“The interest rate has [risen] eight times. And that's not normally happened in the last [two decades].… At this time, I told my clients probably you need to have more cash, and if you try to invest, invest cautiously”
Nevin Xu,
Enoch Wealth
“There are more investors who are becoming aware of alternative investments and where to find them – their unique qualities, the stability and the conservative nature of a lot of them, (such as) multi-residential real estate”
Lavelle Lindo,
Equiton
In Partnership with
EMDs' outlook on the market
As investors stand at the precipice of a new era of risk, experts from Canada’s exempt market dealer space spotlight alternative investment opportunities
Read on
Lavelle Lindo
Equiton
Darvin Zurfluh
Pinnacle Wealth Brokers
Iannick Fallu
Axcess Capital Advisors
Nevin Xu
Enoch Wealth
Industry experts
WHILE THE BENEFITS of diversification are clear to experienced and educated investors, the public-market shocks of 2022 have brought new weight to the concept – and it’s time to consider new tools to protect portfolios.
That was one of several interweaving takeaways at a recent roundtable session hosted by Equiton, a private real estate investment firm that specializes in the multi-residential sector in the Canadian market.
The panel discussion, hosted by Lavelle Lindo, vice president national and strategic relationships, included representatives from across Canada’s exempt-market-dealer space.
Nevin Xu is CEO and UDP at Enoch Wealth, an exempt market dealer with a clientele focused on the Chinese community. Like the broader population of investors, Enoch’s clients have felt an outsized impact from the unusual economic events of 2022, including the Bank of Canada’s historic campaign against record inflation.
“I think the [investing] environment has changed a lot. The interest rate has [risen] eight times. And that's not normally happened in the last [two decades]. So it also brings a lot of challenges to our investors,” he said. “We saw [a public] market correction.... At this time, I told my clients probably you need to have more cash, and if you try to invest, invest cautiously.”
As retail investors look further afield for diversification, some classes of alternatives are becoming more enticing, especially the private real estate space, as it is shielded from market volatility or the emotional volatility of the stock market. Because they’re able to survey a vast multitude of alternative managers, exempt market dealers have a unique vantage point to identify great opportunities.
“[An] exempt market dealer has the ability to raise capital under certain securities exemptions,” said Iannick Fallu, dealing representative at Axcess Capital Advisors. “A focus for most exempt market dealers is the private capital markets – sometimes private credit and sometimes private debt – and other opportunities.”
For traditional investors, conditions in 2022 were challenging, to say the least. Interest rates battered both stock and bond valuations, while putting money in cash meant watching their wealth get eroded by inflation. Translation: the traditional stock-bond balanced strategy may not be as safe as it once was, and investors need to rethink what diversification means for their portfolios.
“The 60–40 portfolio is not likely to be a thing of the future,” said Darvin Zurfluh, founder and CEO at Pinnacle Wealth Brokers. “We’ve been talking about that over the last decade quite a lot. But I think now it’s going to become more mainstream that … if you want to get a better risk-adjusted return or you want to do better than an average return, you do need to add alternatives to the portfolio.”
In contrast to traditional financial institutions that offer mainstream products like mutual funds and ETFs, exempt market dealers can explore the more exclusive domain of alternative strategies and private markets. That gives them the ability to evaluate offerings from small but fast-growing companies, or niche markets like private real estate, especially multi-residential, where they see high potential for future investment.
“There are more investors who are becoming aware of alternative investments and where to find them – their unique qualities, the stability and the conservative nature of a lot of them, [such as] multi-residential real estate,” said Lindo.
“The benefit of considering or looking at exempt market
products truly comes down to that opportunity to diversify their portfolios,” Fallu said. “It comes down to allocating some of their investment funds to different asset classes that may not be available in a publicly traded vehicle.”
After a difficult 2022, investors and clients whose portfolios ended the year in negative return territory might be pessimistic about the months ahead. But as they say, you can either earn or learn from experience, which is exactly what Fallu encouraged investors to do.
"For me, personally, the Buddhist philosophy comes to mind: 'This, too, shall pass,'" he said. “We’re never going to stay in this type of an environment for an extended period.… [There’s] an
opportunity for investors to take inventory of where they're at, take a look at their portfolio, open those statements, and really have a hard look at what your makeup is in terms of your allocations.
“Study what your net worth picture looks like, what your net financial assets look like,” he added. “If you see that you're all stocks, all bonds, there's definitely an opportunity there to take a look and … explore what the other side of the coin looks like.”
While central banks appear to be in the early stages of prevailing against inflation, they are still far from achieving their policy targets. For Zurfluh, that means investors would still do well to seek out alternative investments that can offer a better chance of positive real returns.
“We're still in an inflationary time,” he said. “Look for investments that are a good hedge against inflation.”
Historically, real estate as an asset class has been among the best defenses against inflationary pressure. But the reality is that not all real estate investments will behave the same, and investors can’t expect every manager to have the same strategy or underlying assets. The upshot, according to Zurfluh, is that investors should choose their exposures with open eyes and appropriate caution.
