
00:20:37.475 --> 00:20:41.455
stocks obviously perform exceptionally well this past

413
00:20:41.455 --> 00:20:45.055
quarter, doing even better than, than global markets.

414
00:20:45.755 --> 00:20:48.485
, our Canadian, , or,

415
00:20:48.485 --> 00:20:53.005
or the Stead Wealth Canadian equity pool was up a,

416
00:20:53.125 --> 00:20:56.765
a very solid 10.7% during the quarter coming close

417
00:20:56.825 --> 00:20:59.005
to the 11% benchmark.

418
00:20:59.305 --> 00:21:03.285
So far this year, the, the pool is up close to 15% Now,

419
00:21:03.485 --> 00:21:06.765
although oil and gas producers didn't perform as strongly

420
00:21:07.425 --> 00:21:09.605
in the quarter, , financial

421
00:21:09.665 --> 00:21:14.125
and energy infrastructure sectors like, like Trans Capital

422
00:21:14.385 --> 00:21:16.645
or Trans Canada pipelines did exceptionally well.

423
00:21:16.725 --> 00:21:18.205
I don't think that's what it's called anymore.

424
00:21:18.665 --> 00:21:22.085
, but the, the, those guys did really, really well.

425
00:21:23.035 --> 00:21:25.165
Financial energy infrastructure,

426
00:21:25.705 --> 00:21:29.925
energy infrastructure stocks, , stood out, ,

427
00:21:30.315 --> 00:21:31.365
admirably as well.

428
00:21:31.425 --> 00:21:34.205
And that's really, those are the areas that really helped,

429
00:21:34.625 --> 00:21:38.325
, the quarter success in the Canadian, , equity pool.

430
00:21:38.845 --> 00:21:42.485
I think the, the strength in these sectors really highlights

431
00:21:42.605 --> 00:21:46.325
the benefits of spreading investments across different parts

432
00:21:46.345 --> 00:21:49.045
of the Canadian, , of the Canadian equity market.

433
00:21:50.645 --> 00:21:55.545
If we, , flip over to, to global, , global equities,

434
00:21:57.915 --> 00:22:02.495
, global stocks had another very strong quarter driven

435
00:22:02.635 --> 00:22:05.735
by guess what, the US equity market, again,

436
00:22:05.735 --> 00:22:07.775
because it has such a, you know,

437
00:22:08.075 --> 00:22:11.415
US stocks are anywhere from 65 to 70%

438
00:22:11.415 --> 00:22:12.895
of the global equity index.

439
00:22:13.395 --> 00:22:16.655
Our Canadian, our, our Stead Wealth global equity pool was

440
00:22:16.655 --> 00:22:21.415
up 3.2% during a quarter, a bit behind the benchmarks 5%.

441
00:22:21.845 --> 00:22:25.535
However, we did see some impressive results from some

442
00:22:25.535 --> 00:22:27.135
of our individual investments.

443
00:22:27.135 --> 00:22:31.815
For example, the, the Boston Partners, , which is a,

444
00:22:31.815 --> 00:22:36.255
which is a large cap value fund, , was up over 6.9

445
00:22:36.805 --> 00:22:39.375
beating the US equity market, ,

446
00:22:39.495 --> 00:22:42.775
Morgan Stanley International Advantage Fund, which, ,

447
00:22:43.275 --> 00:22:44.655
is more focused on Europe,

448
00:22:44.795 --> 00:22:47.335
and a bit of Asia had outstanding, ,

449
00:22:47.365 --> 00:22:49.855
quarter was up 9.7%.

450
00:22:49.915 --> 00:22:53.975
But some of the other funds like Pinestone Global Tresco,

451
00:22:54.035 --> 00:22:56.335
US equity didn't perform as well this time.

452
00:22:57.115 --> 00:23:01.655
, meanwhile, you know, we've got an exposure in Asian, ,

453
00:23:02.235 --> 00:23:05.695
in, in Asia called the Asia op, , the, ,

454
00:23:05.695 --> 00:23:07.535
synergy Asia Opportunistic Fund.

455
00:23:07.535 --> 00:23:09.815
It ended the quarter up 2.5%.

456
00:23:11.265 --> 00:23:16.175
, Asia has underperformed the US equity markets for,

457
00:23:16.275 --> 00:23:18.935
for probably the past five to six years.

458
00:23:19.235 --> 00:23:22.695
We do, I have no idea what that's gonna turn around.

459
00:23:22.835 --> 00:23:26.055
And when they will at some point outperform, ,

460
00:23:26.555 --> 00:23:30.335
US equities, valuations in Asia are incredibly

461
00:23:30.335 --> 00:23:32.015
attractive versus us.

462
00:23:32.075 --> 00:23:35.535
So at some point, we will see a turnaround there,

463
00:23:35.955 --> 00:23:39.655
and we think that the, , our Asia opportunistic fund will,

464
00:23:39.655 --> 00:23:43.415
will have an incredible, , period of, of performance.

465
00:23:43.875 --> 00:23:46.965
The pool also continues to hold a bit of cash.

466
00:23:47.115 --> 00:23:48.125
It's up about it.

467
00:23:48.145 --> 00:23:52.085
We, we have about 9%, , at the end of September,

468
00:23:52.695 --> 00:23:57.085
which does provide us some flexibility to make, , the most

469
00:23:57.085 --> 00:23:59.125
of some new opportunities as they come up.

470
00:23:59.125 --> 00:24:01.885
If we see a, a, a, you know, a sell off

471
00:24:01.885 --> 00:24:04.165
as significant sell off in US equities,

472
00:24:04.295 --> 00:24:07.485
we'll be adding back, , to equities and,

473
00:24:07.485 --> 00:24:10.485
and reduce our, our, , our cash exposure.

474
00:24:11.435 --> 00:24:14.645
Yeah, Brent, the, , you know, I always like to,

475
00:24:14.785 --> 00:24:17.805
to remind people as well, just of some of the large changes

476
00:24:17.805 --> 00:24:19.605
that were made within the global equity pool

477
00:24:20.525 --> 00:24:22.125
probably about a year and a half ago now.

478
00:24:22.465 --> 00:24:26.365
You know, we, we hired Boston Partners, , as well

479
00:24:26.365 --> 00:24:28.485
as the pinestone, , team and,

480
00:24:28.905 --> 00:24:30.925
and resco that's not mentioned here.

481
00:24:31.575 --> 00:24:33.605
Would you say upon hiring

482
00:24:33.625 --> 00:24:35.685
or since hiring those, those three different managers,

483
00:24:35.715 --> 00:24:37.205
have they met your expectations?

484
00:24:37.385 --> 00:24:41.165
, you know, , if, if yes, you know, in what way?

485
00:24:41.185 --> 00:24:43.365
If not, , how come and what changes are being made?

486
00:24:43.595 --> 00:24:46.805
Yeah, it was just over a year ago, I think it was, , end

487
00:24:46.805 --> 00:24:51.685
of July of 23 that we added, ,

488
00:24:51.685 --> 00:24:55.885
Boston Partners, resco and pinestone to the portfolio.

489
00:24:56.465 --> 00:24:59.605
And they, they've all done absolute exactly

490
00:25:00.635 --> 00:25:03.885
what we anticipate, you know, let's,

491
00:25:04.635 --> 00:25:08.325
when you have an index that is still dominated by six

492
00:25:08.345 --> 00:25:13.175
or seven companies, , most actively managed

493
00:25:13.825 --> 00:25:16.215
funds are just not gonna part, are, are not going

494
00:25:16.215 --> 00:25:18.015
to outperform an index,

495
00:25:18.015 --> 00:25:20.415
because then you have to be like the index.

496
00:25:20.555 --> 00:25:24.935
You have to be significantly overweight those seven to,

497
00:25:25.035 --> 00:25:26.695
you know, six to seven stocks,

498
00:25:27.025 --> 00:25:29.455
which means you've got a very concentrated portfolio.

499
00:25:29.955 --> 00:25:32.295
So those funds, and,

500
00:25:32.295 --> 00:25:35.695
and in particular the Boston Partners Fund, which is more

501
00:25:35.695 --> 00:25:38.895
of a value oriented, , fund,

502
00:25:40.035 --> 00:25:44.335
has a great a, a a a, a smaller correlation

503
00:25:45.305 --> 00:25:47.645
to the, to the broad equity market.

