Market Commentary: The Cost of Containment


By Rob Edel, CFA

Highlights This Month

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Nicola Wealth Portfolio

Returns for the Nicola Core Portfolio Fund were -1.9% in the month of February.  The Nicola Core Portfolio Fund is managed using similar weights as our model portfolio and is comprised entirely of Nicola Pooled Funds and Limited Partnerships.  Actual client returns will vary depending on specific client situations and asset mixes.

The Nicola Bond Fund returned +0.3% in February. Corporate spreads widened 11 basis points in Canada during the month while U.S. spreads widened 23 basis points as spreads for all sectors widened in sympathy with the equity market correction. Auto finance reversed course and widened 18 basis points after narrowing last month. In early March, the Bank of Canada matched the Fed’s 50 basis point interest rate cut in order to manage concerns on the potential economic fall-out from COVID-19. Despite credit spreads widening, the tremendous rally in treasuries saw all in yields move lower and helped support fixed income securities. Positive returns for the month were also supported by flows. Retail investors sold high yield funds and bought investment grade funds in a flight to quality.

The Nicola High Yield Bond Fund returned 0.7% in February. In local currency returns, the Nicola High Yield Bond Fund was relatively flat as U.S. dollar strength helped support the Nicola High Yield Bond Fund’s returns by 0.7%. Relative to the market, the Nicola High Yield Bond Fund held in strong as the market sold off approximately -1.7%. High yield spreads widened during the month to 600 basis points matching the highs in 2016. The collapse of oil prices caused energy to continue its underperformance. The default rate for energy now stands above 9% and the high yield distress ratio (which measures the % of the market trading below $80) has climbed to over 8%. Defaults are likely to continue to rise in the future. The Nicola High Yield Bond Fund flows were also negative for the month driven by ETF selling as retail investors flowed to more defensive positions. The selling caused pressure within BB issues as traders targeted the more liquid portions of the market to the Nicola High Yield Bond Fund’s redemptions.

The Nicola Global Bond Fund returned +0.1% for the month.  The Nicola Global Bond Fund’s exposure to risk assets in both developed and emerging markets detracted from performance as credit spreads widened around the world; Manulife was most impacted by their high yield bond exposure.

Duration produced mixed results with Templeton’s exposure in Asia ex-Japan and Latin America contributing to performance while their short-duration exposure to U.S. Treasuries (30 year) detracted from performance.  Currency positioning in Latin America (Brazilian Real), Asia ex-Japan and in Northern Europe (Norwegian Krone) detracted from performance, but was partially offset by strength in the Yen and USD$ exposure. Performance of our managers in descending order: Templeton Global Bond +0.5% (estimate), and Manulife Strategic Income Fund -0.1% and PIMCO Monthly Income -0.4%.

The Mortgage Pools continued to deliver consistent returns, with the Nicola Primary Mortgage Fund and the Nicola Balanced Mortgage Fund returning +0.3% and +0.4% respectively last month. Current yields, which are what the Nicola Primary Mortgage Fund and the Nicola Balanced Mortgage Fund would return if all mortgages presently in the Nicola Primary Mortgage Fund and the Nicola Balanced Mortgage 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 Fund had 17.8% cash at month end, while the Nicola Balanced Mortgage Fund had 13.7%.

The Nicola Preferred Share Fund returned -4.8% for the month while the Solactive Laddered Preferred Share Index returned -4.1%. The BMO Laddered Preferred Share Index ETF which tracks the Solactive Laddered index returned -2.8% as volatility in the market made it difficult for ETF market makers to oversee pricing for the ETF.

ETF market makers provide multiple vital roles for ETF’s including ensuring that the price of the ETF accurately reflects the value of the underlying instruments. During market volatility ETF pricing can deviate from the value of the underlying securities. We track the potential mispricing in the market place including the ETF market and have been selling the BMO ETF at a premium to the value of the underlying securities. This premium has since dissolved. Five year Government of Canada yields resumed their precipitous fall and were down 0.2% ending the month at 1.08%.

It wasn’t too long ago, October 2018, that Government yields flirted with 2.5% and had to look to buck the multi-decade trend of lower bond yields. At the current five year Government of Canada yields, we are at a level were the yield of the preferred share market will likely reset at the same value; however, if the five year Government yields move lower and stay low for an extended period of time, preferred share yields will reset lower.

