Performance figures for each account are calculated using time weighted rate of returns on a daily basis. The Composite returns are calculated based on the asset-weighted monthly composite constituents based on beginning of month asset mix and include the reinvestment of all earnings as of the payment date. Composite returns are as follows:

Why Real Estate Needs To Be Considered As More Than One Asset Class

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There’s an old adage that “location, location, location” should drive real estate investment decisions. And while that’s largely true, diversification is also key across segments of the sector such as commercial, industrial, office and multi-family assets. Increasingly, advisors are looking at private real estate to diversify client portfolios, especially during challenging economic times.

“Real estate also serves as a nice counterbalance to the volatility and emotion experienced by the public markets,” says Mark Hannah, managing director of Nicola Wealth Real Estate, a division of Vancouver-based Nicola Wealth Management Ltd., which owns a range of private real estate across North America.

Too often, investors lump real estate together as one asset class, which Mr. Hannah says could mean missing opportunities and overlooking risk.

“You can’t just look at real estate in general; you need to break down each sector and examine how different assets and geographic markets perform in normal and stressed environments,” he says. “Fund composition matters in a stressed environment so that you have a diversity of the right asset types and geography to help weather the storm.”

Globe Advisor spoke with Mr. Hannah recently about how the rising interest rate environment has affected private real estate and his outlook for the sector:

How has the current economic environment affected the sector?

Most experienced real estate players knew the low interest rate environment wasn’t sustainable and it was only a matter of time before interest rates would start to rise. Our team was preparing for this moment and fully anticipated that property valuations would be affected as a result of higher interest rates.

That said, we haven’t seen any significant movement in valuations in certain segments such as industrial, self-storage and apartment buildings. Smaller retail assets are also doing relatively well, as are hotels, as people travelling again after being couped up due to the pandemic lockdowns. Segments that we expect to be most affected in the current environment include high-rise office towers, with fewer people returning to the office, and possibly enclosed shopping malls, with the rapid expansion of e-commerce coming out of the pandemic and people spending less to be more cautious.

These impacts are more the result of COVID-19 than the current economic environment. That’s why you can’t look at real estate as one asset class. They’re all very different.

What drives the misconception about real estate in a rising interest rate environment?

Most people expect valuations to drop significantly as the cost of debt goes up. That’s a normal reaction, but it’s not necessarily the reality.

While there will be some isolated cases in which undercapitalized investors are being squeezed, broadly speaking, it’s not something we see happening. There’s so much capital in real estate that is very patient and has a long-term investment horizon. Buyers may be pausing similar to when the pandemic started, but we expect the activity to ramp back up soon.

What’s your outlook for the sector?

Maybe I’m too optimistic, but I think the current rising interest rate environment will be short-lived and rates go back down sometime early next year. Once that happens, we expect the market to rebound very quickly for most segments. Meanwhile, a lot of capital is sitting on the sidelines, waiting for the opportune time to jump back in.

What’s your advice for advisors looking at the private real estate market?

I recommend advisors consider private real estate as part of their clients’ portfolios. What I like about private assets is they’re not mark-to-market daily and can avoid the volatility and emotion experienced that often comes with investing in public assets. Private real estate investors are often more sophisticated, with a long-term vision. It’s why, for many ultra-high-net-worth investors, real estate represents a large portion of their investment portfolios.

This interview has been edited and condensed.

– Brenda Bouw, special to The Globe and Mail

How top advisors are easing clients’ emotions during rocky markets

This year hasn’t been an easy one for investors, with volatility hitting equities and bonds, interest rates and inflation on the rise, and growing fears of a potential recession and severe housing market correction. In turn, financial advisors have faced increasing client anxiety in the past few months. Alison MacAlpine recently spoke with three of Canada’s Top Wealth Advisors and asked them to share their various approaches to ease clients’ concerns.

Guardian introduces ‘modern tontine’ for retirement planning

Canadians approaching retirement age have a new type of investment product available that mimics aspects of annuities and defined-benefit pension plans. Tontines, which have existed for centuries as “last-person-standing” investment pools in which surviving members inherit the holdings of members who pass away, are arriving in a modernized format. Jameson Berkow covers Toronto-based Guardian Capital LP’s launch of three new mutual funds branded GuardPath Longevity Solutions and how tontines could gain popularity as people live longer.

How to shift investing and withdrawal strategies for RESPs in volatile markets

The up-and-down bouts of volatility in financial markets this year are a vivid study in contrasts for all investors, including students and parents who may be saving for post-secondary education in a registered education savings plan (RESP). Two advisors say investment choices should “de-risk” a portfolio away from equities into more conservative vehicles the closer clients get to the time the funds will be needed, especially when that money is earmarked for something as important as a child’s education. Jamie Sturgeon explores the topic further.

How to play the bull case for uranium

Uranium stocks are basking in a warm glow these days. The spot price for uranium – a metal that goes through several industrial processes to become fuel for nuclear power plants – has started to recover after a decade-long bear market triggered by Japan’s Fukushima nuclear disaster in 2011. Shirley Won takes a closer look at the outlook for the sector and which stocks portfolio managers recommend.

What you and your clients need to know

Canadian banks push U.S. expansion as economic uncertainty clouds prospects at home

Canadian bank chief executive officers are racing to grab a larger share of the U.S. banking market, eyeing expansion in targeted areas at a moment when economic uncertainty is eating into fees and putting pressure on demand for new loans. Although the U.S. banking market has often been inhospitable to foreign banks, it offers Canadian banks a tantalizing chance to increase profits more quickly than they can at home. James Bradshaw looks at the various strategies the Big Five are using to gain an edge in this hyper-competitive market.

The dos and don’ts for surviving and profiting in a world of rising interest rates

An epic moment in interest rate history was the surge of summer, 1980. A quick recap of what was happening in the year the Bank of Canada’s benchmark rate jumped to roughly 17 per cent by year-end from 10 per cent in July – The Captain & Tennille had one of the year’s big hits, The Blues Brothers was a top-grossing movie and Canadian diplomats helped six U.S. embassy staff escape from Iran. If these cultural and historical references don’t sound familiar, then you could probably use some guidance on how to navigate a world of fast-rising rates. On the occasion of the Bank of Canada raising its overnight rate for a fifth time in 2022, Rob Carrick shares tips on how to manage as rates rise.

This turnaround bet with solid fundamentals is bucking the stock market dip

Do you have any winning investments so far in 2022? This has been a common question for investors given the grinding market weakness. Shawcor Ltd. SCL-T +3.99%increase
is one of the stocks that has bucked the trend and is up about 50 per cent year-to-date. This Toronto-based company is in the energy and transportation infrastructure business, operates in more than 20 countries with roughly 5,000 employees and generated $1.1-billion in sales last year. Philip MacKellar, a writer for the Contra the Heard Investment Letter, takes a look at why he and his team see more upside in the stock.

– Globe Advisor Staff