Highlights This Month
- Returns in January were so good, the damage done in December was nearly reversed
- Rapid weakening of China’s economy is a big concern
- Europe is particularly vulnerable to a slowing Chinese economy, especially Germany.
- A longer term battle between the world’s two largest economies has just begun.
- Economic recession in the U.S. is at least a year away
Nicola Wealth Management Portfolio
Returns for the Nicola Core Portfolio Fund were up 1.6% in the month of January. The Nicola Core Portfolio Fund is managed using similar weights as our model portfolio and is comprised entirely of Nicola Wealth Pooled Funds and Limited Partnerships. Actual client returns will vary depending on specific client situations and asset mixes.
The Nicola Bond Fund returned +1.0% in January. It was a strong month for bonds with interest rates declining and credit spreads narrowing, and the FTSE/TSX Core Canadian Universe Bond Index gained +1.5%. From narrowing credit spreads, the East Coast Investment Grade Fund II gained +2.3% in January, recouping its cumulative losses of last November and December. The Nicola Bond Fund currently has a net yield of 3.0% and low duration of 1.9 years.
The Nicola High Yield Bond Fund returned +0.4% in January, while the BofAML US High Yield Index gaining +4.5%. The Nicola High Yield Bond Fund’s monthly return was held back due to U.S. Dollar depreciation and underperformance of its defensive strategies (which outperformed in Q4 last year). The U.S. Dollar depreciated -3.8% in the month and the Nicola High Yield Bond Fund now has 37% U.S. Dollar currency exposure. The internally managed portion of the Nicola High Yield Bond Fund returned +3.9% in January. After deploying its 25% cash balance fully in December and participating in the January market rally, the internal portfolio is back to a defensive 20% weight in cash equivalents. The overall Nicola High Yield Bond Fund has a net yield of 5.9% and duration of 2.7 years.
The Nicola Global Bond Fund returned -0.7% for the month. The Nicola Global Bond Fund benefited from credit spread compression in both North American and emerging markets, and select duration exposure in EM (i.e. Mexico). Unfortunately, these positive factors were offset by the strength in the Canadian dollar (CDN$ appreciated 4.1% versus the US$).
Individual Fund returns (CDN$) in descending order: Manulife Strategic Income Fund +1.9%, Templeton Global Bond -1.1% and PIMCO Monthly Income -2.8%. Both PIMCO and Manulife’s returns were strong in local currency terms due to tightening credit spreads in both the U.S. High yield and U.S. Investment grade markets.
The Mortgage Pools continued to deliver consistent returns, with the Nicola Primary Mortgage Fund and the Nicola Balanced Mortgage Fund returning +0.3% and +0.5% respectively last month. Current yields, which are what the funds would return if all mortgages presently in the fund were held to maturity and all interest and principal were repaid and in no way is a predictor of future performance, are 4.0% for the Nicola Primary Mortgage Fund and 5.5% for the Nicola Balanced Mortgage Fund. The Nicola Primary Mortgage Fund had 19.9% cash at month end, while the Nicola Balanced Mortgage Fund had 13.0%.
The Nicola Preferred Share Fund returned –0.9% for the month while the BMO Laddered Preferred Share Index ETF returned -0.2%. The market started off the month on a positive note before falling during the latter half of the month. Sentiment remains challenged in the space as ETF’s saw almost $80 million of outflows. Additionally new supply came to market with four new issues totaling $900 million. The combination of more supply and less demand led to weaker returns. We remain constructive on the markets as the new bank rate reset preferred shares came to market at a 330 basis point spread to five year Government of Canada, a very attractive offering relative to corporate bonds which should introduce more fixed income managers to participate in the preferred share market and offset any lack of demand from the retail side.
Canadian Equities had a strong bounce back in January after a weak December. The S&P/TSX was +8.7% while the Nicola Canadian Equity Income Fund +7.5%. Top contributing sectors were Consumer Discretionary, Materials and Financials. Negative contributing sectors were Health Care, Energy and Information Technology. We do not have exposure in Health Care or Information Technology where valuations are high and value is slim.
We sold our position in smaller cap names Intertape Polymer, ECN Capital, and Whitecap Resources as we took the opportunity to high grade the portfolio and add to many large-cap companies that suffered from the market selloff in 2018. We also initiated a position in Maple Leaf Foods. Top contributors to performance were Interfor, Air Canada and Great Canadian Gaming Corp. Top detractors were SNC-Lavalin Group, Pinnacle Renewable Energy, and Canadian National Railway.