“You’ve got to look at what you’re invested in [with respect to] real estate,” he said. “If a manager is in a variable-rate mortgage, or it’s a company that’s renewing at higher interest rates, that could be damaging to their returns and to their success.
“Look for the right EMD and the right advisers that’s finding certain niches in the marketplace that can perform well with higher interest rates and inflationary times,” he said. “Keep a diverse portfolio and really, stay the course and move ahead with confidence.… Don’t let emotions drive your decisions.”
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Lavelle Lindo, vice president national and strategic relationships, has spent his 20+ year career developing, building, and growing strategic relationships within the financial services industry. He has a proven track record of onboarding and partnering with advisors to create lasting relationships. His deep experience with asset managers, independent wealth managers, and some of Canada’s biggest banks extends from front-line client-facing roles to senior management. Trust, integrity, and giving back to the community are cornerstones of partnership development for Lindo. At Equiton, Lindo is responsible for growing and maintaining strategic corporate relationships.
Equiton
Lavelle Lindo
Darvin Zurfluh is founder and chairman of Pinnacle Wealth Brokers, as well as the director for Pinnacle Wealth Planning, a life insurance agency. He has numerous designations, including fellow of the Canadian Securities Institute (FCSI), financial management advisor (FMA), and certified financial planner (CFP). After starting in banking, Zurfluh soon found his true passion in alternative investments. He was a pioneer, establishing the first sizeable exempt market distribution channel in Western Canada – Alberta Land and Investment Brokers. With the aim of growing outside Alberta, Pinnacle was formed and has more dealing representatives than any other exempt market dealer in the country.
Pinnacle Wealth Brokers
Darvin Zurfluh
Edmonton-based Iannick Fallu is passionate about sharing the benefits and risks involved with exempt market securities. He is a firm believer that making strategic allocations to private market offerings can further enhance the critical aspect of portfolio diversification and ultimately provide added value to his clients’ investment portfolios. Fallu has been serving clients in the private capital markets for over 10 years and has been a proud contributing member of the PCMA dealing representative advisory committee since its inception in March of 2019. He is registered and available to work with clients in the provinces of Alberta, British Columbia, and Ontario.
Axcess Capital Advisors
Iannick Fallu
CEO and UDP of Enoch Wealth, Nevin Xu is also the founder and president of Wistom Group, and currently the vice president of the North American Investment Chamber of Commerce. Xu started his career as an entrepreneur in various industries and subsequently joined the wealth management and insurance industries. With the leadership temperament and pioneering spirit of an entrepreneur, Xu’s insight and experience expertly integrate resources to bridge high-quality projects and qualified investors.
Enoch Wealth
Nevin Xu
EMDs' outlook
on the market
As investors stand at the precipice of a new era of risk, experts from Canada’s exempt market dealer space spotlight alternative investment opportunities
Read on
Nevin Xu
Enoch Wealth
Iannick Fallu
Axcess Capital Advisors
Darvin Zurfluh
Pinnacle Wealth Brokers
Lavelle Lindo
Equiton
Industry experts
Lavelle Lindo, vice president national and strategic relationships, has spent his 20+ year career developing, building, and growing strategic relationships within the financial services industry. He has a proven track record of onboarding and partnering with advisors to create lasting relationships. His deep experience with asset managers, independent wealth managers, and some of Canada’s biggest banks extends from front-line client-facing roles to senior management. Trust, integrity, and giving back to the community are cornerstones of partnership development for Lindo. At Equiton, Lindo is responsible for growing and maintaining strategic corporate relationships.
Equiton
Lavelle Lindo
Darvin Zurfluh is founder and chairman of Pinnacle Wealth Brokers, as well as the director for Pinnacle Wealth Planning, a life insurance agency. He has numerous designations, including fellow of the Canadian Securities Institute (FCSI), financial management advisor (FMA), and certified financial planner (CFP). After starting in banking, Zurfluh soon found his true passion in alternative investments. He was a pioneer, establishing the first sizeable exempt market distribution channel in Western Canada – Alberta Land and Investment Brokers. With the aim of growing outside Alberta, Pinnacle was formed and has more dealing representatives than any other exempt market dealer in the country.
Pinnacle Wealth Brokersv
Darvin Zurfluh
Edmonton-based Iannick Fallu is passionate about sharing the benefits and risks involved with exempt market securities. He is a firm believer that making strategic allocations to private market offerings can further enhance the critical aspect of portfolio diversification and ultimately provide added value to his clients’ investment portfolios. Fallu has been serving clients in the private capital markets for over 10 years and has been a proud contributing member of the PCMA dealing representative advisory committee since its inception in March of 2019. He is registered and available to work with clients in the provinces of Alberta, British Columbia, and Ontario.
