Why alternative markets thrive

alternative investing

There’s an old saying: the road to hell is paved with good intentions. It’s a harsh statement, but it does reflect the fact the results of our actions aren’t always as intended. There’s perhaps no better example of that than in the financial markets.

Recently, Benjamin Tal, who is deputy chief economist with CIBC World Markets, stated in a paper he wrote that recent restrictions in Canada’s mortgage lending industry — specifically, the B-20 mortgage stress test —  has resulted in unintended consequences, such as the rise of the alternative lending market. This echoes other warnings from other sources that the stress test is squeezing Canada’s mortgage and housing sectors.

Addressing supply and demand

Let’s take a step back to assess the situation. Canada has had an alternative mortgage lending sector for quite some time. It was established decades ago to try and increase private investing in mortgages. Yet, even before the current stress tests, this market has been on the rise. Why? Because, it could be argued, the traditional lending practices of the banks have been somewhat restrictive.

Now, let’s turn to the investing sector, which has followed a somewhat similar path to the mortgage sector. Traditionally, most people who wanted to invest did so through the public markets, such as stock markets, investing in traditional securities, such as stocks and bonds, that come with strict disclosure regulations, such as a prospectus.

The freedom to grow

However, this model was not satisfactory to a growing number of investors that wanted to seek higher returns than found in these traditional public markets. Hence, the rise of alternative and private investing in which the regulations and disclosure requirements are relaxed under certain conditions. This meant that investors who wanted to take greater responsibility over their portfolios could do so in order to meet more demanding investment objectives.

So, is there a lesson in all of this? Yes. The lesson is that the alternative markets, whether in mortgages or investing, exist for a reason. They thrive when governments, banks and regulators don’t provide the kind of room for growth and investment that the free markets allow for.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Do-it-yourself investing?

investment planning

The world of investing has certainly changed over the years, especially when it comes to access and culture. There used to be a time when people of a certain wealth with a certain background would have stockbrokers to help them manage their investment assets. The idea of, say, a factory worker or a plumber having an investment portfolio would have seemed strange back then.

But times have changed, haven’t they? Or have they? There certainly has developed over the years a greater amount of access to investing with the public at large. From discount brokerages to do-it-yourself online investing, the opportunities for everyone to invest on their own have never been greater.

Doubts about investing

However, according to a recent survey conducted by TD, Canadians in general are still very anxious about doing investing on their own, and are lacking in the confidence and knowledge needed to do so.

Specifically, one in three surveyed say they don’t know the basics of investing,  almost 40 percent of people not confident in investing never seek out resources to learn about investing, but 65 percent said they’d like to be able to invest for retirement, 36 percent want to purchase a new home, and 23 percent want to save for an education.

So, what does this information tell us? Well, it tells us that people want to use investing for a lot of good purposes, but they’re just not sure of how to go about doing it. So, how does this gap get addressed?

Going beyond yourself

The first solution is that people should always try educate themselves about finance and investments. There is no shortage of resources on that front. It’s just a matter of having some confidence to take that first step.

However, as much as personal knowledge and investment is important, let’s face it, not everyone can be an investment expert, although they should still be able to benefit from investing. As a result, potential investors shouldn’t be afraid to seek professional investment help, whether it’s in the form of an advisor, planner, counselor — you name it. Combining your own learning with that of a trained professional can often be a formula for long-term investing success.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Women and investing

investing gender gap

One of the basic truths about investing these days is that it has very much changed over the years, in a number of ways. It is open more to the public, which accounts for the growth of discount brokerages. The amount of information available is endless, thanks in part to the digital age and the internet. And the types of investments one can make has grown in scope, thus the growth of alternative and private investing.

However, as Hilary Osborne of the Guardian points out, one surprising area where perhaps there hasn’t been as much change as expected is in women doing the investing. If you think about all the ways in which women have broken through traditional barriers, which includes two female Muslims being elected to the U.S. Congress last year, the fact that women have not embraced investing as much as men is something that has gone largely unnoticed.

A world of opportunity

And, when something has gone unnoticed in the world of investing, it means opportunity. It means reaching out in ways where everyone possible can benefit from the advantages of investing, including women, which also means, to begin with, we need to understand why women aren’t investing as much as men, and how that gap might be addressed.

First, there is the ever-present wage gap between men and women, which might be a basic barrier to women in the investing world. They basically don’t have as much money to invest with as men. However, it’s also not 1950 anymore. Women are far more independent than they every have been, which means they have more discretion over their own financial decisions.

Winning hearts and minds

Which brings us to the second possible barrier for women and investing, and which Osborne points to in her article, which is that women tend to have a different mindset than men when it comes to what to do with money. The old stereotype appears to be holding, which is that women tend to save, while men tend to invest.