The Nicola Canadian Tactical High Income Fund had its second best month ever returning +5.9%; the best month was back in March of 2016 where it earned 8.3%. Despite this solid performance, the Fund trailed the S&P/TSX’s +8.74% return. The Nicola Canadian Tactical High Income Fund’s relative underperformance was due to being underweight Healthcare, Energy, Info Tech & Financials.
The market rebounded from the December 24th low and Canadian option volatility collapsed 40%. The Nicola Canadian Tactical High Income Fund was still able to earn low-double-digit option premium on both Calls and Puts during the month on select names. Our financial exposure was reduced during the month (i.e. Royal & Bank of Nova Scotia) as our previously written Put options expired and we did not re-write. The Nicola Canadian Tactical High Income Fund has an equity-equivalent exposure of 66% (down from 76% in December) and remains defensively positioned with companies that generate higher free-cash-flow and have lower leverage relative to the market.
The Nicola U.S. Equity Income Fund returned +7.7%, underperforming the S&P500 which returned +8.0%. In terms of sectors, our overweight in materials detracted from relative performance; in terms of stock selection, positive contributions from Citigroup, Royal Caribbean Cruises and Air Lease were more than offset by Bank of America, Medtronic, and not owning Facebook. We sold HCA after strong performance, and also sold L3 Communications. Within Banks, we sold Citigroup while increasing existing weights in other Banks. We also reversed some tax loss sales from last month.
All sectors in the S&P 500 were positive last month, with the S&P 500 experiencing its best January in decades with at 8% return. The Nicola U.S. Tactical High Income Fund had a strong bounce back as well, posting an 8.4% return—it’s best month since inception! The Nicola U.S. Tactical High Income Fund’s relative outperformance was mostly due to being overweight Consumer Discretionary & Financials.
The Nicola U.S. Tactical High Income Fund’s delta-adjusted equity decreased from 68.5% to 56%. The portfolio remains defensively positioned with a lower valuation multiple, higher free-cash-flow, and lower leverage relative to the S&P 500. The only new name we added was John Deere.
The Nicola Global Real Estate Fund was -0.4% for the month of January vs. the iShares (XRE) +7.2%. Publicly traded REITs were strong as rising interest rate worries seem to have diminished. We view the 10 year GoC yields as an important indicator and the GoC 10 year rates declined from 1.97% at the end of December to 1.88% at the end of January.
The positive contribution from the publicly traded REITs was more than offset by the move in USD/CAD exchange rate. The U.S. dollar moved -3.7% lower which negatively affected fund performance as 42% of the Nicola Global Real Estate Fund is allocated to U.S. denominated LPs. Currently, publicly traded REITs make up 16% of the fund which is on the low end of our range. We added the Invesco Core Asia Real Estate Fund to our mix in January and also experienced large outflows as clients rebalanced their portfolios. We are in the process of selling the Nicola Global Real Estate Fund over the next several months and bringing our publicly traded REIT portfolio back up to the 20-25% range.
We report our internal hard asset real estate Limited Partnerships in this report with a one month lag. As of January 31st, December performance for Nicola Canadian Real Estate LP was +1.1%, Nicola U.S. Real Estate LP +1.2%, and Nicola Value Add LP +2.1%.
The Nicola Alternative Strategies Fund returned -1.6% in January (these are estimates and can’t be confirmed until later in the month). Currency detracted -2.3% to returns as the Canadian dollar strengthened, reversing some of the weakness we saw in the prior quarter. In local currency terms, Winton returned -1.7%, Millennium +1.1%, Apollo Offshore Credit Strategies Fund Ltd +1.5%, Verition International Multi-Strategy Fund Ltd +2.0%, Renaissance Institutional Diversified Global Equities Fund +0.6%, RPIA Debt Opportunities +1.8%, and Polar Multi-Strategy Fund +0.8% for the month.
We initiated a position in the Renaissance Institutional Diversified Global Equities Fund (“RIDGE”) at the end of last year. The RIDGE fund is a market-neutral global equity based strategy with the goal of negligible long term beta and a risk target around 10% (standard deviation). Renaissance Technologies LLC is a world renowned manager that focuses on systematic or quantitative based investing.