504
00:25:47.825 --> 00:25:48.885
So when, if the s

505
00:25:48.885 --> 00:25:52.645
and p 500 sells off today, which it, which is in the process

506
00:25:52.705 --> 00:25:55.565
of selling off the Boston Partners Fund,

507
00:25:55.955 --> 00:25:58.685
will do significantly better than the index.

508
00:25:58.745 --> 00:26:02.805
So it's doing exactly what we anticipated it to do.

509
00:26:03.185 --> 00:26:06.045
We didn't want it to have a a hundred percent correlation

510
00:26:06.045 --> 00:26:08.965
with the markets, and neither did we want the other, ,

511
00:26:08.965 --> 00:26:11.925
funds we have in there to be, to do exactly the same

512
00:26:11.985 --> 00:26:15.805
as the index, because then you're the index, right?

513
00:26:15.865 --> 00:26:19.325
The index we know is being driven by six or seven stocks.

514
00:26:19.395 --> 00:26:21.565
It's a very concentrated index.

515
00:26:22.025 --> 00:26:25.485
And we do anticipate over the next number of years

516
00:26:25.955 --> 00:26:29.325
that the a more equal weighted s

517
00:26:29.325 --> 00:26:32.925
and p index, it's gonna do much, much better than the, the

518
00:26:33.595 --> 00:26:36.525
more concentrated, , s and p 500.

519
00:26:40.305 --> 00:26:43.485
Yeah. And that, that's, , that's good points and,

520
00:26:43.505 --> 00:26:46.285
and a lot of it as well as the valuation perspective,

521
00:26:46.345 --> 00:26:48.765
you know, the managers that we're utilizing are,

522
00:26:48.825 --> 00:26:50.725
are investing companies that have

523
00:26:51.315 --> 00:26:54.005
significantly lower valuations than what's, ,

524
00:26:54.005 --> 00:26:56.085
we were showing on the previous couple of slides as well.

525
00:26:56.115 --> 00:26:58.165
Yeah. So what does this look like in the

526
00:26:58.165 --> 00:27:01.405
private equity market? Strategic growth?

527
00:27:01.595 --> 00:27:04.525
Yeah. Let's take a look at strategic growth for a moment.

528
00:27:05.025 --> 00:27:09.155
, you know, the pool had a very,

529
00:27:10.345 --> 00:27:11.595
very solid performance.

530
00:27:12.255 --> 00:27:15.155
It, it obviously did not keep pace with, with,

531
00:27:15.385 --> 00:27:16.675
with the s and p 500.

532
00:27:16.935 --> 00:27:20.475
, another should it, you know, it's got a very low,

533
00:27:20.495 --> 00:27:24.315
almost a negative correlation with, with, , ,

534
00:27:24.425 --> 00:27:26.235
with publicly traded stocks.

535
00:27:26.235 --> 00:27:29.995
So if the end, if the stocks are up 10, if you've got a

536
00:27:30.655 --> 00:27:32.955
no correlation, it's not gonna be up the same.

537
00:27:33.335 --> 00:27:38.315
But, but this strategy, there is no doubt in any

538
00:27:38.315 --> 00:27:40.115
of our mind that over the long term,

539
00:27:40.265 --> 00:27:43.035
this is gonna add significant value

540
00:27:43.575 --> 00:27:45.275
to client portfolios

541
00:27:45.275 --> 00:27:49.715
because there's a lot of investments in there, ,

542
00:27:49.945 --> 00:27:54.195
that have zero correlation actually with the economy, ,

543
00:27:54.535 --> 00:27:56.955
and, and should continue to do very well.

544
00:27:57.175 --> 00:28:01.755
So, yeah, so the, the pool was up 2.9 for the quarter up,

545
00:28:01.755 --> 00:28:05.755
11.2% so far this year, which I really think highlights the,

546
00:28:06.175 --> 00:28:10.275
the resilience of, , the strategic allocation

547
00:28:10.275 --> 00:28:11.355
of the pool's holdings.

548
00:28:11.355 --> 00:28:12.995
And I should mention that, ,

549
00:28:13.175 --> 00:28:17.235
the volatility on this pool is, is probably half of

550
00:28:17.235 --> 00:28:20.395
what you're gonna get in, in traditional, , you know,

551
00:28:20.875 --> 00:28:21.995
publicly traded stocks.

552
00:28:22.545 --> 00:28:26.115
Most of the pools of holdings had positive results,

553
00:28:27.495 --> 00:28:32.075
, with some really standout performers like EFM global

554
00:28:32.095 --> 00:28:34.835
growth, which is up 26% for the year.

555
00:28:35.795 --> 00:28:39.875
PLC number two, which is, which is a, a co-investment

556
00:28:40.615 --> 00:28:43.595
in a recently a filed IPO.

557
00:28:43.705 --> 00:28:47.875
It's a, , it's a crypto exchange that, that they've filed

558
00:28:47.975 --> 00:28:49.475
to go to go public here.

559
00:28:50.585 --> 00:28:53.565
, we're hoping within the next four to six months,

560
00:28:53.745 --> 00:28:56.525
and we think that that will, will be a nice contributor

561
00:28:56.665 --> 00:28:58.845
to performance going going forward.

562
00:28:58.845 --> 00:29:01.325
And that was up 31% for the, for the, ,

563
00:29:01.545 --> 00:29:03.165
for the month or for the quarter.

564
00:29:03.545 --> 00:29:07.045
And the Pretium structured credit opportunities fund sub

565
00:29:07.045 --> 00:29:09.965
16.3% year to date a

566
00:29:09.985 --> 00:29:11.685
and apart from that performance,

567
00:29:12.345 --> 00:29:15.285
10% cash flow is generated by

568
00:29:15.285 --> 00:29:16.845
that fund on a quarterly basis.

569
00:29:17.225 --> 00:29:20.485
Of course, not everything is gonna be up, you know,

570
00:29:20.605 --> 00:29:24.285
a few holdings like the Pender technology inflection fund

571
00:29:24.345 --> 00:29:27.005
was down 14.5% for the year.

572
00:29:27.225 --> 00:29:30.195
But, , most of that is,

573
00:29:30.455 --> 00:29:33.595
and I'm, I'm, I'm trying not to get too complex,

574
00:29:33.775 --> 00:29:36.715
but most of that was because of the J curve.

575
00:29:37.225 --> 00:29:39.155
When you're, when you're investing,

576
00:29:39.585 --> 00:29:41.035
this'll be a bit educational,

577
00:29:41.085 --> 00:29:43.925
but when you're investing in private funds

578
00:29:44.585 --> 00:29:46.285
and you commit $10 million

579
00:29:47.065 --> 00:29:49.925
and you've had no money called, you have no money invested,

580
00:29:49.985 --> 00:29:52.125
yet, you are still being charged

581
00:29:52.925 --> 00:29:55.685
a management fee based upon what you've committed.

582
00:29:55.905 --> 00:29:59.605
And that's why it takes a bit of time for you get

583
00:29:59.605 --> 00:30:00.725
through that break even.

584
00:30:00.835 --> 00:30:02.445
It's all because of those fees

585
00:30:02.835 --> 00:30:04.405
that you're paying on something

586
00:30:04.405 --> 00:30:05.925
that's not fully invested yet.

587
00:30:06.025 --> 00:30:08.325
So, , then we had the, ,

588
00:30:08.415 --> 00:30:10.445
accelerate diversified credit fund,

589
00:30:10.445 --> 00:30:12.725
which invests in Business Development Corps.

590
00:30:12.745 --> 00:30:17.245
It was down 4.8%, no reflection on the quality

591
00:30:17.665 --> 00:30:19.205
of the underlying holdings.

592
00:30:19.665 --> 00:30:22.685
, it, so far, the past couple of months,

593
00:30:22.715 --> 00:30:24.045
it's done exceptionally well.

594
00:30:24.585 --> 00:30:26.805
, anyway, that had a bit

595
00:30:26.805 --> 00:30:28.525
of a drag on portfolio performance.

596
00:30:28.525 --> 00:30:30.605
But looking forward, we're very optimistic

597
00:30:31.685 --> 00:30:35.415
that factors like, , asset harvesting,

598
00:30:36.245 --> 00:30:39.535
meaning some of the funds that we invest in are going to,

599
00:30:39.595 --> 00:30:43.135
are looking right now at liquidity options

600
00:30:43.915 --> 00:30:45.415
for their investments.

