Investing The New Way

When most of us think of investing, we think of the stock market – investing in publicly traded equities. While most retail investors compete for the same, limited number of public companies listed on global exchanges, tens of millions of private businesses exist worldwide, many of which also seek to raise capital by issuing equity or borrowing from investors. Investing in private companies is not new, but for the most part, has only been accessible by institutional investors such as pension and endowment funds, charitable foundations and the ultra-high-net-worth. Until now. Harbourfront has exclusive access to retail friendly private businesses including private equity, private debt and private real estate. This means regardless of your investor accreditation status, you can access private securities through your Harbourfront advisor.

Private securities generally provide portfolio stability and offset the volatility in equity and fixed income markets. Faced with historically low interest rates, bonds no longer do their job so the old 60/40 ‘balanced’ portfolio approach, no longer works.

Goodbye 60/40

High-interest rates during the 80s and 90s supported the case of the “balanced” portfolio. Today, volatile equity markets coupled with increasing interest rates and low return bonds have created headwinds for the investment community.

Hello 40/50/10

Factoring and Real Estate, Mortgage Investment Corporations and Bridge Loans may provide portfolio stability with equity type returns.

With a low-interest rate environment, investors can no longer turn to cash or near cash investments as a means to build and retain wealth. Over time income tax implications and inflation erode capital. The opposite extreme of aggressive equities is also an approach which we don’t favor.

Our average client will generally live through another five to seven economic & market cycles. As trying to time these cycles is a futile exercise, we prefer to prepare rather than react.

Our belief as such is that more can be achieved through efficient portfolio construction. By quantifying risk through back-tested portfolio analyses while comparing with past and projected returns, we have been successful in capturing strong returns during periods of market growth and preserving more capital during economic contractions.

As investors, we must remember that a stock or bond is issued by an underlying business. When selecting securities we ask ourselves a number of questions. Do we feel that this company will be in business and have paying customers regardless of various economic environments? Do we feel that this company has a competitive advantage within its industry & do we feel it is likely to grow its business? Does the company have a strong management team and has it been consistent in growing its earnings? Despite different economic periods, conflicting political views & civil unrest, human beings will always need certain goods and services. By investing in the companies that provide the products and services we just can’t do without, we will benefit from these businesses’ long term productivity.

In addition to seeking capital appreciation, we see income as another form of profit. Whether our clients need a regular stream of income or prefer not to draw from their portfolio, tax efficient income based investing forms part of our portfolio construction efforts.

We believe that income based investing also contributes to our clients’ risk management plan. A regular stream of income reduces overall volatility while also returning the initial capital investment over time.

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