Exempt market chart

Looking for returns at the dawn of 2020?

We have just had a decade of growth, especially in the United States. Traditionally, if you do business with a financial advisor at a banking institution or a brokerage firm, you probably have a balanced portfolio of stocks and bonds to varying degrees depending on your risk tolerance. Is the use of traditional assets still appropriate for doing this? This will be followed by an introduction to alternative investments, the typical portfolio of North American wealthy people, and a possible option for you to achieve the desired returns in future years, while considering the risk tolerance specific to each investor.

The traditional wallet

Ah that famous 60% equity, 40% bonds. In time, these two asset classes combined together would reduce the volatility of a portfolio because they were not very correlated, that is, they did not react in the same way depending on the economic context or news. What can we expect as a return on such a portfolio for years to come?

At first, let’s look at the equity part. In a previous blog, I mentioned that the expected return on a portfolio of mainly US stocks for the next ten years would be almost zero if trends remain. Here is an update issued by the GMO-7 group. Note that rate of success of this group in predicting the future trend is of the order of 97%. As of March 31 2019, the expected return on US equities for the next 7 years could be negative and, in the expectation of a positive return, it would be necessary to move towards international equities. Moreover, even the bond portion should provide a near-zero return over the same 7-year period. In fact, if you look more closely at the performance of the last 40 years of US 10-year bond, we see that the yield has declined significantly, yielding a meagre 2.5% over the last decade. With a likely drop in future rates south of our border, what will be the return on this asset class?

Finally, some economists predict that there is a risk of a recession in the United States, a situation that could occur in 6 to 12 months. The likelihood that the US Central Bank will lower the key rate at least once this year is more than 95%.

Alternative products

Most managers agree that the current US equity market is expensive and that the risk is increased. As expected, returns from traditional assets appear low for the coming years, alternative products can be used to increase portfolio diversification as these products generally have a low correlation with traditional assets. But what is an alternative product?

Alternative investments are defined as anything that does not fall into the category of traditional investments. It includes real estate; personal or public, hedge funds, venture capital, options or others. It is a very broad universe and the quality of the products as well as the approach of use can vary greatly. Very large pension funds are the biggest users of alternative products to improve the diversification of their portfolio, which should result in better returns for a given level of risk.

Tiger 21

Tiger 21 started about 19 years ago. Six entrepreneurs from New York who sold their business initially started it. The group has grown to include more than 640 members who discuss legal issues, family matters, philanthropy and how to invest their nest egg. The members of this group are regularly questioned to share the distribution of their portfolio.

The asset allocation of high net worth members of the group is as shown in the figure above. A little over a quarter of the portfolio is invested in real estate (other than personal residence and second homes), about a quarter of the portfolio consists of public shares listed on the stock market, another quarter in so-called private investment (non-public).  and the balance containing bonds, liquidity and hedge funds. In summary, more than 50% of the assets held by members are distributed in alternative investments.

Where to find returns?

As discussed above, and if the forecasts materialize again, it seems clear that traditional assets will not deliver the desired returns in the coming years. Are there alternatives that can satisfy the investor? I think so.

I have my Exempt Market Products broker license, in the province of Quebec and Ontario, with the possibility of extending it to other provinces. The exempt market is also known as private placements. I can offer you these products individually, at retail, or in portfolio management, with the possible goal in the short or medium term to obtain a diversification that could resemble that of the members of the Tiger 21 group. Personally, I aim for my clients return in the range of 8% to 12%, with opportunities to invest in growth assets that, although more speculative, could yield returns even higher than those mentioned, always considering the risk tolerance of each investor.

As you can see, we have bonds that can earn you 10% per year and, in some cases, profit participation at maturity. The next newsletter will deal in particular with one of these bonds, Agrotech Ventures, a product still available for a remaining capital of less than 300K. We have private real estate products and alternative products that can complement your portfolio.

Hoping to have the opportunity to provide you with the returns you greatly deserve. Remember that the return is just as important as the capital invested in order to obtain the wealth required for your desired standard of living considering that you could live up to 100 years or more.

Michelle

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References :

Blouin, Geneviève, Altervest, juin 2017, Comment utiliser l’investissement alternatif pour diversifier son portefeuille ;

Legault-Frenette, Alexandre, Altervest, juin 2019, Revisiting conventional wisdom: the famous 60/40 allocation;

Tiger 21 philosophy, November 2018, Learn from your (very wealthy) peers

Tiger 21, Q3 Asset allocation report;

GMO, March 2019, 7 year asset class real return forecast;

Blumenthal, Steve, On my radar, infolettre hebdomadaire.

cannabis Eureka93

Livewell becomes Eureka93

On December 3, LiveWell Canada issued a news release announcing a possible merger with Vitality CBD Health Products to create a world-class life sciences company specializing in CBD, one of the first fully integrated companies to address  the growing demand for CBD products from hemp and cannabis.

 

Vitality is a hemp CBD growing and production company while LiveWell is a CBD research, development, marketing and distribution company. Together, they would combine their Canadian and US operations to meet the growing demand for CBD in North America and international markets.