601
00:30:45.955 --> 00:30:50.015
And I may have mentioned this on the last call, ,

602
00:30:50.015 --> 00:30:52.495
there was a firm in Canada that did a study

603
00:30:53.165 --> 00:30:57.735
that looked back at something like 1200, , private

604
00:30:58.255 --> 00:30:59.455
companies that were sold

605
00:31:00.155 --> 00:31:04.295
and looked at, at what premium had they been sold at

606
00:31:04.915 --> 00:31:07.255
versus their last valuations.

607
00:31:07.675 --> 00:31:10.575
And on average, , those companies were,

608
00:31:10.575 --> 00:31:15.135
were sold at a 28% premium to what their last valuation was.

609
00:31:15.235 --> 00:31:18.295
So we hold a lot of, , a number of funds

610
00:31:18.365 --> 00:31:21.495
that are looking at now to exit some of their,

611
00:31:21.555 --> 00:31:23.255
in their initial investments.

612
00:31:23.275 --> 00:31:25.895
And, and if they are sold at a 28% premium

613
00:31:26.035 --> 00:31:28.215
or a 20% premium, we think that

614
00:31:28.215 --> 00:31:30.535
that will translate into some, some nice gains

615
00:31:30.535 --> 00:31:33.295
for the portfolio going going forward.

616
00:31:34.115 --> 00:31:37.215
, also very optimistic on, , on the,

617
00:31:37.315 --> 00:31:38.975
our legal opportunities fund.

618
00:31:39.135 --> 00:31:40.775
I think that that's a longer term play,

619
00:31:40.835 --> 00:31:44.135
but I think that that will be very, very accretive, ,

620
00:31:44.315 --> 00:31:46.655
for portfolio performance over the long term.

621
00:31:47.495 --> 00:31:49.945
Yeah. Brenda, I just got one quick question, ,

622
00:31:49.945 --> 00:31:53.585
before we move on, just to kind of keep, , things on a,

623
00:31:54.005 --> 00:31:55.225
on a timely basis here.

624
00:31:55.685 --> 00:31:57.225
You know, you mentioned long term

625
00:31:57.445 --> 00:31:58.585
and, , you know, we,

626
00:31:58.585 --> 00:32:00.065
we certainly don't stray away from that.

627
00:32:00.685 --> 00:32:01.985
, I always get questions, you know,

628
00:32:01.985 --> 00:32:04.265
especially when investing in the strategic growth pool,

629
00:32:04.645 --> 00:32:07.305
you know, I've waited, you know, 1, 2, 3 years, ,

630
00:32:07.685 --> 00:32:10.105
and, you know, kind of seen some returns here and there,

631
00:32:10.565 --> 00:32:13.505
but when you're, you're investing in private equity, what,

632
00:32:13.695 --> 00:32:14.985
what do you mean by long term

633
00:32:15.005 --> 00:32:17.785
and what should you really expect in terms of a timeline

634
00:32:17.845 --> 00:32:20.985
to see, you know, the performance that you're suggesting?

635
00:32:22.135 --> 00:32:26.975
So, so let's, so a private, , I'll, I'll get into a bit

636
00:32:26.975 --> 00:32:29.695
of the mechanics of a how a private equity,

637
00:32:29.815 --> 00:32:31.855
and it's the same thing for a private infrastructure

638
00:32:31.855 --> 00:32:35.215
or even a private real estate, , fund where,

639
00:32:35.865 --> 00:32:39.935
where the manager goes out to markets, says, we're raising

640
00:32:40.895 --> 00:32:43.695
whatever it is, 5 billion, $10 billion for this fund.

641
00:32:44.195 --> 00:32:46.975
So it's, it's, so we've got a fund that has got,

642
00:32:47.005 --> 00:32:49.415
it's a 2020 vintage, right?

643
00:32:49.435 --> 00:32:50.495
That's when it was launched.

644
00:32:51.735 --> 00:32:56.355
And they buy a company on, let's call it January 1st, 2020.

645
00:32:57.335 --> 00:32:59.195
And these managers

646
00:33:00.095 --> 00:33:02.555
add tremendous value to the business.

647
00:33:02.585 --> 00:33:04.595
They buy it because they believe

648
00:33:04.595 --> 00:33:08.435
that they can add tremendous value o over the next four

649
00:33:08.435 --> 00:33:10.595
to five years, and then they will sell it

650
00:33:10.595 --> 00:33:15.475
after they've, they've, you know, , grown the business to

651
00:33:15.475 --> 00:33:17.275
where they think it's now fully valued.

652
00:33:17.575 --> 00:33:22.075
So think about that you, we, that, that that fund

653
00:33:22.655 --> 00:33:25.715
bought a business on January 1st, 2020,

654
00:33:26.575 --> 00:33:28.435
and it's adding a tremendous amount

655
00:33:28.435 --> 00:33:29.915
of value to that business.

656
00:33:30.255 --> 00:33:33.075
And then they're gonna look to sell that either four

657
00:33:33.095 --> 00:33:35.575
to six years later, right?

658
00:33:35.885 --> 00:33:38.335
Well, we're just getting to that point now

659
00:33:38.385 --> 00:33:41.415
where these private equity managers

660
00:33:42.155 --> 00:33:45.495
in their initial investments of say 2020

661
00:33:45.595 --> 00:33:49.935
or even 2019, are now looking to exit these businesses

662
00:33:50.125 --> 00:33:53.175
because they believe they're, they've, they've grown them

663
00:33:53.195 --> 00:33:56.135
to the point where they can sell them at a two

664
00:33:56.155 --> 00:33:58.935
to three times what they, they, ,

665
00:33:59.245 --> 00:34:00.375
what they bought them for.

666
00:34:00.715 --> 00:34:03.975
So we're, so that's why you need patients in private equity

667
00:34:03.995 --> 00:34:05.135
or private infrastructure.

668
00:34:05.725 --> 00:34:09.815
They are not, there is, they are not price like private,

669
00:34:10.085 --> 00:34:11.095
like public assets.

670
00:34:11.995 --> 00:34:14.215
And so a lot of that return,

671
00:34:14.635 --> 00:34:16.735
and I like to say that a lot of the return in,

672
00:34:16.875 --> 00:34:19.935
in private funds tends to be backend loaded.

673
00:34:20.435 --> 00:34:23.815
Now in 10 years, we may look back at the, at a fund we have

674
00:34:23.815 --> 00:34:26.815
and say, yeah, over a 10 year period it did 16%,

675
00:34:27.595 --> 00:34:31.815
but it didn't all come, it, a lot of that net

676
00:34:32.795 --> 00:34:34.375
return came, right?

677
00:34:34.465 --> 00:34:37.415
Maybe from year five onwards.

678
00:34:37.715 --> 00:34:39.375
That's why patience is required.

679
00:34:39.375 --> 00:34:40.815
Hopefully that explains a bit.

680
00:34:41.285 --> 00:34:43.375
Yeah. Yeah. I I think it's four

681
00:34:43.375 --> 00:34:44.775
to six years probably at a minimum.

682
00:34:45.315 --> 00:34:49.215
, you can just think of how, what is involved to actually,

683
00:34:49.835 --> 00:34:51.575
, you know, add value to a business

684
00:34:51.575 --> 00:34:52.855
and what, , goes into that.

685
00:34:52.955 --> 00:34:55.615
So sometimes it's, you know, a matter of eight to 10 years,

686
00:34:56.195 --> 00:34:57.575
, especially depending on

687
00:34:58.155 --> 00:35:00.735
how much influence the manager has on the company and,

688
00:35:00.795 --> 00:35:01.975
and you know, how the,

689
00:35:01.975 --> 00:35:03.255
where they see the company progressing.

690
00:35:03.355 --> 00:35:06.535
But, , yeah. Let's, let's maybe move on to, ,

691
00:35:07.115 --> 00:35:09.135
the, the next pool fund.

692
00:35:09.155 --> 00:35:10.615
And we can talk a little bit about that.

693
00:35:11.135 --> 00:35:13.215
I know you talked a little bit about some of the strengths

694
00:35:13.215 --> 00:35:16.095
and weaknesses of strategic growth already, but yeah, let's

695
00:35:16.095 --> 00:35:17.895
Talk, what about The strategic income?

696
00:35:18.245 --> 00:35:23.015
Yeah, strategic income last quarter, it earned, , 0.9%,

697
00:35:23.835 --> 00:35:26.815
, bringing its performance for the, for a year

698
00:35:26.815 --> 00:35:28.135
to date close to five.

