“Alternatives are not correlated with traditional stocks and bonds. This is instead about offering diversification and lowering volatility with the trade-off being reduced liquidity and flexibility”

Cynthia Lombardi, National Bank Financial

“Alternatives are suitable for all portfolios in any market condition. This is a core position built for the long term that reduces much of the sensationalism that comes with public markets and prevents impulse decision-making”

Travis Forman, Harbourfront Wealth Management

“Alternatives, and especially private equity, demand a shift in dynamics that pairs an element of patience with a sense of ownership. Clients should expect to invest like owners and understand who they’re co-investing with”

Frank Laferriere, Mandeville Private Client

“Private securities don’t trade regularly, which means they’re not subject to constant pricing. They tend to correlate more regularly with the underlying asset”

Rod Burylo, Axcess Capital Investors

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How to succeed with alternatives

At a recent round table hosted by Equiton, a leading private real estate investment firm, industry experts revealed their strategies for leveraging the alternatives space to manage market volatility

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Frank Laferriere

Mandeville Private Client

Cynthia Lombardi

National Bank Financial

Rod Burylo

Axcess Capital Advisors

Travis Forman

Harbourfront Wealth Management

Industry experts

CYCLICAL UPS and downs define the investment sector; however, new opportunities in private and alternative allocations are smoothing out the ride. Lavelle Lindo, VP, national & strategic relationships at Equiton, spoke with a panel of fellow experts about this growing new sector and what advisors, clients, and retail investors need to know. Institutional investors and pension plans have long been defined by diversification across public and private investments, with upwards of 40 percent of investment portfolios among Canada’s top seven pension plans allocated to alternatives or the private space. With investor access to non-traditional investments in commodities, precious metals, private equity, venture capital, hedge funds, and real estate opportunities growing, their characteristics and benefits require expertise and discussion.

strategy begins with the understanding that they defy a traditional infrastructure focused on highly liquid marketable securities. “Investors are often governed by red day, green day outcomes – whether the market is down or up – and they can get very emotional about it. Alternatives, and especially private equity, demand a shift in dynamics that pairs an element of patience with a sense of ownership. Clients should expect to invest like owners and understand who they’re co-investing with. This is something pension plans and family offices have been doing for a long time because it works. They’re achieving success whether markets are up or they’re down.”

Cynthia Lombardi, senior advisor, IA support and client offering, wealth management, National Bank Financial, says the first thing she tells investors wanting to learn more about alternative investments is that they don’t offer hedge-fund-like year-over-year returns. “Alternatives are not correlated with traditional stocks and bonds. This is instead about offering diversification and lowering volatility, with the trade-off being reduced liquidity and flexibility,” Lombardi explains. Frank Laferriere, senior vice president and chief operating officer at Mandeville Private Client, Inc., agrees that educating investors about the characteristics that shape this diversification

Rod Burylo, chair of the investment review committee at Axcess Capital Investors, noted industry speaker, and manager of exempt market dealer (EMD) and investment fund manager (IFM) services, says one of the primary advantages of investing in alternatives relative to traditional asset classes is the reduction in volatility. “Private securities don’t trade regularly, which means they’re not subject to constant pricing. They tend to correlate more regularly with the underlying asset,” he says. Harbourfront Wealth Management portfolio manager and director of private investment strategy Travis Forman adds that investment in alternatives prevents regrettable sell decisions that often accompany highly liquid public securities.

“Alternatives are suitable for all portfolios in any market condition. This is a core position built for the long-term that reduces much of the sensationalism that comes with public markets and prevents impulse decision-making. Private securities don’t have a level of liquidity that allows investors to head to the keyboard and hit sell when they’re emotionally charged, which smooths out the investor experience.” Forman notes that today’s market is especially favourable for investment in private real estate. “Private real estate has been a lot smoother than the public real estate experience lately, especially with inflation between six and eight percent,” he says. “When real estate rents rise, and if operators have controlled their stacks correctly, the environment is especially favourable. When you have high valuations and inflation, you’ve got an ideal hedge.”

Governance and regulation As alternatives grow and evolve, so, too, do the regulations that surround them. According to Lombardi, the single most significant development within the space was the introduction of National Instrument 31–103. “We’ve seen what I call a professionalization of the sector,” Lombardi explains. “Specific designations, registration categories, and a larger number of better-trained, monitored participants have led to an improved environment for clients. Firms must demonstrate rigorous know-your-product (KYP) processes, and that’s forcing a tightening of the shelf and dedicated due diligence.” Burylo notes regulation now stretches into the breakdown of allocations. “We’re seeing the securities regulators indicating that 10 percent allocation to a single issue is a good rule of

thumb. We’re also seeing indications that more than 20 percent to 30 percent allocation to a particular family of issuers requires special acknowledgements from the client that they understand they may be exceeding numbers considered prudent.” Prudence and diversification “Even our most conservative investor profile can invest up to 20 percent in alternatives,” says Lombardi. “What’s important is how you split it up. We encourage diversification, especially in the OM space, and we do a breakdown based on who the IFM is and the nature of the underlying asset.” Mandeville takes a slightly different approach. “We start with the premise that everyone deserves the right to have access to wealth-creating strategies,” says Laferriere. “We’ve built substantial tools that assess a client’s liquidity needs, capacity, and their appetite for risk. This offers a ballpark framework around how much to allocate to privates and alternatives within each category to meet client objectives. Every allocation is custom-tailored to client goals,” he says, noting concentrated portfolios and a fairly condensed list of choices from a top-loaded platform of investment opportunities guide both quality and diversification restraint.

of that, we begin to allocate,” he explains. Laferriere says the key determinant at Mandeville is whether the institutional investor would align with the offering. “We look at who we are entrusting our clients’ money to. Do these people have skin in the game? Would this be the type of investment the most erudite, successful investor would invest in? If not, it doesn’t make it to the platform.”

