Nicola Wealth Ontario Regional Manager Ron Haik and Business Development Rick Goossen presented to ELO.

1. 2020 Strategic Outlook
Richard (Rick) J. Goossen, BA (Hons), LLB, LLM, PhD
Business Development
Ron Haik, MBA, CFP®, CIM®, FCSI®, CIWM, TEP
Senior Financial Advisor & Regional Manager, Ontario at Nicola Wealth

2. Tax-efficient portfolios
Markets
Private assets Debt

3. extend the application of (a
method or conclusion, especially
one based on statistics) to an
unknown situation by assuming
that existing trends will continue
or similar methods will be
applicable.

5. 1929-1936 recover
1929-1942 recover
Canada 13.7% - 290,000 new jobs
NO
• Unemployment Insurance
• Social Security/ CPP
• Deposit Insurance

7. 1% lower
Than Jan.1st
Global markets -12% YTD

8. How would you
invest and allocate
your capital if it was
committed for five
years ?

9. 25 years 1 depression and 4 recessions
Dividend Yield 13.4% June 1932

10. 7.5 years and 2 recessions for full recovery beyond the prior peak
-45% drop 15 months later
25% recovery before recession is over
S& P 500 Price ( nominal )

11. 24 years and 5 recessions for full recovery beyond the prior peak
S& P 500 Price ( adjusted for inflation)

12. S& P 500 Price ( nominal )
Riding a Wave –No net change in 12.5 years
-57% before recession over
-49% 1 year after
recession is over

13. $1.43M more per $1M
Than 60/40 balanced
Over 20 years
Core YTD=-1%
Vs. -3.75 % for 60/40

14. Not Public or Private,
but Public and Private
The Tyranny of the ‘Or’
Vs.
The Genius of the ‘And’

15. December 2000 to June 2019
Return Value of $1M Invested
S&P500TR: 6.7% $3,540,000
R3000TR: 7.0% $3,740,000
PRIVATE EQUITY: 9.1% $5,460,000

16. -56% decline in 20 years

17. $700 Billion in share buybacks in 2019. Where is this money going?

18. +$4.5 Trillion
Share Buybacks
2009-2019 = $5 Trillion

19. Private = 7.5%
of public markets
June 2020

20. 40% more since 2009

21. 0
5
10
15
20
25
30
35
40
45
50
2000.01
2000.06
2000.11
2001.04
2001.09
2002.02
2002.07
2002.12
2003.05
2003.1
2004.03
2004.08
2005.01
2005.06
2005.11
2006.04
2006.09
2007.02
2007.07
2007.12
2008.05
2008.1
2009.03
2009.08
2010.01
2010.06
2010.11
2011.04
2011.09
2012.02
2012.07
2012.12
2013.05
2013.1
2014.03
2014.08
2015.01
2015.06
2015.11
2016.04
2016.09
2017.02
2017.07
2017.12
2018.05
2018.1
2019.03
2019.08
2020.01
Cape Shiller Index 2000-2020
130% more since 2009
PE Ratio = 14
PE Ratio = 32
June 2020
PE ratio
about 40

22. 41%

23. +50%

24.  Diversify
 Manage Costs
 Evergreen
 Waterfalls
Managing Private Asset Risk

25. • 2% on committed capital for five
years
• If 80% of committed funds
invested average fee is >5% /year
• Performance fees of 20%
• 1.5% on invested capital for five
years
• Offer co-invest opportunities
• Blended fee can be under 1%/yr.
• Performance fees 15%
• About 75% lower overall first five
years
Fees: Committed vs. Invested Capital

26.  Managers
 Vintages
 Geography
 Industries
 Asset Classes
(equity, debt, infrastructure,
real estate)
NW Private Equity
 $275M AUM – 21 Funds
 12 managers
 14 direct / co-invest assets
 Global companies
 4%/yr. higher 5 year returns vs.
avg. other NW equity funds
Diversification

27.  Significant minimum investment
 5-year funding period 10-14 year
fund
 Liquidity when assets sold
 Investor responsible for “Dry
Powder”
 Small minimums
 No other capital commitment
 1-3 year minimum hold
 Liquidity periodically (monthly /
quarterly, annually)
 Add new capital when available
Closed End vs. Evergreen Funds

28. $3400
$770
Equity ($Billions) Debt ($Billions )
 Less Risk
 Lower returns
 Shorter Duration
 Current Income
 RRSP/ TFSA and
Foundation eligible
US Private Asset Markets 2018 (Preqin)