699
00:35:28.515 --> 00:35:32.295
, although it's slightly below our longer term goals,

700
00:35:32.385 --> 00:35:36.655
we're, we're very optimistic about the, the, the performance

701
00:35:37.335 --> 00:35:39.765
going forward, especially with, with some

702
00:35:39.765 --> 00:35:41.085
of the funds we have in there.

703
00:35:41.095 --> 00:35:44.685
We'll be delivering pretty substantial, ,

704
00:35:45.105 --> 00:35:47.245
in our opinion gains going forward.

705
00:35:47.945 --> 00:35:52.135
, Aries Pathfinder two did exceptionally well

706
00:35:52.135 --> 00:35:55.295
during the quarter, was up 10.4% this year.

707
00:35:55.915 --> 00:35:59.055
, thanks to, its, its focus on alternative credit.

708
00:35:59.795 --> 00:36:02.935
, it does very well in a, in very complex markets,

709
00:36:04.525 --> 00:36:07.385
not hugely accretive to the overall pool's return

710
00:36:07.385 --> 00:36:09.345
because it's still a very small waiting.

711
00:36:10.085 --> 00:36:14.905
But we did commit, , a, a pretty substantial, I think,

712
00:36:14.985 --> 00:36:18.145
I believe we committed 15 million USD to this fund.

713
00:36:18.705 --> 00:36:22.025
I think we've had maybe $3 million called, so down the road,

714
00:36:22.195 --> 00:36:23.745
let's say over the next two years

715
00:36:24.365 --> 00:36:28.065
as it's being fully invested, this should it, this is a fund

716
00:36:28.065 --> 00:36:31.185
that they, the manager is targeting a 15%

717
00:36:31.285 --> 00:36:32.345
net net rate of return.

718
00:36:32.405 --> 00:36:35.345
So I think it'll be very accretive to portfolio

719
00:36:35.405 --> 00:36:37.025
to pool performance going forward.

720
00:36:37.455 --> 00:36:41.465
Churchill Middle Market Fund also had a very strong quarter,

721
00:36:41.845 --> 00:36:43.985
, or or year to date, ,

722
00:36:44.565 --> 00:36:47.705
it middle market senior secured lending.

723
00:36:47.845 --> 00:36:50.185
It continues to do very, very well.

724
00:36:50.965 --> 00:36:55.545
The ICM Music royalty trust, another very solid return

725
00:36:55.645 --> 00:36:56.665
for year to date.

726
00:36:57.665 --> 00:37:00.975
Again, not all funds, and that's why you diversify.

727
00:37:01.075 --> 00:37:03.135
Not everything in your portfolio is going

728
00:37:03.135 --> 00:37:04.895
to shoot the lights out.

729
00:37:04.895 --> 00:37:08.055
And I, I talked about the diversified credit income fund,

730
00:37:08.055 --> 00:37:10.775
which invests in, in, in a, in a basket

731
00:37:10.955 --> 00:37:12.495
of business development Corps.

732
00:37:12.635 --> 00:37:14.895
It was down during the quarter, ,

733
00:37:15.075 --> 00:37:18.695
the Mesa West Real Estate income fund, Mesa West, it,

734
00:37:18.755 --> 00:37:21.055
and that's the fifth, fifth vintage we're in.

735
00:37:21.165 --> 00:37:23.095
It's a Morgan Stanley fund.

736
00:37:23.155 --> 00:37:27.015
It was down 3.4  percent during, during the quarter,

737
00:37:27.015 --> 00:37:29.855
which I think really reflects, , some

738
00:37:29.855 --> 00:37:34.495
of the struggles in real estate income on the upside, ,

739
00:37:34.635 --> 00:37:38.855
of a fund that had a large drag on performance last year

740
00:37:38.955 --> 00:37:41.095
or for probably for about 18 months.

741
00:37:41.195 --> 00:37:46.015
The theorem main fund, , was up slightly for the quarter

742
00:37:46.795 --> 00:37:50.415
and every month that we're now getting performance, it's,

743
00:37:50.445 --> 00:37:55.075
it's in the, like mid, , 0.6,

744
00:37:55.075 --> 00:37:58.715
0.7% range, kind of what we, we expect it to do longer term.

745
00:37:58.895 --> 00:38:02.195
So a lot of the tailwinds are, are headwinds

746
00:38:02.195 --> 00:38:04.275
that have faced last year turning into slowly

747
00:38:04.345 --> 00:38:05.515
into, into tailwinds.

748
00:38:05.655 --> 00:38:09.875
So looking ahead, we expect improved performance as,

749
00:38:10.015 --> 00:38:14.275
as current market, , challenges start to gradually ease

750
00:38:14.375 --> 00:38:17.315
and, and new strategies are introduced to the pool.

751
00:38:18.015 --> 00:38:20.475
And so we're really excited about, , some

752
00:38:20.475 --> 00:38:23.635
of the upcoming opportunities that we're seeing as well.

753
00:38:23.895 --> 00:38:27.555
And, and believe that adjustments we we make

754
00:38:27.555 --> 00:38:31.155
to the pool will continue to, to deliver very strong

755
00:38:31.705 --> 00:38:34.515
diverse income for investors over the long term.

756
00:38:34.945 --> 00:38:36.645
And some of these things that we're, or,

757
00:38:36.665 --> 00:38:40.765
or investments we're looking at are not going to add value

758
00:38:41.385 --> 00:38:44.045
the very next day or the next month or the next quarter,

759
00:38:44.505 --> 00:38:45.565
but longer term.

760
00:38:46.025 --> 00:38:49.525
But I think that performance longer term, , we're very,

761
00:38:49.555 --> 00:38:53.365
very optimistic on this pool's outlook, , going forward.

762
00:38:55.595 --> 00:38:57.775
How about if I switch to, , sorry,

763
00:38:57.855 --> 00:38:58.855
I should have put this up.

764
00:38:59.075 --> 00:39:03.075
, , why don't we flip over to, , the real,

765
00:39:04.405 --> 00:39:09.175
real asset pool in, in the, in the second quarter of 24?

766
00:39:09.635 --> 00:39:12.575
, or I guess that would've been, , yeah, third quarter,

767
00:39:12.955 --> 00:39:16.375
, it was up at 2.1%, ,

768
00:39:17.575 --> 00:39:19.975
bringing the, the year to date up to 5.4

769
00:39:21.155 --> 00:39:22.495
steady growth shows.

770
00:39:22.695 --> 00:39:26.055
I think that strength in various sectors in the pool, and,

771
00:39:26.055 --> 00:39:29.335
and this is our lowest volatile pool as well.

772
00:39:29.475 --> 00:39:31.855
It is like, if you track it on a daily basis,

773
00:39:32.035 --> 00:39:33.935
I'm sure it's like watching pink dry,

774
00:39:34.285 --> 00:39:35.815
it's not gonna move very much.

775
00:39:35.915 --> 00:39:38.855
But we do anticipate that this pool, ,

776
00:39:39.405 --> 00:39:42.695
over the longer term is, is going to deliver some very,

777
00:39:42.725 --> 00:39:46.695
very solid high single digit returns, which is

778
00:39:46.695 --> 00:39:47.735
what we're, we're targeting.

779
00:39:48.235 --> 00:39:52.575
, you know, public infrastructure funds performed, ,

780
00:39:52.865 --> 00:39:56.015
especially well, , driven, I think really by,

781
00:39:56.075 --> 00:39:57.775
by global development projects.

782
00:39:57.835 --> 00:40:01.775
And, and if you look at some of our, our ETFs global on the,

783
00:40:01.775 --> 00:40:03.455
on the infrastructure side, they,

784
00:40:03.455 --> 00:40:06.095
they were up exceptionally well during the quarter,

785
00:40:06.195 --> 00:40:09.335
but really reflects what public markets, ,

786
00:40:09.755 --> 00:40:11.095
did, did join the quarter.

787
00:40:11.725 --> 00:40:13.975
Real estate showed a bit of, ,

788
00:40:14.185 --> 00:40:16.335
mixed results across different holdings.

789
00:40:16.875 --> 00:40:20.495
Avenue Living Real Estate Core Trust performed very well.

