Our mandate is to protect investment capital and implementing diversification as a tool to achieve that.
By combining managers into a diversified pool of roughly 70% private lending, for a strong base, and 30% others, including concepts like private real estate, music royalties, etc., risk is significantly reduced, and income is enhanced. It also allows us to negotiate institutional rates which offsets fees of managing a fund.
Our strategy combines 14 managers, diversified by investment style. Our selection process was based on in-depth due diligence of the managers and their ability to generate above GICs and traditional fixed income returns and minimize periods of losses over extended periods. That is, to generate long-term equity returns without the volatility.
Why invest in
Multi-Manager Income Solutions?
Professional Management
Our Investment Management Committee conducts in-depth review of all new concepts and portfolio managers before funds are allocated.
Once purchased, we conduct regular reviews with the Private Debt and Equity portfolio managers to review what we call the 3 Ps: Portfolio Holdings, Performance and Problems.
We rebalance the portfolio and make changes as necessary.
Access to Broad Range of Private Concepts: Our goal is to engineer risk adjusted returns.
Many concepts may never find a home in a typical investment portfolio but could help improve returns.
Examples, such as Canadian Multi-Family, Storage and Music Royalties, have helped to generate above Private Lending Returns and overall strategy returns.
Focus on the Composite
There are periods during which managers will experience turbulence.
For example, managers occasionally have trouble balancing in and outflows and were left holding large cash positions, which reduced returns.
By investing in a Multi-Manager solution, investors can focus the composite rather than returns for the individual holdings.
Diversification
When most people look at diversification, they focus on risk reduction.
Diversification is also a key driver of generating returns. Over proper investment timeframes (3 – 5 years minimum), it reduces the stress of always needing to be right.
Can anybody consistently predict the future?
Greater Flexibility
Diversification can be applied to more than manager, asset allocation and investment selection. We also diversify redemption schedules, geography, etc.
Consistent and Simplified Reporting
Receive one report that updates you on all aspects of the fund.
Institutional Class Holdings
By converting individuals to fund holdings, we negotiated better rates with our managers and use this to offset costs of managing the fund.
Access to a Larger Variety of Investments
A Multi-Manager solution is able to invest in opportunities that have higher minimums.
Risks & Volatility
Understanding risks and volatility is critical to being successful investing in both public and private markets and both share similar risks, but others are quite different.
- Manager Risk
- There is always the possibility that a manager may make a series of bad investments or allow self-interest to put investment capital at risk. Through our due diligence process, we work to minimize this risk. In a multi-manager strategy, this risk is reduced.
- Liquidity Risk
- Investments in Private Lending and Real Estate are less liquid than traditional investments, such as publicly-traded equities and bonds.
- Investors may have limited options to sell their shares or exit the investment before the end of the investment term.
- Private funds can be “gated” (investors may be restricted or limited in their ability to add or withdraw funds) mostly due to high volumes of redemptions during short periods of time, which can last for long periods of time. This has happened when the reputation of the fund or manager comes into question or when significant losses are experienced.
- This lack of liquidity could result in challenges if you need to access your capital unexpectedly.
- Valuation and Transparency
- Private Lending and Real Estate is not subject to the same level of regulatory oversight and reporting requirements as publicly traded REITs.
- This can lead to challenges in accurately valuing the underlying real estate assets and a lack of transparency regarding the financial performance and operations.
- Limited Exit Options
- Exiting a Private Lending and Real Estate investment can be more complex and restricted compared to publicly-traded REITs.
- There might be restrictions on selling your shares to other investors, and the process could be subject to certain limitations or conditions, potentially impacting your ability to realize returns on your investment.
- To mitigate these risks, thorough due diligence and partnering with experienced management teams are essential.
- Volatility
- Private investments, such as private debt and equity, are not traded on public exchanges. Their valuation and trading occur less frequently and are often based on third-party valuations.
- This is advantageous as it removes investor stress caused by volatility of publicly traded securities, but investors should understand and be comfortable with pricing mechanisms.
- Diversification
- Diversification reduces investor risk and volatility, which is why we created our Multi-Manager strategy.
Liquidity
- Liquidity can vary depending on the type of investment that you choose but investors should have a minimum two-to-five-year timeframe with potential early redemption penalties.
- This has happened when the reputation of the fund or manager comes into question or when significant losses are experienced.
Potential Returns
- Every investment has many moving parts so predicting the future should be used for estimation purposes only.
- Target range for this strategy is 6 – 8% over periods of three to five years. A back test created by combining the performance of our selected funds has achieved this over the past seven years.
- More importantly, the composite return of this strategy had no negative months over the past five years and the individual funds held in the fund have only 10 negative months out of 784 data points or 1.2% of the time.
Taxation
- Income distributed by the Multi-Manager strategy is income flowed through from the holdings.
- Private lending makes up approximately 70% and associated income is normally income.
- Private Real Estate may be a combination of income and return of capital, which flows tax free but is recaptured when liquidated.