The S&P/TSX was down -5.9% while the Nicola Canadian Equity Income Fund was -6.7%. There were no positive contributing sectors to Index returns in February as Coronavirus fears gripped the markets and investors sold everything. The underperformance of the Nicola Canadian Equity Fund was mainly due to being overweight the Industrials sector (and Air Canada in particular) which were hit hard in the month. Our Industrials sector positioning more than offset positive contributions from Health Care, Materials and Financials. The top positive contributors to the performance of the fund were Great Canadian Gamin, Nutrien and Andlauer Healthcare. The largest detractors were Air Canada, Maple Leaf Foods, and Ag Growth International. There were no new additions in February. Nutrien was our only sell.

The Nicola US Equity Income Fund returned -7.3% vs -8.2% for S&P 500. The Nicola US Equity Income Fund’s relative outperformance was due being underweight Financials and positive contribution from select stocks within Information Technology (Nvidia +14.3%) and Real Estate (Crown Castle called-away on February 21st).   The worst performing stocks were within the Energy and Financials sectors which were impacted by Coronavirus and uncertainty around global growth.   Call option activity increased during the month as the Nicola US Equity Income Fund took advantage of heightened volatility.  The Nicola US Equity Income Fund ended the month 21% covered.  The delta-adjusted equity exposure is 92%.  New position(s): Walt Disney Company and Verizon Communications.  Sold positions(s): Crown Castle via call options.

The Nicola U.S. Tactical High Income Fund returned -7.6% vs -8.2% for S&P 500. The Nicola U.S. Tactical High Income Fund’s relative outperformance was due to being underweight Utilities and Materials (both 0% weights) and from certain stocks being called-away ($2.4M of L Brands and all of Dave & Busters were sold on February 21st at significantly higher prices than month-end; 40% higher in Dave & Busters’ case).  The sectors and stocks that hurt performance were in Energy (Valero), Financials and Industrials.  Option volatility spiked 113% during the month (18.9% to 40.11 vol).  Unfortunately the Nicola U.S. Tactical High Income Fund deployed a lot of capital just days before the market sell-off which hurt performance. The delta-adjusted equity rose from 50% to 73%.  1 New name: Verizon Communications.

The Nicola Global Equity Fund returned -6.3% vs -6.7% for the MSCI ACWI Index (all in CDN$). The Nicola Global Equity Fund slightly outperformed the benchmark due to our underweights in Energy and Materials which were the worst performing groups in February. Performance was marginally offset by country/region mix (underweight US, overweight Asia) and our underweight in Communication Services which was one of the best performers. Performance of our managers in descending order was EdgePoint -8.9%, ValueInvest -7.5%, Lazard -7.5%, Nicola Wealth EAFE -7.3%, C Worldwide -5.1%, and BMO Asian Growth & Income -1.65%.

The Nicola Global Real Estate Fund return was +0.4% in February vs. the iShares (XRE) -3.5%. Publicly traded REITs experienced a correction in the month but outperformed the broad S&P/TSX which was -5.9%. A key factor to watch is the yield on the 10 year Government of Canada bonds which were down from 1.27% down to 1.13% as investors worried about global growth. Falling long government bond yields have the effect of pulling both cap rates and FFO/AFFO yields lower. We prefer the multi-family and industrial sectors that have strong cash flow visibility, stability and built-in growth, where the multi-year outlook appears strong for rental growth.

Investor demand for apartments continues to be strong as two private Canadian firms (Starlight Investments and KingSett Capital) agreed to purchase the country’s third-largest publicly traded multi-family REIT, Northview, at a 12% premium over what the REIT was trading at. As a result, we took profits and sold NVU-U. There were no new additions.