790
00:40:20.575 --> 00:40:24.695
I think it was up 8.6% return so far this year,

791
00:40:25.155 --> 00:40:29.495
but I do know that it's had a, it's been marked up for the,

792
00:40:29.595 --> 00:40:32.495
for the, , for the month of ending September.

793
00:40:32.955 --> 00:40:35.775
And it's showing a very, it, I think by the end of the year,

794
00:40:35.775 --> 00:40:38.535
they're targeting closure to a 14% on this one.

795
00:40:38.875 --> 00:40:40.855
And Henderson Park Real Estate Fund,

796
00:40:40.855 --> 00:40:43.575
which is a pan-European real estate fund.

797
00:40:43.955 --> 00:40:46.975
, and it's a private equity, , private real estate

798
00:40:47.035 --> 00:40:49.615
and private real estate has not done, ,

799
00:40:49.625 --> 00:40:52.335
especially well over the past year or so.

800
00:40:52.515 --> 00:40:55.415
And it was up, , 5.7% year to date.

801
00:40:55.515 --> 00:40:59.095
So very, very well within, while, while when you consider

802
00:40:59.125 --> 00:41:01.615
that, that private real estate in general has not

803
00:41:01.645 --> 00:41:02.815
done especially well.

804
00:41:03.795 --> 00:41:08.575
, you know, if we flip over to, you know, some parts of,

805
00:41:08.995 --> 00:41:11.455
of, of, , global, ,

806
00:41:11.965 --> 00:41:14.735
agriculture, I did quite well.

807
00:41:15.015 --> 00:41:18.015
Canadian farmland continues to perform very strongly.

808
00:41:18.515 --> 00:41:21.215
But on the flip side, if we, if we look at some of these,

809
00:41:21.995 --> 00:41:24.935
, actually I'm, I got ahead of myself.

810
00:41:25.395 --> 00:41:28.695
If we look at, , some of the things that did not perform

811
00:41:29.225 --> 00:41:31.015
quite as well, ,

812
00:41:31.315 --> 00:41:35.005
the Nuveen Global Farmland Fund showed a slight decline

813
00:41:35.035 --> 00:41:38.085
even, it was, if it was flat, it's still having somewhat

814
00:41:38.105 --> 00:41:42.805
of a, of a negative impact on the overall port portfolio.

815
00:41:43.745 --> 00:41:48.085
, looking forward, we, we expected future asset sales,

816
00:41:48.995 --> 00:41:52.245
very similar to what I just said about public equities.

817
00:41:52.625 --> 00:41:54.365
The same thing is happening,

818
00:41:54.365 --> 00:41:56.725
having happening in infrastructure.

819
00:41:56.915 --> 00:41:59.565
Some of our, our 2019

820
00:41:59.625 --> 00:42:03.405
and 2020 vintage funds are actively looking

821
00:42:03.505 --> 00:42:04.645
for liquidity options.

822
00:42:04.665 --> 00:42:08.605
In other words, they're looking to start, , selling some

823
00:42:08.605 --> 00:42:13.325
of their assets and, you know, talking to those managers,

824
00:42:13.475 --> 00:42:17.165
most of them value their existing assets at a,

825
00:42:17.165 --> 00:42:20.285
at a sizable discount to what they believe they can get

826
00:42:20.465 --> 00:42:22.125
for them when they sell them on the market.

827
00:42:22.265 --> 00:42:23.605
And, and if that happens, I think

828
00:42:23.605 --> 00:42:26.805
that will be very accretive to portfolio performance.

829
00:42:27.545 --> 00:42:31.565
We are making a bit of, , changes within our,

830
00:42:32.375 --> 00:42:35.835
within the ag agriculture side of the, of the portfolio,

831
00:42:36.485 --> 00:42:41.475
we've been introduced to, to several US based strategies

832
00:42:41.585 --> 00:42:44.395
that, that, , have done exceptionally well.

833
00:42:44.615 --> 00:42:48.275
And so we're, we're looking to make a few, a few tweaks, ,

834
00:42:48.305 --> 00:42:52.955
with our global, , global, , agriculture exposure.

835
00:42:53.295 --> 00:42:57.995
So, , so anyway, I, I think that, you know, while

836
00:42:58.855 --> 00:43:02.315
the, the, the asset pool hasn't necessarily, ,

837
00:43:04.155 --> 00:43:08.085
delivered the returns that we, you know, where we,

838
00:43:08.155 --> 00:43:11.205
we'd be really happy with, I think that, again,

839
00:43:11.305 --> 00:43:15.685
we have a number of holdings in there, , that have,

840
00:43:15.755 --> 00:43:18.005
have now gone through their J curve and,

841
00:43:18.065 --> 00:43:19.485
and their, their, ,

842
00:43:19.805 --> 00:43:22.565
although performance is still strong for, for something

843
00:43:22.565 --> 00:43:26.565
that got next to no volatility, I think that as,

844
00:43:26.825 --> 00:43:29.045
as our funds start to harvest

845
00:43:29.265 --> 00:43:31.365
or exit some of their positions, I think that

846
00:43:31.365 --> 00:43:34.285
that's when you're going to see a creative return

847
00:43:34.345 --> 00:43:35.965
for the pool going forward.

848
00:43:36.145 --> 00:43:40.685
So overall, I'm very happy with the direction of our pools,

849
00:43:41.065 --> 00:43:44.805
all of our pools, , even the global equity pool.

850
00:43:45.225 --> 00:43:47.485
, I like how it's structured right now.

851
00:43:47.545 --> 00:43:50.765
And if, you know, if we continue to see a bit of volatility

852
00:43:51.345 --> 00:43:54.685
in public markets, I think that our global equity pool will,

853
00:43:54.835 --> 00:43:58.965
will, , will do much better, , than say the s and p 500.

854
00:43:59.425 --> 00:44:04.125
, but overall, the pools are doing exactly what,

855
00:44:04.345 --> 00:44:05.565
, what they're built to do,

856
00:44:05.705 --> 00:44:09.285
and that's to deliver, you know, strong performance,

857
00:44:09.715 --> 00:44:12.885
performance with minimal volatility.

858
00:44:13.345 --> 00:44:15.565
So on that note, Mike, why don't I,

859
00:44:16.445 --> 00:44:17.605
Yeah, I'll, I'll get into questions.

860
00:44:17.725 --> 00:44:19.245
I do, I do have one quick one.

861
00:44:19.545 --> 00:44:23.365
, just as it relates to not only the real asset pool,

862
00:44:23.425 --> 00:44:24.925
but strategic income as well.

863
00:44:25.105 --> 00:44:28.925
Mm-Hmm. So is our two positions that tend to make up, ,

864
00:44:29.645 --> 00:44:31.805
a pretty large, , portion of a lot

865
00:44:31.805 --> 00:44:34.085
of our conservative investors portfolios.

866
00:44:34.235 --> 00:44:35.525
Yeah. For due reason,

867
00:44:35.525 --> 00:44:37.725
because of the, you know, the conservative nature.

868
00:44:37.905 --> 00:44:39.325
But, , you know,

869
00:44:39.325 --> 00:44:41.725
at the beginning when we talk about potential recession

870
00:44:41.725 --> 00:44:44.045
volatility in the markets, you know,

871
00:44:44.045 --> 00:44:46.765
that can be a little bit of a cause for, for concerns.

872
00:44:46.865 --> 00:44:49.965
So for those clients that are a bit more conservative

873
00:44:49.965 --> 00:44:52.965
that have, , higher allocation to real assets

874
00:44:53.065 --> 00:44:56.205
and strategic income, do you, do you expect even

875
00:44:56.205 --> 00:44:59.525
through a recessionary period that they continue to provide,

876
00:45:00.145 --> 00:45:01.805
you know, the stability, ,

877
00:45:02.465 --> 00:45:03.485
and consistency that,

878
00:45:03.485 --> 00:45:04.525
that they have over the number of years?

879
00:45:05.315 --> 00:45:06.315
Yeah,

880
00:45:07.335 --> 00:45:10.255
I mean, you know, if you just have, ,

881
00:45:10.685 --> 00:45:13.715
look at it this way, I, I mean, , first of all,

882
00:45:13.875 --> 00:45:17.555
IE even if the US goes into a recession, I think it'll be a,

883
00:45:17.675 --> 00:45:18.995
a very shallow recession.

884
00:45:19.075 --> 00:45:21.435
I think Canadian recession will be a lot deeper than

885
00:45:21.435 --> 00:45:23.435
what we, than what the US experiences.