The Nicola Precious Metals Fund returned +3.8% for the month while underlying gold stocks in the S&P/TSX Composite index returned +4.3% and gold bullion was lower -0.8% in Canadian dollar terms. The month marked a period of strong returns for names such as Alamos Gold, Kirkland Lake Gold, and Detour Gold, which all returned more than 14% each.
January in Review
January is considered a gloomy time of year. Be it the bad weather, dealing with holiday credit card debt, or the realization summer is over six months away, January is generally not most people’s favorite month (in the Northern Hemisphere at least). Many studies suggest that Monday, January 21st is the low point, dubbed blue Monday by researchers; it’s believed to be the gloomiest day of the year. According to the Toronto Sun, people are less likely to smile before 11:16 a.m. and they complain an average 34 minutes, 12 minutes more than any other day. For the markets, January 21st was a U.S. holiday (Martin Luther King Day) so it was very quiet and thus hard to gauge how gloomy investors were.
For the month of January in total, however, investors were far from gloomy. All global equity exchanges ended the month solidly in the green. In the U.S., the S&P 500’s 7.9% increase (price only in US$’s) was its biggest monthly return since October, 2015 and best January since 1987. Not to be outdone, Canada’s S&P/TSX soared 8.5% in local currency (price only in C$’s) and 12.4% when translated into U.S. dollar terms given the 3.8% appreciation in the loonie during the month.
Impressive stuff, but wait, emerging markets did even better, with the MSCI Emerging Markets Index rising 8.7% (price only in US$’s), its best showing since March 2016. Bond investors also did well, with credit spreads and interest rates both moving lower. Bond prices move inversely to yields such that lower yields mean higher prices and overall returns. The ICE BofAML US High Yield Index returned 4.6% in January (in US $’s) as a result of yields falling 100 basis points from 7.95% at the end of 2018 to 6.95% by January 31st. January might be a gloomy month, but the markets provided investors with a little sunshine last month.
Returns in January were so good, the damage done in December was nearly reversed.
While the S&P 500 and S&P/TSX never entered an official bear market (a decline from the market top of 20% or more) last year, the NASDAQ and Russell 2000 did. The technology centric NASDAQ topped out on August 29th and by Christmas Eve was down 23.4%. The Russell 2000, which is an index of small U.S. public companies, peaked in August 31st and fell 29.6% by the end of trading on December 24th. Since then, the NASDAQ has rallied and as of February 5, had gained 19.6%, just short of the 20% gain needed to exit a bear market.
The Russell 2000 gained 20.2%, thus escaping the grips of the bear market. Just to be clear, this doesn’t mean the Russell 2000 has erased the losses experienced last year. In order for this to happen, the 29.6% loss would need to be followed by about a 36% gain to bring investors back to even. For the NASDAQ, a further 11% return would be needed, with a roughly 31% gain to wipe out the 23.4% peak to trough decline last year. Still the rally has been impressive, with the NASDAQ poised to make its second fastest exit from a bear market in history. Powering its rise have been the usual FAANG suspects.
So what changed from December to January to cause the market to virtually turn on a dime?
Positive developments in the two factors weighing on the market in December, namely the Fed tightening monetary policy and the trade war between the U.S. and China. The outlook for both changed for the better in January. Probably the biggest catalyst was confirmation from Federal Reserve Chairman Jerome Powell that the central banks tightening program was being put on indefinite hold. As we mentioned last month, the inversion of the short end of the yield curve was a desperate cry from the market to the Fed to stop raising rates, and it appears they got the message. Investors now believe the Fed is done raising rates this cycle, with derivative markets pricing in a 98% chance, overnight rates will be either unchanged or lower a year from now.
Just three months ago, markets were pricing in at about a 65% probability the Fed increased two or more times in 2019. Not only did Chairman Powell pivot in his position regarding increasing rates, but he also indicated the Fed was flexible in the pace in which it planned to reduce its QE (Quantitative Easing) swollen balance sheet. While Powell and his colleagues continue to maintain the reduction in the Fed’s balance sheet of $40 to $50 billion a month, it hasn’t contributed to tighter monetary conditions. They appear willing to consider ending the tapering process sooner than expected, thus maintaining a higher than expected balance sheet for the foreseeable future.