The Nicola Alternative Strategies Fund returned +1.1% in February.  Currency contributed +0.8% to returns as the Canadian dollar continued to weaken through the month. In local currency terms since the funds were last priced, Winton returned -0.8%, Millennium +0.5%, Renaissance Institutional Diversified Global Equities Fund +2.4%, Bridgewater Pure Alpha Major Markets -5.4%, Verition International Multi-Strategy Fund Ltd +0.8%, RPIA Debt Opportunities +1.0%, and Polar Multi-Strategy Fund +1.1%. The returns for Winton were impacted by energy, metals and fixed income. Profits in long exposure to U.S. government bonds were offset by losses from Brent Crude, gasoline, and heating oil in the energy space and copper in the metals space. Polar had strong returns during the month as arbitrage strategies continued to have steady returns despite the turmoil in the rest of the markets. Specifically, convertible bond arbitrage had a strong month as stock prices fell materially and although credit spreads widened, select credits did not see a commensurate sell off. In addition, given low volatility was in the marketplace, the Nicola Alternative Strategies Fund had hedges in place as a type of insurance policy for a large market correction. These hedges helped to stabilize overall returns.

The Nicola Precious Metals Fund returned -6.6% for the month while underlying gold stocks in the S&P/TSX Composite index returned -6.8% and gold bullion was up 1.0% in Canadian dollar terms. Overall gold stocks were on their way to having a strong positive month in the first three weeks of February until everyone hit the panic button and gold stocks fell in tandem with the rest of the market.

However volatility was already percolating underneath the surface during the first few weeks of February as well. Agnico Eagle and Kirland Lake Gold, two large gold producers, were down more than 15% and 10% respectively during the first three weeks of the month, even before the large sell off started on company specific issues. This highlights paradoxically that gold and gold stocks are both volatile and a safe haven asset. We manage the Nicola Alternative Strategies Fund with a mix between precious metal stocks and the physical metal and will continue to review the balance between the two. However, we believe the most recent sell-off was mainly due to profit taking as people were selling their winners since gold stocks are up 33.6% over the past year compared to 4.9% for the S&P/TSX Composite.

 

February in Review

 

Global markets are being buffeted by a number of issues simultaneously, but the situation is also extremely fluid such that it becomes difficult to report on events and markets without making a decision between what to discuss this month versus what may or may not be relevant in next month’s commentary.

We mention this not in an appeal for sympathy, but rather to acknowledge that much of what we write this month may become outdated by the time it is circulated.  We also can’t emphasize enough that while we confine our remarks to the economic and market related impact of events taking place, the impact on humanity far outweighs any investment considerations and our thoughts go out to all those directly impacted.  When we make this statement, we are of course referring to the corona virus (COVID-19), which had by far the largest impact on markets last month, and likely will again this month as well.  There were, however, a number of other events contributing to volatility, like the U.S. election, oil prices, and perhaps lost in all the noise, the movement towards alternative energy.  We will touch on all these issues this month, but because it was the major driver, let’s start, and end, with COVID-19.

A start and end with COVID-19.

Knowledge of the COVID-19 outbreak wasn’t a February event.  We discussed it last month and the bond markets have appeared to start discounting it’s impact since late last year, around the time Chinese doctor Li Wenliang began warning about a new illness being encountered in Chinese hospitals.

While equity markets sold off at the end of January, they recovered and went on to make new all-time highs on February 19th  before starting a rather sharp nearly uninterrupted decline that has continued into March.  While it appears equity markets were ignoring the warnings bond traders were signaling. Hopes COVID-19 and its economic impact would be contained mainly to China were likely behind the continued advance.  As the death toll passed through 2,000 and containment appeared more and more unlikely, equity prices globally turned lower, confirming the positive price action not only of U.S. treasury’s (lower yields mean bond prices are higher), but other safe haven assets like gold and the Japanese yen.  The severity and abrupt nature of COVID-19 clearly fits the definition of a “black swan” event, which became more readily apparent to all investors when it became a global issue.

The market decline.

Perhaps most unnerving for investors are the speed in which stocks have declined.  From its February 19th all-time high, it took a mere six trading sessions for the S&P 500 to drop a cumulative 12% and into correction territory (a drop of more than 10%), the quickest round trip from a market peak to market correction ever. Markets have suffered greater one day drawdowns, like October 19, 1987 when the S&P 500 crashed 22.6% in one day, but no market has fallen from an all-time high as quickly as we experienced last month.  Predictably, volatility has also spiked considerably higher.  Last month we highlighted how calm the market had been, with the S&P 500 going 70 trading days without a move of more than 1%, either up or down.