886
00:45:24.335 --> 00:45:28.115
But if, if, you know, traditional balanced portfolios

887
00:45:28.805 --> 00:45:30.835
today have have basically three choices.

888
00:45:31.985 --> 00:45:35.205
Public equities, public fixed income, or cash.

889
00:45:36.105 --> 00:45:39.375
And most conservative, , investors

890
00:45:40.005 --> 00:45:43.095
have a pretty healthy exposure to fixed income.

891
00:45:43.755 --> 00:45:46.975
All traditional fixed income is,

892
00:45:47.355 --> 00:45:49.135
has interest rate sensitivity.

893
00:45:49.235 --> 00:45:51.295
So there, if, if interest rates go up,

894
00:45:51.595 --> 00:45:54.975
not just interest rates, but, or, or inflation, but,

895
00:45:55.195 --> 00:45:59.655
but concerns about, , fiscal responsibility.

896
00:46:00.315 --> 00:46:02.215
And, and so at the end of the day,

897
00:46:02.215 --> 00:46:04.135
traditional fixed income is tied to

898
00:46:04.135 --> 00:46:05.615
what interest rates are doing.

899
00:46:06.205 --> 00:46:09.055
When you look at alternative sources of income,

900
00:46:09.165 --> 00:46:13.935
like private credit, like, , music royalties,

901
00:46:14.165 --> 00:46:18.695
like infrastructure debt, , where, where you're lending

902
00:46:18.915 --> 00:46:20.895
to, , critical infrastructure,

903
00:46:21.295 --> 00:46:25.495
I think the risk in those areas, it's much, much less

904
00:46:26.655 --> 00:46:29.345
than in, in certain areas within corporate,

905
00:46:29.985 --> 00:46:31.225
publicly traded corporate bonds.

906
00:46:31.325 --> 00:46:34.505
So even music royalties,

907
00:46:34.825 --> 00:46:36.505
regardless if we go into a recession,

908
00:46:36.525 --> 00:46:38.225
people are still gonna listen to music.

909
00:46:39.615 --> 00:46:43.075
, people aren't gonna cancel their, their apple, you know,

910
00:46:43.075 --> 00:46:44.555
or their Spotify account.

911
00:46:45.015 --> 00:46:47.675
And so we, we believe that that, ,

912
00:46:47.675 --> 00:46:52.035
music royalties will continue to pay out strong cash flow.

913
00:46:52.555 --> 00:46:55.715
I think if you're looking at real assets, you know,

914
00:46:55.865 --> 00:46:58.875
agriculture, it, it's, it's, I think it's, it's an anchor,

915
00:46:59.295 --> 00:47:03.035
, that that's gonna continue to do, to do quite well.

916
00:47:03.035 --> 00:47:05.555
People, regardless of the economic environment,

917
00:47:05.615 --> 00:47:08.475
are gonna continue to, to, to need food.

918
00:47:08.775 --> 00:47:12.035
And if you look in, in private infrastructure, ,

919
00:47:12.035 --> 00:47:15.675
there's a lot of areas within private extra infrastructure

920
00:47:15.825 --> 00:47:18.355
will, that will continue to do well.

921
00:47:18.895 --> 00:47:22.155
, you are looking at essential infrastructure,

922
00:47:22.255 --> 00:47:25.395
things like gas, , you know, oil pipelines

923
00:47:25.615 --> 00:47:27.475
or, , utilities.

924
00:47:27.545 --> 00:47:30.765
Doesn't matter what the economy does, people need that,

925
00:47:30.875 --> 00:47:32.685
that, , essential infrastructure.

926
00:47:32.745 --> 00:47:34.725
And then when you look at real estate,

927
00:47:34.795 --> 00:47:36.925
sure there's gonna be certain areas of real estate

928
00:47:36.925 --> 00:47:38.125
that don't do so well,

929
00:47:38.305 --> 00:47:42.045
but if you look at something like the avenue living for

930
00:47:42.585 --> 00:47:45.365
equity trust, people still need places to live, right?

931
00:47:45.545 --> 00:47:47.765
People are still going to rent apartments.

932
00:47:47.825 --> 00:47:50.685
So it's a very diversified approach.

933
00:47:50.745 --> 00:47:53.285
And, and, and one thing I should say, one

934
00:47:53.285 --> 00:47:56.045
of the fastest growing areas within private infrastructure

935
00:47:56.905 --> 00:47:58.005
is, is data.

936
00:47:58.675 --> 00:48:01.565
Doesn't matter what kind of, no one's gonna cancel their,

937
00:48:01.575 --> 00:48:03.725
their internet access, right?

938
00:48:03.995 --> 00:48:06.885
That is cent, let's, let's, let's face it,

939
00:48:07.595 --> 00:48:11.205
data is an essential infrastructure today.

940
00:48:11.225 --> 00:48:15.085
People will always need access to, to data.

941
00:48:15.345 --> 00:48:18.525
So there's certain areas might not do so well,

942
00:48:18.855 --> 00:48:21.125
other areas will do just fine regardless

943
00:48:21.145 --> 00:48:22.405
of the economic environment.

944
00:48:22.405 --> 00:48:25.405
So it's a really well structured portfolio

945
00:48:25.955 --> 00:48:29.165
that should do well, regardless of the economic environment.

946
00:48:30.445 --> 00:48:32.335
Well, that's, that's great. Yeah.

947
00:48:32.355 --> 00:48:33.775
And, and, , you know, for,

948
00:48:33.915 --> 00:48:36.655
for conservative investors from a holistic standpoint

949
00:48:36.715 --> 00:48:39.055
and looking at your entire portfolio, you know,

950
00:48:39.055 --> 00:48:41.575
conservative investors, we'll also have a portion allocated

951
00:48:41.575 --> 00:48:44.135
to growth investments and vice versa

952
00:48:44.245 --> 00:48:46.855
with aggressive investors having some sort of allocation

953
00:48:46.915 --> 00:48:48.415
to conservative investments.

954
00:48:48.415 --> 00:48:50.535
And there's, , there is a reason for that.

955
00:48:50.635 --> 00:48:51.735
So, , really important

956
00:48:51.735 --> 00:48:53.655
to just continue having those conversations with your,

957
00:48:53.655 --> 00:48:54.695
your wealth counselor and,

958
00:48:54.755 --> 00:48:56.855
and, , if there's any specific questions relating

959
00:48:56.855 --> 00:48:58.735
to your portfolio in, in general.

960
00:48:59.275 --> 00:49:02.615
, but yeah, let's jump into the, , the q and a.

961
00:49:03.075 --> 00:49:05.735
, and there is a couple of questions that are starting to,

962
00:49:05.755 --> 00:49:06.975
, come through.

963
00:49:07.475 --> 00:49:10.575
And if you haven't, please, , you know, please ask away

964
00:49:11.275 --> 00:49:12.735
and we'll try to get to them if we can.

965
00:49:13.235 --> 00:49:14.575
, maybe starting off, ,

966
00:49:14.635 --> 00:49:17.895
and this is actually a good timing as we go into the, ,

967
00:49:18.555 --> 00:49:21.335
colder months of the year up here in Canada,

968
00:49:21.595 --> 00:49:24.095
people are heading down, , down south for warmer weather.

969
00:49:24.155 --> 00:49:26.455
So I'm only slightly jealous, but, ,

970
00:49:27.075 --> 00:49:28.495
You Know, the question being, you know, with,

971
00:49:28.525 --> 00:49:30.935
with everything going on in the world, what do you see the,

972
00:49:31.075 --> 00:49:33.575
the currency between Canada and the US going?

973
00:49:36.685 --> 00:49:37.985
, I have no idea, Mike.

974
00:49:38.365 --> 00:49:42.425
No, , I think there's really three, three variables

975
00:49:42.425 --> 00:49:45.305
that drive the, the USD, ,

976
00:49:45.885 --> 00:49:48.505
one is interest rate differentials, right?

977
00:49:48.765 --> 00:49:51.185
And, and money flows to where

978
00:49:51.695 --> 00:49:54.025
they can get a better rate of return.

979
00:49:54.765 --> 00:49:57.945
, the other is a use as a safe haven currency.

980
00:49:58.205 --> 00:50:02.585
So if, if we listen, if, if World War III breaks out,

981
00:50:02.685 --> 00:50:05.025
you wanna have, there's two currencies you wanna own,

982
00:50:05.045 --> 00:50:07.105
you wanna u own the Japanese Yen,

983
00:50:07.405 --> 00:50:09.745
and you wanna own the US dollar, they're both

984
00:50:10.425 --> 00:50:12.465
considered safe haven currencies.