The Fed’s balance sheet rose from $900 billion before the financial crisis to $4.3 trillion by the end of 2008. While never giving an exact target of where they expect the portfolio to finally end up once the tapering process began, many estimated it could shrink to a range of $1.5 to $3 trillion over a five year time horizon. A recent survey indicated market participants now believe the portfolio could stabilize at $3.5 trillion, only $500 billion from its current level. These dovish statements by the Fed, in combination with the market rally and lower bond yields, helped loosen financial conditions in January, reversing the sharp tightening seen in late December.
While the market appeared to like what the Fed was saying, what may be more important is why the Fed was saying it. What changed their minds from continuing to raise rates in 2019, to a complete halt, and even possibly cutting rates?
The Federal Reserve appears to have changed it’s sentiment towards the global economy such that it now more closely reflects the views of attendees at this year’s annual World Economic Forum in Davos Switzerland. Last year’s participants were widely optimistic on the global economy and markets, with the catchphrase “synchronized global recovery” dominating most discussions. This year, the mood was more somber. Participants aren’t overly bearish, but they are less complacent with investment sentiment trending more negative. Valuations appear to confirm the “glass half empty” consensus view in Davos, with last year’s Forum marking the high point in valuations, which have been on a steady decline since.
Powell is likely widely optimistic. Eventually the U.S. will run out of workers. While the labour force expanded by about 844,000 workers over the past year (as of September), non-farm payrolls increased by 2.5 million.
The key in the short term might lie with the labour participation rate and its ability to normalize. The unemployment rate only measures people actively looking for work while the participation rate measures the percentage of the entire population that is actually employed. At 62.9% in October versus around 66% before the Financial Crisis, the participation rate is indicating there still maybe untapped slack in the labour force which can be lured back to work without driving wages and inflation dangerously higher.
Some of the decline in the participation rate is due to an aging demographic, but given the participation rate of 25 to 54 year old workers is still below pre-financial crisis levels, demographics don’t explain the entire shortfall. These idled workers don’t have the job skills required to participate in the workforce, are disabled and unable to work, or would rather play video games and live in their parents’ basement. The latter would be classified as slack in the labour force. Or just slackers for short.
Synchronized global slowdown over synchronized global recovery
Rather than a synchronized global recovery, it appears we have a synchronized global slowdown, with purchasing manager indices in the U.S., Eurozone, and China all turning lower. The J.P Morgan Global Purchasing Manager’s Index dropped to 50.7 in January, still above the 50 level and in expansion territory, but at its weakest level in two and a half years. Also, forward estimates for global industrial production continues to languish below the long term 3.1% average. The World Bank recently lowered their 2019 global growth forecast to 2.9% versus a downwardly revised 3.0% for 2018, while the IMF is forecasting the global economy will expand 3.5% this year, its second downgrade in the past year. Last July, the IMF was forecasting global growth at 3.9%, but lowered their forecast in October to 3.7%.
Rapid weakening of China’s economy a big concern.
Perhaps the biggest concern for World Bank and IMF forecasters, as well as heads of state and corporate leaders attending the World Economic Forum in Davos, is the rapid weakening of China’s economy, which slowed to a 6.4% GDP growth rate in Q4 and +6.6% for all of 2018, its slowest in 28 years.
China’s President Xi has made it a priority in 2019 to stop the slowdown and has emphasized growth must be maintained within a “reasonable” range believed, to be between 6% and 6.5%. It’s historically been believed China’s “official” growth is “man-made”, or at least smoothed out. According to a recent Blomberg article, Chinese GDP has changed 0.2% per quarter since 2011, less than half the quarterly volatility experienced by the U.S. economy. And Barclays’ alternative activity indicators indicate China’s economic growth rate could be weaker than the government may be letting on.
Fears of a trade war with the U.S. is likely contributing to some of the recent economic weakness as uncertainty drives investment away from China and dampens consumer confidence, but the government crackdown on private sector lending is the major reason for the recent weakness. Markets rallied last month on the hopes China and the U.S. were moving closer to a trade deal, but greater fiscal and monetary stimulus is what the Chinese economy really needs.
Even then, given the rapid increase in debt levels has resulted in an increasingly smaller and smaller increase in economic growth in China, more stimulus might not do the trick this time. Leland Miller, from economic research firm China Beige Book, estimates Chinese corporate nonfinancial debt was about 157% of GDP in Q3/2018 versus only 94% for emerging markets as a whole. Mr. Miller believes it is becoming harder and harder to stimulate the Chinese economy as debt growth is outpacing economic growth.