 

Under the terms of the agreement, Vitality’s shareholders would own 85% of the new business while LiveWell’s shareholders would own 15% of the company. The distribution could be 90% / 10% if Vitality were able to produce 3000kg / day of CBD by 30 June 2019.

 

On April the 10th. Vitality’s shareholders voted in favor of the merger, while the following day, April 11, 2019, 97% of LiveWell’s shareholders accepted the merger between the two companies, creating the new EUREKA93 company, which will trade under the symbol ERKA. Eureka93 comes from the fact that the facility in Montana is in the city of Eureka, accessible by road 93. With a bit of imagination, the leaders say Eureka, what a good idea …

 

The final proportion of the agreement ultimately allows LiveWell’s shareholders to own 15% of the shares of the new company. The rest will be held by the shareholders of Vitality (83%) and those of Mercal (2%).

To date, the acquisition of Acenzia (research and development, Windsor) has been completed. Eureka93 is in the process of finalizing the sale of CBD isolate in Tilray (Nasdaq: TLRY) at a rate of 300kg / month starting in the summer of 2019. Other agreements are being negotiated. The adoption of the Farm Act Bill in the United States last December has allowed companies to grow hemp legally. This created a craze for this product and for CBD (non-psychotropic part of Cannabis). In addition, the fact that these products were banned for several years implies that there has been almost no research and development. Eureka93 has a competitive advantage due to its progress in these areas.

The company currently produces about 50Kg / day of CBD at its Montana plant. It is the largest producer in North America for the moment. According to the forecasts of the managers, this production should increase gradually to 100kg / day in Q3 2019 then to 200kg / day towards the end of the year. The Las Cruces plant (New Mexico) is under renovation and is expected to be in operation in Q3 2019 with a potential production of 1000kg / day. It is expected that in 2020, the plant could produce up to 4000kg / day at its maximum operating level.

Eureka93 already has four high-potential customers who are willing to buy a good part, if not all, of the company’s CBD production (CEO’s statement at the April 11 meeting). The price of a wholesale kilogram of CBD ranges from $ 6500 to $ 10,000 per kilogram. Eureka93 will also enter the retail sector with refined products and isolates, profitability being significantly increased

Managers have announced that a request has been made to integrate the NASDAQ. For this reason, the new firm has consolidated the shares of LiveWell Canada at a ratio of 15: 1. In doing so, the company assumes that the share price will remain above US $ 4, the minimum amount required to enter the NASDAQ. It is mentioned that the registration for this stock market exchange could be done in the summer of 2019. In the meantime, it was mentioned during the meeting that, following the results of the votes of the shareholders, the firm had about two weeks of paperwork to be done before submitting it to the Canadian Stock Exchange. In the wording issued by the firm, the latter expects the stock to be listed at the end of April.

 

Obviously, it is not possible to determine the price of the stock at its next exit, it would be only speculation. However, the company’s management mentions that it would be normal to have downward pressure at the time of opening (statement of the CEO at the meeting of April 11) given the time elapsed since stopping transactions. At the time of the trading stop, LiveWell’s stock traded at $ 0.74 per share. As a result of the consolidation, this equates to $ 11.10 for the new Eureka93 stock (15 times 0.74 = 11.10). There will be approximately 74 million shares outstanding.

 

Finally, I would like to point out that the AGROTECH bond, a product we currently distribute at Cape Cove Financial Management, has an exposure in Eureka93 (originally LiveWell stock) and is available for some time as a new portion is added to the available capital. This bond will give you a 10% distribution per year for 3 years followed by a profit sharing afterwards where the investor will take 75% of this profit.

I remain available for any questions you may have

 

Michelle Martel

Page du site web d'AgroTech Ventures Inc

A last chance to get exposure in LiveWell in the Private Market

AGROTECH VENTURE FUND INC.

3 years Term
Minimum Investment $2,500
Target Annual Return 10% + Profit Participation
Quarterly distributions
RRSP, TFSA, LIRA,… Cash and Corporation

mmartel@capecove.ca
613.915.9677 / 514.447.8070 x206

This advertisement does not constitute an offering of
securities and cannot be relied upon for making your investment decision. It is qualified in its entirety by the Offering Memorandum (OM) of the issuer. Please read OM before making any investment decision and investing.

The Investment Funds Institute of Canada (IFIC)

Media Release IFIC Welcomes New Member – Cape Cove Financial Management Toronto, ON – February 15, 2018 – The Investment Funds Institute of Canada (IFIC) today announced that Cape Cove Financial Management has joined IFIC. “On behalf of our board and membership, I am pleased to welcome Cape Cove as a new member,” said Paul C. Bourque, president and CEO. “IFIC benefits from a wide range of voices and views, and we will welcome Cape Cove’s unique perspectives on our industry’s opportunities and challenges.” Quebec-based Cape Cove offers diversified investment services to its clients. It serves as a portfolio manager, exempt market dealer and mutual funds dealer. Its offerings include discretionary traditional and alternative portfolio management strategies. Membership was approved during an IFIC board meeting on February 14, 2018. For more information about Cape Cove, please visit capecove.ca. https://lnkd.in/eZZ-uzW

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