985
00:50:12.965 --> 00:50:16.345
And the other, it, it's, it's a countercyclical currency.

986
00:50:17.085 --> 00:50:21.745
The, the US dollar tends to appreciate when global growth,

987
00:50:22.565 --> 00:50:23.625
, slows.

988
00:50:24.715 --> 00:50:28.525
, and it, it, , and it appreciates,

989
00:50:28.625 --> 00:50:32.725
or it depreciates when global growth accelerates.

990
00:50:33.025 --> 00:50:37.285
So if you believe that the global economy is going

991
00:50:37.285 --> 00:50:39.725
to decelerate us, , you know,

992
00:50:39.725 --> 00:50:41.765
if Canada goes into a recession

993
00:50:41.765 --> 00:50:44.805
before the us, then I think the US will continue to,

994
00:50:45.585 --> 00:50:48.325
to appreciate, I think the US dollar will continue

995
00:50:48.545 --> 00:50:50.405
to appreciate over the short term,

996
00:50:50.505 --> 00:50:55.325
but as we get out, out of a slowing economic environment,

997
00:50:55.945 --> 00:50:59.045
that's when you wanna be, , underweight the US dollar.

998
00:51:00.935 --> 00:51:03.305
Yeah. Yeah. It's, , I mean, especially right now

999
00:51:03.305 --> 00:51:06.145
with some of the recent cuts in, in Canada

1000
00:51:06.285 --> 00:51:09.745
and, you know, potential, , deeper recession too, right?

1001
00:51:09.745 --> 00:51:12.625
That might be a little bit more impactful, ,

1002
00:51:12.625 --> 00:51:16.145
and unfortunately hurt, hurt our dollar, , you know,

1003
00:51:16.145 --> 00:51:18.905
over the foreseeable future at least, , the, you know,

1004
00:51:18.905 --> 00:51:21.305
the big event that we haven't really discussed, the,

1005
00:51:21.305 --> 00:51:24.825
the US election that's coming up, , very much anticipated.

1006
00:51:25.365 --> 00:51:28.385
, could you just give a, a brief, ,

1007
00:51:28.385 --> 00:51:29.825
because I got a number of questions here,

1008
00:51:29.825 --> 00:51:31.225
so I'm just gonna wrap it up in the one,

1009
00:51:31.245 --> 00:51:35.625
but, so could you give an idea of what's you expect if, ,

1010
00:51:35.845 --> 00:51:37.225
either candidate wins?

1011
00:51:41.675 --> 00:51:45.245
Well, long term, I don't think, regardless of who,

1012
00:51:45.425 --> 00:51:47.285
who wins, I mean, it's,

1013
00:51:48.645 --> 00:51:50.855
sure there's always gonna be some short-term

1014
00:51:50.995 --> 00:51:52.055
impact on the market.

1015
00:51:52.205 --> 00:51:56.015
Like we saw back when, when, , Trump won the,

1016
00:51:56.075 --> 00:51:58.415
the election back in 2016, we saw

1017
00:51:58.935 --> 00:52:00.695
a massive rally in equities.

1018
00:52:01.195 --> 00:52:03.615
It could happen again, regardless of who wins.

1019
00:52:03.715 --> 00:52:06.775
But I think, you know, if, if just focusing, I think that,

1020
00:52:07.195 --> 00:52:10.375
you know, the, the betting markets are having Donald Trump,

1021
00:52:10.635 --> 00:52:12.215
, winning the election.

1022
00:52:13.775 --> 00:52:15.395
So if, if, if it happens

1023
00:52:15.455 --> 00:52:18.235
or not, who knows, it's too cold to too close to call.

1024
00:52:18.695 --> 00:52:22.395
But if, if, , you know, if Harris does win the election,

1025
00:52:22.475 --> 00:52:24.275
I don't, it, it'll be business as usual.

1026
00:52:24.415 --> 00:52:26.515
So it shouldn't have a dramatic increase

1027
00:52:26.535 --> 00:52:28.635
or impact on, on, on the markets.

1028
00:52:29.295 --> 00:52:32.755
But I think, , you know, the, the common belief is

1029
00:52:32.755 --> 00:52:37.075
that if, if Trump wins, it would be good for stocks, ,

1030
00:52:37.075 --> 00:52:41.115
but bad for bonds, mainly due to expectations

1031
00:52:41.215 --> 00:52:43.075
of more corporate tax cuts.

1032
00:52:43.345 --> 00:52:47.475
However, I think there's a few, , few issues

1033
00:52:47.505 --> 00:52:51.595
with the thinking with bond yields that are now over 4%

1034
00:52:51.655 --> 00:52:52.915
and continuing to rise,

1035
00:52:52.925 --> 00:52:55.635
which I think is reflecting concerns about

1036
00:52:55.895 --> 00:52:57.955
fiscal policy.

1037
00:52:58.855 --> 00:53:03.555
, and there's a, there's a budget deficit of, of 7%

1038
00:53:03.555 --> 00:53:07.555
of GDP in the US federal debt is unsustainable.

1039
00:53:08.025 --> 00:53:09.875
It's absolutely unsustainable.

1040
00:53:10.495 --> 00:53:12.555
And many, I think, moderate

1041
00:53:14.065 --> 00:53:18.225
Republicans would likely oppose anything that that worsens,

1042
00:53:18.885 --> 00:53:21.625
, the fiscal, , fiscal situation.

1043
00:53:21.695 --> 00:53:25.845
Plus, with the GOP's growing populism, you know,

1044
00:53:26.105 --> 00:53:30.125
tax cuts for larger corporations may not have the same

1045
00:53:30.125 --> 00:53:31.725
appeal as it as it used to.

1046
00:53:31.905 --> 00:53:36.405
So, you know, I, I think the biggest, the biggest issue,

1047
00:53:37.005 --> 00:53:39.565
regardless of which party wins the election,

1048
00:53:39.705 --> 00:53:44.285
is they are going to absolutely have to deal

1049
00:53:44.875 --> 00:53:48.285
with, , the current fiscal situation.

1050
00:53:48.665 --> 00:53:53.125
You know, , if you look at bond deals in the us,

1051
00:53:54.445 --> 00:53:57.745
the Federal Reserve ha made their first big rate,

1052
00:53:58.515 --> 00:53:59.775
, cut recently.

1053
00:54:00.595 --> 00:54:01.855
, and,

1054
00:54:02.435 --> 00:54:06.495
but what what's been happening is we haven't seen, ,

1055
00:54:06.555 --> 00:54:08.175
we haven't seen the long

1056
00:54:08.235 --> 00:54:10.655
and let's say 10 year bond yields, ,

1057
00:54:10.765 --> 00:54:11.935
they haven't gone down either.

1058
00:54:11.965 --> 00:54:15.535
They've actually been, been going, going up, which I,

1059
00:54:15.655 --> 00:54:19.095
I really think suggest that longer rates are, are rising

1060
00:54:19.205 --> 00:54:24.015
because of emerging worries about fiscal sustainability.

1061
00:54:24.675 --> 00:54:29.095
, the Fed finally stepped back, , or,

1062
00:54:29.115 --> 00:54:34.095
or the Fed had been, you know, managing the yield curve

1063
00:54:34.095 --> 00:54:36.775
with all of its quantitative easing programs.

1064
00:54:37.475 --> 00:54:41.415
, but, but as it, at it's been pulling back from that,

1065
00:54:41.815 --> 00:54:44.255
I think, , the term premium or

1066
00:54:44.275 --> 00:54:48.495
or longer yields are heading back to where they should be.

1067
00:54:49.115 --> 00:54:50.375
So what we've been living

1068
00:54:50.375 --> 00:54:52.935
through over the past 15 years is not normal.

1069
00:54:53.195 --> 00:54:54.935
It was an absolute aberration,

1070
00:54:54.955 --> 00:54:57.855
and I think bond yields will begin to,

1071
00:54:58.115 --> 00:55:00.255
to reflect out of control deficit.

1072
00:55:00.675 --> 00:55:04.535
So the point is, regardless of which party wins, the focus

1073
00:55:05.415 --> 00:55:09.295
absolutely has to be on fiscal, , responsibility

1074
00:55:09.475 --> 00:55:12.855
or bond yields in the US or going to continue to take off.