The state of the Chinese economy matters to global investors given China accounted for 18.3% of global GDP on a purchasing power basis in 2017, and according to Bernstein’s Michael Parker, represents about 40% of global economic growth. The impact on the global economy of a slowing Chinese economy can be seen by the decline in Chinese import growth, particularly semiconductors. Diminished retail sales growth and increased refined oil exports due to a lack of domestic demand are also signs of a slowing Chinese economy. HSBC estimates a drop in China’s GDP growth rate to 6% in 2019 could shave more than 3% off the earnings growth rate of the MSCI All Country World Index. According to Oxford Economics, China’s exports to developed economies last year were nearly 10% lower than the year before.
Europe is particularly vulnerable to a slowing economy, especially Germany.
As of 2017, China has become the second largest export market for the EU (after the U.S.), accounting for 10.5% of total exports, and is one of the reasons GDP growth for the Eurozone’s largest economy (Germany) slipped to 1.5% last year, the lowest in five years. According to Germany’s statistics agency, factory orders were down 1.6% month to month in December, and down 7% compared to last year.
Deutsche Bank economists believe Germany’s GDP will likely contract in the first quarter of 2019. This is bad news for the Eurozone as Germany is considered central to European growth. With Brexit hanging over Britain and protesters putting much needed economic reform in France in jeopardy, don’t look for anyone else bailing out growth in Europe. The EU recently slashed Germany’s forecasted growth rate from 1.8% to 1.1%.
The World Bank believes economic growth in the Eurozone slipped to 1.9% last year and will slip even further in 2019 to 1.6%. A key date to watch in the short term is March 29th, the day Britain is scheduled to exit the EU. If Britain leaves with no deal in place (Hard Brexit), Bloomberg believes the British Pound could fall as much as 25%. Wouldn’t that be fun. British PM Theresa May is trying to pry further concessions from the EU that she could present to parliament and force a last minute vote where members would have to choose between what will likely be two bad choices. Markets hate uncertainty, and it doesn’t get any more uncertain than this.
U.S. showing strain of a slowing global economy.
China, and trade in general, is less important for the U.S. economy, but the U.S. is still showing the strain of a slowing global economy. According to a January Bloomberg survey, the odds of a U.S. recession within 12 months has spiked to 25%, the same level reported by a February WSJ survey of private sector economic forecasters. According to the WSJ survey, over 45% of forecasters believe a recession will start in 2020, while over 39% believe a downturn will be pushed back to 2021. According to the transcripts from company earnings calls and presentations, recession talk has increased, with nearly 7% of calls including words like “recession”, “nearing”, or “probable”.
The government shutdown will likely shave first quarter growth but a couple tenths of a percent or so, but unless Republicans and Democrats can’t find an agreeable solution before February 15th and a second shut down takes place, the hit to growth will be a minor onetime event that investors will likely give market a free pass.
Same for the polar vortex hitting much of the country in February. Economic growth will likely be lower, but who cares. More of a concern is the recent decline in consumer confidence, particularly expectations for the future. In combination with the decline in inflationary expectations, this is likely what caught the Federal Reserve’s eye and led the Chairman Powell pivot away from raising interest rates. Consumer spending is nearly 70% of the U.S. economy and has a much greater impact on growth than trade.
While the recent decline in consumer confidence and inflationary expectations is a concern, the decline in consumer confidence at least is coming from historically high levels. With the health of the job markets so strong, it’s tough to make the case that a recession is immanent. According the economists at Bernstein, job growth is running at a pace well above levels seen in past recessions and total nonfarm payrolls have historically rolled over prior to past recession. In addition, wage growth looks to be finally gaining traction, which should help buoy consumer confidence.
It is likely economic growth will slow, as will earnings growth, which will probably be the next test the markets face.
With more than half of S&P 500 companies having reported fourth quarter earnings, earning per share is on track to increase a respectable 16.8% according to Refinitiv. Looking forward, however, analysts are forecasting first quarter 2019 earnings to be down 0.1%, much worse than the 5.3% growth expected at the start of the year, with the percentage of analysts downgrading estimates far out numbering upgrades. This is a top down forecast, however.
On an individual company basis, the decline looks a lot less dramatic with UBS forecasting the median S&P 500 firm’s earnings estimate for 2019 to have only fallen 0.5% since the start of the year. What does this means for future returns? The last time the markets experienced a “profits recession” was the third quarter of 2015 through the second quarter of 2016, during which the S&P 500 delivered a volatile, but still positive 1.7% return, thus proving stock returns don’t always move in the same direction as earnings.