Since this calm streak was finally broken on January 27th, moves in excess of 1% have become routine with trading volume spiking higher. Algorithmic and program trading can explain part of the volatility as certain market movements, such as prices falling below a 50 day moving average, for example, can trigger a pre-programmed sales of stock, but moves of this magnitude are clearly signs of uncertainty, of which there is plenty right now.

Confident that we know we don’t know a lot about COVID-19.

The one thing we can confidently claim we know about COVID-19 is that that there is a lot we don’t know.  We are not epidemiologists, and in fact didn’t even know what the word meant (Wikipedia: the study and analysis of the distribution, patterns and determinants of health and disease conditions in defined populations) before the COVID-19 outbreak.  Everything we know has been attained from public sources (newspapers) and investment industry research (who quote various experts on the subject).

In other words, we don’t claim to know any more about the virus than the general public, which unfortunately is very limited.  For this reason, we don’t feel it’s necessary to add to the daily commentary of speculation regarding what COVID-19 may or may not be, but rather highlight what metrics are important in determining what the ultimate impact will be for global markets and economies.

The two most important metrics in our opinion are how contagious and how deadly is COVID-19?  We still don’t know the answer to either.  Based on the data available so far, COVID-19 appears to be more contagious than the seasonal flu, but less contagious than SARS or the measles.  Like the flu, COVID-19 has been shown to be contagious before symptoms appear, though we don’t have a handle on how long.  According to John Hopkins University, symptoms start showing roughly five days after infection, but other researchers have found cases where the incubation period was a short as two days and as long as 27 days.  The medical Journal of Internal Medicine put the average incubation period at 5.1 days and believes 97.5% of those developing symptoms will do so within 11.5 days.  But not everyone infected will actually have symptoms.  Some estimate the number of infected people showing mild or even no symptoms at 80%.  This is important because in order to determine the number of people requiring care will be a function not only of the percentage of people infected, but also how sick they become.

Same for fatality rates.  Based on current data, fatality rates are running around 3.4% of reported cases, but if the actual number of people infected is much higher, the final fatality rate will be much lower, likely below 1%.  According to the Washington Post, in a briefing to Congress, U.S. Health Officials disclosed that they believe the fatality rate in the U.S. will likely be in the range of 0.1 to 1.0%.  The elderly appear to be more at risk while children less so, though researchers are not sure why.  There are no vaccines or cures.  The best advice health providers can give to people at present is to keep their distance, wash their hands, and don’t touch your face.

The estimated numbers.

It’s comforting that many people who get infected will show only mild symptoms, but the math can still get pretty scary if a large percentage of the population gets infected.  According to Dr. Amesh Adalja of John Hopkins University, 20% to 60% of the U.S. population will ultimately contract COVID-19.  Based on the lower end of this estimate, that would total about 60 million Americans and 7.5 million Canadians.   If based on China’s experience 20% of cases require hospitalization and 5% end up in critical care (Italy’s experience has been worse) and we assume only 20% of the 60 million infected are even identified, that still leaves nearly 2.5 million Americans (300,000 Canadians) fighting over less than 1 million hospital beds.

Of course not everyone will get COVID-19 at the same time, and there is still the hope warmer weather will diminish the threat, like the seasonal flu, though again, nobody knows if this will be the case.  The goal of containment or social distancing is to help spread out the infections such that the healthcare system is able to cope.  Containment appears to be working in China, and if North America can delay the spread of COVID-19 as long as possible, the impact might not be as severe as seen in China, South Korea, Italy, and Iran.  Combined with the superior health preparedness of the U.S. healthcare system, fatalities could end up closer to the low end of the range, closer to that of the flu.

The economic cost of containment.

There is an economic cost to containment, however. Morgan Stanley recently outlined three different economic scenarios in which they believe the impact of COVID-19 can unfold.  The most optimistic scenario would see COVID-19 confined mainly to China and contained by the end of March with little impact to the U.S. economy.  Under scenario 2, more geographies are impacted, but disruption to the global economy is limited to the first half of 2020.  Scenario 3 is the most pessimistic, with the impact of COVID-19 extending into the second half of the year and escalating risk for a global recession.  Given the spread of the virus, we would suggest scenario 1 can unfortunately be ruled out and the best we can hope is scenario 2 becomes the most likely outcome.  Backing up this forecast, the OECD recently downgraded global growth by 0.5% in 2019 but we still see total 2020 GDP growth of 2.4%, in line with Morgan Stanley’s scenario 2.