1075
00:55:13.235 --> 00:55:16.655
Listen, they, they pay a trillion dollars in interest

1076
00:55:16.735 --> 00:55:20.735
payments a year today when you have a a a, a budget

1077
00:55:20.795 --> 00:55:23.095
of about $7 trillion

1078
00:55:23.155 --> 00:55:27.255
and only about five point, some of that is from, from, ,

1079
00:55:27.595 --> 00:55:31.455
tax revenue and a a trillion is tax is interest.

1080
00:55:32.315 --> 00:55:33.645
Something has to be done.

1081
00:55:35.875 --> 00:55:36.885
Yeah, I agree.

1082
00:55:36.885 --> 00:55:38.325
And I think most, most listeners,

1083
00:55:38.325 --> 00:55:40.085
listeners would probably agree with that,

1084
00:55:40.225 --> 00:55:41.245
, statement as well.

1085
00:55:41.345 --> 00:55:42.445
And, , just

1086
00:55:42.445 --> 00:55:45.685
before we, we get to wrapping things up here, here, Brent,

1087
00:55:46.465 --> 00:55:48.565
and, , if we didn't get to your, to your question,

1088
00:55:48.705 --> 00:55:51.045
we will, , certainly reach out to individually,

1089
00:55:51.145 --> 00:55:54.695
but, , you talked a little bit about some of the changes,

1090
00:55:54.925 --> 00:55:57.615
updates within each individual pool fund,

1091
00:55:58.235 --> 00:56:00.255
but perhaps, you know, as a summary,

1092
00:56:00.555 --> 00:56:04.215
you could just provide a quick, , update as to

1093
00:56:04.725 --> 00:56:07.175
what we're doing from a high level port portfolio

1094
00:56:07.175 --> 00:56:11.015
perspective to not only help preserve clients' capital,

1095
00:56:11.115 --> 00:56:12.895
but also continue to provide some of

1096
00:56:12.895 --> 00:56:14.335
that responsible growth over time.

1097
00:56:15.245 --> 00:56:18.255
Yeah, I mean, you know, we've high, why, why would you,

1098
00:56:18.555 --> 00:56:20.295
why would you reduce equity exposure

1099
00:56:21.775 --> 00:56:25.765
when equities are going up and portfolio management?

1100
00:56:26.745 --> 00:56:28.965
, let's face it, there's no, there's no doubt

1101
00:56:28.995 --> 00:56:31.725
that diversification has worked against all

1102
00:56:31.725 --> 00:56:34.165
of us over the past two years, right?

1103
00:56:34.225 --> 00:56:37.205
We should have been a hundred percent in the s and p 500.

1104
00:56:38.555 --> 00:56:41.215
, but we believe that that returns

1105
00:56:41.435 --> 00:56:43.095
and the main reason is forward

1106
00:56:43.095 --> 00:56:44.575
looking, not backwards looking.

1107
00:56:46.045 --> 00:56:49.035
And we talked about this at the beginning, you know,

1108
00:56:49.175 --> 00:56:52.295
JP Morgan expects, you know,

1109
00:56:52.365 --> 00:56:56.935
returns in global equities in the low single digits,

1110
00:56:57.195 --> 00:57:01.975
, , , Goldman Sachs 3%, Apollo Group,

1111
00:57:02.075 --> 00:57:03.175
2.9%.

1112
00:57:03.235 --> 00:57:05.255
So you can't, you can't look back

1113
00:57:05.255 --> 00:57:08.055
and say, well, geez, equities have done 15% the past

1114
00:57:08.875 --> 00:57:10.815
10 years they're going to, or whatever it was.

1115
00:57:10.815 --> 00:57:12.975
They're gonna do the same thing going forward.

1116
00:57:13.155 --> 00:57:16.095
No, you've, you've gotta look at capital market assumptions,

1117
00:57:16.095 --> 00:57:17.775
and if you look at capital market assumptions

1118
00:57:17.775 --> 00:57:21.745
for the next decade, traditional

1119
00:57:22.485 --> 00:57:27.185
stocks and bonds are not expected to do that well.

1120
00:57:27.485 --> 00:57:29.905
So we're not, we're not managing portfolios

1121
00:57:29.905 --> 00:57:31.705
for the next six months or next year.

1122
00:57:32.055 --> 00:57:35.025
They're, they're, we build strategic asset mixes

1123
00:57:35.025 --> 00:57:36.985
that should deliver a client's expected

1124
00:57:37.045 --> 00:57:38.385
return over the long term.

1125
00:57:39.005 --> 00:57:41.825
And so with, with traditional stocks

1126
00:57:41.825 --> 00:57:43.705
and bonds likely to deliver

1127
00:57:44.475 --> 00:57:47.425
lower returns in the coming years, ,

1128
00:57:47.565 --> 00:57:50.345
and equities have already done exceptionally well.

1129
00:57:50.845 --> 00:57:53.505
We just think that when you look at things like private

1130
00:57:53.505 --> 00:57:57.695
credit that are expected, , by,

1131
00:57:57.835 --> 00:58:02.295
by most analysts out there to do probably twice the return

1132
00:58:02.995 --> 00:58:06.935
of, of public equities, doesn't it make sense

1133
00:58:07.035 --> 00:58:09.455
to take a bit off of, of public equities

1134
00:58:09.455 --> 00:58:12.015
that have already done exceptionally well over the two past

1135
00:58:12.035 --> 00:58:15.415
two years and to reallocate to, to assets

1136
00:58:15.845 --> 00:58:18.255
that over the next decade we'll do better.

1137
00:58:18.595 --> 00:58:21.655
So that, that's the whole idea of portfolio management is

1138
00:58:21.715 --> 00:58:24.455
to ensure that you're building a portfolio

1139
00:58:25.165 --> 00:58:29.255
that will deliver client, , expect returns or,

1140
00:58:29.275 --> 00:58:32.415
or return to clients' need over the long term and,

1141
00:58:32.415 --> 00:58:33.895
and not the focus on

1142
00:58:33.915 --> 00:58:36.615
how they've just done over the past two years.

1143
00:58:38.235 --> 00:58:41.605
Yeah, yeah. Looking at the longer terms key, , you know,

1144
00:58:41.605 --> 00:58:43.405
valuations are key, like we, we mentioned,

1145
00:58:43.985 --> 00:58:46.045
and, you know, I can't tell you how many people I've spoken

1146
00:58:46.065 --> 00:58:49.805
to that's, you know, even looking back at 2000, you know,

1147
00:58:49.805 --> 00:58:52.565
wish they would've taken, taken some off the table, right?

1148
00:58:52.585 --> 00:58:55.285
And, and diversified, , on the way up.

1149
00:58:55.345 --> 00:58:56.885
You're never gonna, you're never gonna hit the

1150
00:58:56.885 --> 00:58:57.925
peak, you're never gonna hit the bottom.

1151
00:58:58.145 --> 00:58:59.805
If you do, it's most likely luck.

1152
00:58:59.865 --> 00:59:02.845
But, , we look at things from a long-term holistic

1153
00:59:02.875 --> 00:59:04.285
pers perspective as well. And,

1154
00:59:04.665 --> 00:59:05.685
And so yeah, we're, we're gonna

1155
00:59:05.685 --> 00:59:07.805
Wrap up here and then, , you know, thank you again,

1156
00:59:08.245 --> 00:59:10.645
everyone that joined the call, I stayed on the call.

1157
00:59:10.645 --> 00:59:11.805
Thank you for your questions.

1158
00:59:12.585 --> 00:59:14.445
If you have any additional questions afterwards,

1159
00:59:14.445 --> 00:59:16.165
please reach out to your wealth counselor.

1160
00:59:16.625 --> 00:59:18.165
, but other than that, ,

1161
00:59:18.275 --> 00:59:20.365
hope everyone has a safe Halloween

1162
00:59:21.065 --> 00:59:23.325
and, , yeah, we'll see each other again soon.

1163
00:59:23.985 --> 00:59:25.125
All right. Thanks everyone.
 

Kinsted Wealth is a leader in high net worth wealth management in Canada, providing tailored strategies to meet the unique needs of institutional investors and individuals seeking investment management in Calgary. Our firm, a Calgary investment firm, is dedicated to helping you achieve financial stability and growth through a well-diversified portfolio and effective investment strategies.