30. 49.8%
31.4%
24.9%
44.6%
53.5%
36.5%
26.8%
48.8%
43.7%
25.8%
21.9%
33.7%
22.4%
41.5%
22.4%
44.9%
Salary/Bonus Eligible Dividends Capital Gains Ineligible dividends
2019 2020 2013 Increase 2013-2020
This changes things

31. Depends what you count
5 years to recover tax revenue

32. Customized approach based on your situation

33. 43%
Private
Core Portfolio Asset Allocation (December 2019)
Public Equities
32%
Public Fixed
Income
21%
Private
Debt/Mort.,
13%
Private Equity
4%
Real Estate
21%
Alternatives
9%
57%
Public

34. Less
Taxable
Annually
Private Equity
10.5%
Mortgages
23.0%
Private Debt
10.5%
CDN Real Estate
12.5%
US Real Estate
23.0%
Value Add
Real Estate
7.5%
Global
Real Estate
8.0%
Infra.
5.0%
100% Taxable
RRSP / IPP /
TFSA
Foundations
Core Private Asset Allocation (December 2019)

35. Private
Equity
15.3%
Cdn. Real
Estate
19.5%
US Real
Estate
34.5%
Value
Add Real
Estate
11.6%
Infra.
6.7%
Global
Real
Estate
12.4%
$1,000,000
$1,658,000
$658,000
$156,450
$10,070
Starting
Capital
Ending Capital
(before fees)
Gain
(before fees)
Taxable
Income
(gross )
Tax Paid
(after fees /
RDTOH)
Private Assets
How Is This Possible?
• RDTOH reduces corporate tax by 60%
• Low turnover of assets
• Depreciation creates return of capital
• Planning fees deductible
5 Year Results (2014-2019)
• Gross return before fees = 10.7%/yr
• Net return after fees = 9.7%
• Net return after taxes = 9.6%

36. Private
Equity
10.5%
Mortgage
23.0%
Private
Debt
10.5%
CDN Real
Estate
12.5%
US Real
Estate
23.0%
Value Add
Real Estate
7.5%
Global
Real Estate
8.0%
Infra.
5.0%
$1,000,000
$1,579,000
$579,000
$116,000
$-
Starting
Capital
Ending
Capital
(before fees)
Gain
(before fees)
Taxable
Income
(gross)
Tax Paid
(after fees /
RDTOH)
Private Assets
How Is This Possible?
• Interest income paid into registered plans
• Other private assets have low tax turnover
• Portfolio is balanced within private assets
• Weighted cash flow 4%+ annually
5 Year Results (2014-2019)
• Gross return before fees = 9.6%/yr.
• Net return after fees = 8.6%
• Net return after taxes = 8.6%

37. Lessons From This
• Planning first: portfolio design
and financial planning
• Diversify
• Cash flow matters
• Private does not = higher risk
but it does = less liquidity
• How much of your returns are
taxable?
• What can you do about that?

38. Therefore, it could be somewhat misleading and biased to translate "机"
(jī) in the context of the word "危机" (wēijī) to "opportunity" instead of "a
changing point" or "a confidential event"
Are we at a changing point?

43. Real estate update on key metrics
95% 98%

46. Future Factors for real estate
• Geographic diversification
• Growing population
• Residential safest , Industrial next
• Some retail will work ,regional, neighbourhood malls with
development value add
• Build to own ( especially residential )
• Spread between cap rates and mortgage rates
0.0%
5.0%
10.0%
15.0%
20.0%
Canadian
Income
US Income Value Add
8.2%
11.8%
13.9%
9.2%
11.9%
15.5%
9.8%
11.2%
0.0%
1 year
5year
10 year

47. 6% yield vs. 3%
=9% bond yield

48. Buy/hold return since
inception =2%
• Issuers of preferreds sound
financially
• Low price equals higher
yields
• Taxed favourably
• Discipline of rebalancing –
buy low /sell high

49. Sell HY Bonds up 3.7%
Buy Pref shares -19.8%

51. Consistent Growth

52. Converging

53. -8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
-6.1%
4.5%
-1.0%
5.7%
Global US equity Core Balanced Sustainable Innovation
YTD returns equity funds 2020
Theme
Renewable energy and
innovation will grow faster
than the overall economy

55. 200%
190%
250%
Post Covid=100%?

56. Debt service<20% of Mid 90’s

57. Not much change
Since WW11

58. Debt is rarely reduced
This may rise
By 20%

59. 40%
20%
30%
7%

60. Taxes higher so plan Challenged but Opportunities
Higher Allocation We have been here before