While Morgan Stanley doesn’t quantify the market’s reaction to the various scenarios, we would associate scenario 2 to what RBC strategists Lori Calvasina classifies as a “growth scare”, which have historically seen equity market corrections of 14-20%.  The S&P 500 was down just over 8% in February (the S&P/TSX was -5.9%) but has fallen as much as 18.9% from its February 19th high in early March, so within the ballpark of typical growth scares.

If scenario 3 and a recession develops, Calvasina reports the last 12 U.S. recessions have seen the S&P 500 fall on average 32%, though the median drawdown has been only 24%.  So far the S&P 500 is still discounting a scenario 2 growth scare style correction rather than a recession (spoiler alert for next month, equity markets have fallen into bear market territory and are signaling a recession).  The bond market, however, is another story.  Under scenario 2, Morgan Stanley penciled in a 25 basis point cut in overnight rates by the Federal Reserve, but the Fed made an emergency intermeeting cut of 50 basis points on March 3rd after the 3 month versus 10 year yield curve inverted earlier in February.  Intermeeting cuts are rare, with the last one taking place during the Lehman Brothers crisis in 2008.  In each of the six previous cases the Fed cut rates between regularly scheduled meetings, they lowered rates again at the next policy meeting.  Futures markets are presently suggesting this time won’t be any different and the Fed will follow up with an additional 50 basis point cut, or a total of 100 basis points.  Under Morgan Stanley’s recessionary scenario 3, they assume the Fed would cut 75 basis points.

The Fed isn’t the only one acting like a recession is the most likely scenario, bonds yields have plummeted to all-time lows.  At one point in early March, the entire U.S. yield curve traded below 1%.  We don’t expect nominal US treasury’s to trade into negative territory like nearly 25% of the global bond market, but real 10 and 30 year treasury yields (nominal yield less inflation) have sunk below zero.

So who is right, equities or bonds?  Recession or growth scare? 

A lot will depend on how severe the containment measures in the U.S. will be.  China’s economy virtually shut down and only now is slowly recovering.  Current U.S. economic numbers are virtually useless given they are based on the pre-virus economy.  The economy was already slowing, and at the very least is now likely to be dangerously close to stall speed.  Bloomberg Economics Probability of Recession, which uses a range of financial market and real economy indicators to gauge the risk of a recession within 12 months, has currently spiked to just above 50%.  According to JP Morgan, the decline in equity markets suggests a 50% chance of a recession while credit markets are discounting odds of about 35%.  The key is likely to come down, to the U.S. consumer.  Consumer confidence remains high, but according to Goldman Sachs, its Twitter sentiment index has broken lower.

COVID-19 could cost Trump the White House.

Markets are keenly watching which way the economy breaks, but perhaps no one is more focused on the direction of the economy than President Trump.  It’s hard to beat an incumbent President seeking re-election.  It’s nearly impossible if the economy is strong.  The economy is typically listed as the number one issue for voters, followed by healthcare.  COVID-19 could negatively hit both and cost Trump the White House.  If the U.S. economy slips into recession, Trumps chances of being re-elected decline. Trump needs to down play the risk of COVID-19 so the negative hit to consumer confidence is minimized.  If COVID-19 turns out to a bigger issue, however, and Trump is perceived to have been too slow to react, he could be blamed for the negative consequences that will result from an overloaded and unprepared U.S. healthcare system.

Already his popularity is tracking below where other Presidents have been given how low the unemployment rate is.  It was always going to be a tough election, likely coming down to a few key States like Wisconsin, Pennsylvania, and Michigan, now the balance maybe shifting away from Trump.

But if not Trump, then who? 

The markets weren’t really focused on the Democratic nominee because they assumed Trump would win.  A Bernie Sanders Presidency would be a catastrophe for the market, but it was always assumed Trump would crush Sanders if he became the Democrat’s chosen one.

The belief a Sanders nomination would in fact increase Trump’s chances of being re-elected likely helped push markets higher.  Once odds makers began discounting a recession and a Trump loss, however, markets began taking Sanders’ lead in the Democratic nomination more seriously.  Most of the market correction in early March was due to news that COVID-19 had spread beyond China, but some was due to the realization that Bernie Sanders could actually win the whole shebang and become and become President.