In fact, famed Yale Professor Robert Shiller found stocks and earnings moved in different directions in 55 of the past 145 years, and when they do move in the same direction, the magnitude of difference can be vast. In 1997, for example, earnings grew less than 3%, but the S&P 500 gained a massive 31%. Bottom line, the correlation between earnings and returns is not as strong as you might think. Near term earnings tend to be less important than the longer term prospects for earnings and the rate they are discounted at. Certainly a recession would fit into this category, as would a trade war between the U.S. and China.
A recession wouldn’t only impact stocks.
Corporate bonds, particularly investment grade, are where many investors believe the next big bubble is forming and likely to burst in the next downturn. According to institutional bond manager Doubleline, 62% of investment grade debt matures in the next five years and the amount of corporate debt outstanding rated just above junk is at record levels.
There is not much wiggle room for investors in a recession, especially if they hold this debt in mandates that can’t hold non-investment grade bonds. Many of these Triple B issues (one notch above junk) also offers less protection to borrowers, known in the industry as covenant lite, such that in a bankruptcy or restructuring, investors are less likely to get all their capital back.
The levered loan market (variable rate loans to companies with higher leverage) has also become riskier, with roughly 27% of all first-lien loans issued by companies at the end of 2018 failing to have a corresponding junior debt tranche. In bankruptcy, unsecured junior bonds act as a buffer, with the senior first-lien bond investors being fully repaid before junior debt holders receive any funds. In January, credit spreads and yields for both investment grade and high yield bonds rallied (moved lower), in line with the equity markets, providing investors with positive returns (bond prices move inversely with yields).
A more accomodative Fed and optimism around a trade deal between China and the U.S. reversed the two major fears overhanging the market in December.
For both equites and bonds, January was a risk on month, with returns up nearly as much as they were down in December. A more accommodative Fed and optimism around a trade deal between China and the US reversed the two major fears overhanging the market in December. That doesn’t mean we’re out of the woods as far as the rest of the year, however. According to Goldman Sachs, economic policy uncertainty is elevated and has spiked well above the 20 year median. The fact the U.S. government was shut down a record 35 days over funding President Trump’s border wall shows how dysfunctional U.S. politics are right now.
Expect more turmoil and news headlines over the coming months, especially now that the Democrats control the house. Even ratifying the new NAFTA (USMCA) agreement is likely to run into opposition as the Democrats will avoid giving Trump any victories leading up to the 2020 election.
A longer term battle between the world’s two largest economies has just begun.
Hopes of the U.S. and China agreeing on a new trade deal before the March 2nd deadline looks more promising, but fundamentally changing the way China does business might be a bridge too far. Even if a trade deal is reached, expect continued conflict between the world’s two largest economies. Markets will rally on news increased tariffs have been avoided, but a longer term battle between the world’s two largest economies has just begun. Washington’s attitude towards China has changed as China is now viewed as an economic and military threat.
New fiscal and monetary stimulus programs should help the Chinese economy regain its footing this year, but longer term growth challenges are becoming a greater concern. As for the Fed, they are on hold for now, but if the markets continue recover, interest rate hikes will again be on the table.
Economic recession in the U.S. is at least a year away.
If inflation starts to move higher, the Fed will tighten regardless of what the market thinks. We think an economic recession in the U.S. is at least a year away. Growth will slow and corporate earnings growth may decline, but both should remain positive. China will do ok once they decide to stimulate again. Europe is the big question mark. All this leaves us with volatile but generally positive investment markets and returns. For now.
This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information presented here has been obtained from sources believed to be reliable, but not guaranteed. Returns are quoted net of fund/LP expenses but before NWM portfolio management fees. Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Please speak to your NWM advisor for advice based on your unique circumstances. NWM is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities’ commissions. This is not a sales solicitation. This investment is generally intended for tax residents of Canada who are accredited investors. Please read the relevant documentation for additional details and important disclosure information, including terms of redemption and limited liquidity. Nicola Crosby Real Estate, a subsidiary of Nicola Wealth Management Ltd., sources properties for the SPIRE Real Estate portfolios. Distributions are not guaranteed and may vary in amount and frequency over time. For a complete listing of SPIRE Real Estate portfolios, please visit www.nicolacrosby.com. All values sourced through Bloomberg.