Axcess Capital Advisors
Iannick Fallu
CEO and UDP of Enoch Wealth, Nevin Xu is also the founder and president of Wistom Group, and currently the vice president of the North American Investment Chamber of Commerce. Xu started his career as an entrepreneur in various industries and subsequently joined the wealth management and insurance industries. With the leadership temperament and pioneering spirit of an entrepreneur, Xu’s insight and experience expertly integrate resources to bridge high-quality projects and qualified investors.
Enoch Wealth
Nevin Xu
EMDs' outlook
on the market
As investors stand at the precipice of a new era of risk, experts from Canada’s exempt market dealer space spotlight alternative investment opportunities
Read on
Nevin Xu
Enoch Wealth
Iannick Fallu
Axcess Capital Advisors
Darvin Zurfluh
Pinnacle Wealth Brokers
Lavelle Lindo
Equiton
Industry experts
Darvin Zurfluh is founder and chairman of Pinnacle Wealth Brokers, as well as the director for Pinnacle Wealth Planning, a life insurance agency. He has numerous designations, including fellow of the Canadian Securities Institute (FCSI), financial management advisor (FMA), and certified financial planner (CFP). After starting in banking, Zurfluh soon found his true passion in alternative investments. He was a pioneer, establishing the first sizeable exempt market distribution channel in Western Canada – Alberta Land and Investment Brokers. With the aim of growing outside Alberta, Pinnacle was formed and has more dealing representatives than any other exempt market dealer in the country.
Pinnacle Wealth Brokers
Darvin Zurfluh
Edmonton-based Iannick Fallu is passionate about sharing the benefits and risks involved with exempt market securities. He is a firm believer that making strategic allocations to private market offerings can further enhance the critical aspect of portfolio diversification and ultimately provide added value to his clients’ investment portfolios. Fallu has been serving clients in the private capital markets for over 10 years and has been a proud contributing member of the PCMA dealing representative advisory committee since its inception in March of 2019. He is registered and available to work with clients in the provinces of Alberta, British Columbia, and Ontario.
Axcess Capital Advisors
Iannick Fallu
CEO and UDP of Enoch Wealth, Nevin Xu is also the founder and president of Wistom Group, and currently the vice president of the North American Investment Chamber of Commerce. Xu started his career as an entrepreneur in various industries and subsequently joined the wealth management and insurance industries. With the leadership temperament and pioneering spirit of an entrepreneur, Xu’s insight and experience expertly integrate resources to bridge high-quality projects and qualified investors.
Enoch Wealth
Nevin Xu
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Lavelle Lindo, vice president national and strategic relationships, has spent his 20+ year career developing, building, and growing strategic relationships within the financial services industry. He has a proven track record of onboarding and partnering with advisors to create lasting relationships. His deep experience with asset managers, independent wealth managers, and some of Canada’s biggest banks extends from front-line client-facing roles to senior management. Trust, integrity, and giving back to the community are cornerstones of partnership development for Lindo. At Equiton, Lindo is responsible for growing and maintaining strategic corporate relationships.
Equiton
Lavelle Lindo
Rebuilding the balanced portfolio
“The benefit of considering or looking at exempt market products truly comes down to that opportunity to diversify their portfolios … [into] different asset classes that may not be available in a publicly traded vehicle”
Iannick Fallu,
Axcess Capital Advisors
“The 60–40 portfolio is not likely to be a thing of the future....If you want to get a better risk-adjusted return or you want to do better than an average return, you do need to add alternatives to the portfolio”
Darvin Zurfluh,
Pinnacle Wealth Brokers
82 months of positive returns
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Hindsight is 20/20, especially for private investments
One common attribute among successful investors is an ability to look not at the puck, but at where it’s going. With the benefit of experience and expertise, some investment professionals and veteran wealth advisers were able to recognize the first hints of record inflation even in 2021, and position their clients’ portfolios accordingly. Unfortunately, the same couldn’t be said for most retail investors.
“Over the last 12 months, I think the [best] opportunity was if you had the foresight to go all cash and then buy in at some low points. But traditionally, people aren't doing that,” said Fallu.
“In hindsight, it's always easy to say, ‘I probably would have moved most of my money out of the public markets, whether that was bonds or equity … or at least kept some money in healthcare, or some money in oil and gas,’” Zurfluh added. “But realistically, that's a little bit riskier than keeping a lot of my investment portfolio [the same]. I would, however, have kept all of my REITs because real estate was consistent over that [time].”
While the public markets experienced extreme turbulence last year, exempt market securities didn’t suffer nearly as much volatility. It was a lucky break for investors that were able to get exposure to those assets in time, but it was a missed opportunity for many others.
“You could have sold your positions in January [or] February 2022, avoided the whole downturn in the public space, and moved your mutual fund money or your public money into the private [space],” Fallu said. “It would have been sheltered from all this volatility and you would have [experienced] a positive return for 2022 as opposed to a negative return.”
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Contact us
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Copyright © 1996-2023 KM Business Information Canada Ltd.