Joe Biden’s big win on Super Tuesday (March 3rd), in which 12 State primaries were up for grabs with Biden taking 9 of them, not only resurrected his campaign but positioned Biden as the new odds on favorite to take the nomination.  Michael Bloomberg, despite spending north of half a billion dollars on his campaign, and Amy Klobuchar withdrew and joined Pete Buttigieg in endorsing Joe Biden.  Elizabeth Warren suspended her campaign, but has declined to endorse Sanders or Biden for the time being.  It’s not over. Biden is prone to fumbles and missteps and doesn’t excite the more progressive elements of the Democratic Party.  Also, Sanders is a good debater and the upcoming March 15th one on one debate with Biden could be his last stand.  Markets would view a Biden victory as neutral to positive, finally some good news.

An industry desperately in need of some good news is the oil industry. 

Earlier in the year, before COVID-19 fears took over headlines, the growing belief that climate change is a major threat to the global economy was causing capital to shift out of sectors tagged with being big carbon emitters, like energy, and into sectors and industries deemed to be part of the solution, like utilities.

Utility sector investors, in fact hit the trifecta in that not only were they associated with green energy, by they tend to have high dividend yields (appealing in a world where bond yields are very low) and were one of only two sectors (REIT’s being the other) spared from potential damage from Bernie Sanders’ campaign promises.  In early March, oil completed its own trifecta, though it was a losing one.  Oil was hit by ongoing environmental concerns, as seen in Canada with the rail disruptions and pipeline demonstrations, global demand has been slashed given the COVID-19 containment measures, and finally the coup de grace, Saudi Arabia announced production increases and price cuts after failing to gain Russia’s cooperation in collectively cutting production to halt the decline in the price of crude.  The Saudi’s made their move over the weekend and oil promptly fell 24% Monday morning, the largest single day crash since the 1991 Gulf War.

This was obviously bad news for Canada and the Canadian dollar, but also an issue for the U.S. given shale oil drillers have dominated U.S. capital spending in recent years.  It used to be lower oil prices were good form the U.S. economy, this is no longer the case.  Russia knows this is likely being opportunistic in their timing, targeting the U.S. producers, as well as the U.S. government that levied sanctions against Russia last year.

Let’s end the commentary as we started with COVID-19.

So lots of moving parts, and believe us, they continue moving as we write.  As promised, let’s end this commentary as we started, with COVID-19.  It’s not the only factor behind the markets recent correction, but it is definitely the largest contributor.  Without clarity on the duration of the severity of the outbreak, it’s very difficult for the market to properly discount the ultimate impact.

Expect continued volatility until infection rates stabilize and turn consistently lower, globally.  Could we see a global recession?  Not our base case but a definite possibility, in which case markets could have further to fall.  A lot of the damage has already been done, however, and we don’t see the same financial imbalances present before the 2008 recession.  Perhaps the recovery will take a bit longer if containment measures are more drastic, but they will recover.  We base our asset allocations for the long term and use events like this as opportunities to rebalance when warranted.  Perhaps a more important question is whether there will be any longer term implications.  Will COVID-19 permanently change supply chains and our view of globalization?  Could it impact not only the 2020 U.S. election, but future elections as populism gains an even greater footing?  What about inflation?  Lower economic activity (demand) and lower oil prices point towards deflation in the short term, but supply disruption and a shift towards de-globalization could lead to higher inflation in the future.

 

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 Nicola Wealth 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 Nicola Wealth advisor for advice based on your unique circumstances. Nicola Wealth 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. For a complete listing of Nicola Wealth Real Estate portfolios, please visit www.nicolacrosby.com. All values sourced through Bloomberg. Effective January 1, 2019 all funds branded NWM were changed to the fund family name Nicola. Effective January 1, 2019 Nicola Global Real Estate Fund, Nicola Canadian Real Estate LP, Nicola U.S. Real Estate LP, and Nicola Value Add LP adopted new mandates and changed names from NWM Real Estate Fund, SPIRE Real Estate LP, SPIRE US LP, SPIRE Value Add LP.