“We want to see a good track record,” says Lombardi. “Our retail clients run the gamut – a variety of big and small. We rely a lot on the infrastructure being provided by the IFM, the underlying manager or the subadvisor, and the risk reputation if something doesn’t go well. We’re not interested in a new feeder into a fund that has no institutional ownership or has not been adopted by the likes of a pension fund.” Recognized platform performance More and more, allocation to alternatives is becoming a suitable strategy for just about every investor, and it’s an area in which Equiton is a strong performer. With close to $800 million in assets under management, it is committed to helping advisors expand their clients’ wealth through quality private real-estate solutions. “One of the great things about Equiton is that it’s a fast-growing investment manager with a multi-strategy approach,” says Forman. “We really appreciate the regular

Investment trends, Canada’s pension plans

Equiton is Canadian-owned and -operated since 2015. We invest in residential and commercial properties and have significant and growing assets under management. Our exponential growth is a result of our leadership team’s deep understanding of real estate investing, and their expertise in navigating the industry to generate long-term wealth for our investors. We have the resources and expertise to find the right properties, perform the proper due diligence, and build strong relationships with advisors. We ensure our properties increase in value by actively managing each property. In essence, we know what to buy to generate value for our investors.

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Frank is the director, senior vice president, and chief operating officer at Mandeville Private Client. Prior to joining Mandeville, he was the chief financial officer, chief operating officer, and board member for Manulife Securities Inc. for over 12 years, including its predecessor companies Berkshire TWC Financial Group. Prior to joining Berkshire, Frank held a number of positions within the Barclays Bank Canadian subsidiaries, where he was first the chief financial officer for BZW Canada Limited, the broker dealer, and was responsible for all financial, regulatory, and operational aspects of the dealership.

director, senior vice president and chief operating officer, Mandeville Private Client

Frank Laferriere

Cynthia began working at National Bank Financial in 2004. She has been dedicated to the education and adoption of non-traditional assets for retail clients. She is responsible for developing, implementing, and managing a vast platform of wealth management products while maintaining a disciplined approach to market risk and compliance. Cynthia holds a BComm degree from the John Molson School of Business of Concordia University, with a major in finance. She is a CFA® charterholder and a CAIA® charterholder.

senior advisor, IA support and client offering, wealth management, National Bank Financial

Cynthia Lombardi

Ron has worked in financial services for many companies in roles that include CCO, CFO, and director. For over 30 years, Rod has been designing and delivering continuing education as a writer and speaker on the topic of business ethics and professional responsibility for several designation and registration categories, including CPA, CFP, PBA, and IIROC. He is a 2004 Canadian Advisor of the Year Award winner, and author of three books, including The Wealthy Buddhist (2019).

senior advisor, IA support and client offering, wealth management, National Bank Financial

Rod Burylo

In 2016 Travis and his team joined Harbourfront Wealth Management, leaving behind a 17-year career with a competing firm. As director of private investment strategy with Harbourfront, Travis wears two hats. Not only does he run a successful wealth-management practice, but he is also instrumental in architecting and managing the Rockridge Private Debt Pool, Forsyth Private Real Estate Portfolios, and Laurier Private Equity Pool for Willoughby Asset Management; these are Canada’s first retail, multi-provider portfolio solutions focusing on private debt, private real estate, and private equity.

BA, CFP, FMA, CIM, FCSI, portfolio manager, director of private investment strategy, Harbourfront Wealth Management

Travis Forman

Lavelle Lindo

Equiton Moderator

Lavelle has spent his 20+ year career developing, building, and growing strategic relationships within the financial services industry. A charismatic leader with a proven track record of onboarding and partnering with advisors and creating lasting relationships, Lavelle’s deep experience with asset managers, independent wealth managers, and some of Canada’s biggest banks extends from front-line client-facing roles to the senior management. Trust, integrity, and giving back to the community are cornerstones of partnership development for Lavelle. Lavelle holds an honours Bachelor of Arts in communications and public relations from Andrews University.

VP national & strategic relationships

Lavelle Lindo

Institutional investors and pension plans have long been defined by diversification across public and private investments, with upwards of 40 percent of investment portfolios among Canada’s top seven pension plans

Private real estate faring well

“Private real estate has been a lot smoother than the public real estate experience lately, especially with inflation between six and eight percent”

Panel members agree that regardless of investment philosophy, due diligence that ensures quality and reduces counterparty risk is paramount. Harbourfront Wealth Management, for example, aims for significant diversification within the confines of performance objectives. “We’ll start with due diligence around talent, tenure, track records, and other KPIs,” says Forman. “But then we’ve also hired a third-party due diligence team that takes a deep dive into everything we do. If we get the green light, then it’s up to the investment fund services team to make sure it matches mandates on liquidity and other factors before going to an investment committee. If the product passes all

portfolio valuations Equiton provides as a way of smoothing out investor experiences and delivering on returns. We like what Equiton is doing, and we’ve very happy with our investment,” he says. The outcomes Equiton continues to offer Mandeville are equally favourable. According to Laferriere, “As long as Equiton keeps doing what they’re doing, we’re golden.”

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