So, what can be done to change such mindsets? Frankly, reminding everyone, including women, about the advantages of investing, and how to manage risk, is probably the best approach available. Anyone looking at the history of investing knows that returns keep going up while risk is managed successfully. This isn’t a secret formula of success. It’s a basic roadmap that everyone can use to reach their investment objectives, including women.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Seeking global investment opportunities

investing beyond Canada

In today’s world of investing it may seem strange to keep emphasizing the need to have a global outlook, but as Kevin Greenard writes in the Times Colonist, there’s a reason why Canadians have often stayed at home when it comes to investing, and breaking out of that mould can take some time, and education.

Specifically, before 2005, Canadians were restricted to having no more than 30 percent of their registered accounts in foreign holdings. After 2005, all restrictions were dropped and Canadians were allowed to have 100 percent of such holdings in foreign countries. Yet, sometimes old habits are hard to break, but they are worth it, and Greenard uses the Canada Pension Plan (CPP) as an example.

If the Canadian government does it….

In 1999, 100 percent of the CPP’s assets were in Canada. In 2006, it was only 64 percent, and, in 2018, that number has gone all the way down to 15.1 percent. The greatest source of foreign investment for the CPP was in the United States, followed by Asia and Europe.

So, what should this tell you? It should tell you that, if one of the country’s most important portfolios, which invests for the benefit of Canadian pensioners, believes it’s necessary to invest outside of Canada in order to seek satisfactory returns, then maybe the rest of us should start thinking the same.

There are so many reasons why investors should think globally when seeking opportunities. For one, and it’s something we’ve stressed on these pages for some time, investing in different places is a form of diversification. For example, global factors impact emerging markets differently than they do developed markets, so investing in each helps to diversify and protect a portfolio, doesn’t it.

Diversification and more

Greenard provides other reasons why investing globally, especially for Canadians, is a good idea. For one thing, the list of good investment opportunities, such as good companies, is limited in Canada. Why not expand that list by looking elsewhere? Also, while Canada may be strong in certain sectors, such as resources, it may not be very strong in others. Seek those other sectors in other places.

Indeed, the list of reasons to expand your portfolio globally is far too long to list here, but sometimes it’s just a matter of breaking old habits and going beyond the familiar in order to achieve the kinds of  returns that meet your investment objectives.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

You’re never too young to invest

baby boomer children investing

When you think of a typical investor, what kind of image comes to mind? Do you think of a wealthy elderly gentleman smoking a pipe, reading the financial section, and calling his stock broker for the latest quotes?

This may well have been typical of the kind of person who would have been a consistent investor a few decades ago, but, as with all things, times change, and that certainly holds true in the world of investing. In fact, according to a recent study conducted by OnePoll for Ally Financial, it’s millennials that are investing in surprisingly high numbers.

The maybe-not-so-soft generation

First, let’s briefly establish what a millennial is and why their views towards investing might be important. Millennials are people who were born in the 1980s or 90s and became adults as the new millennium approached. That’s why they’re called millennials. Amazing, right?

But when millennials were born and grew up isn’t as important as the values they’re associated with. Generally speaking, millennials have grown up in an age of technology, and the amount of hardship millennials have had to endure is seen as being less than in previous generations, including the baby boomers that are often the parents of millennials.

A formula for successful investing

So, when the poll came out and found that nearly seven in 10 millennials are investing, it means something. It means that maybe millennials aren’t as spoiled or as soft as the popular image has led some of us to believe. It also means that you’re never too young to invest — literally.

Among the other findings of the poll are that 85% of the millennials surveyed have made money, with the average net being about $2,500. The right age to invest seems to be 28, with an annual salary of $35,000 seen as a minimum, and a savings amount of $3,560 seen as a requirement for entry into the ever-increasing world of investing.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Bonds as alternative investments

alternative investing bonds

The terms bonds and alternative assets don’t always come together, do they. There are a number of reasons for this. Most notably, when investors turn to the alternative markets, they often do so seeking higher returns, and these higher returns are often associated with more glamourous or high-profile types of assets, such as hedge funds, venture capital, corporate finance — you name it.

However, as a recent CNBC article points out, bonds can in fact be a very rewarding aspect of alternative investing. But, as has already been suggested, the problem is that too few people really know anything about them, or about the value they bring to an investment portfolio, especially one unafraid of the alternative markets.

As always, it’s about the returns

As the article specifies, the allure of non-traditional bonds is that they can offer returns that are greater than those of, you guessed it, traditional bonds. Indeed, this reasoning is why the alternative markets exist in the first place, isn’t it. People are seeking greater returns than those offered by the traditional markets. It’s that simple.

When it comes to non-traditional bonds, the challenge isn’t only that investors aren’t aware of them, but the fund managers and experts are also not as aware of them as they should be. What does this mean to the forward-seeking investor? It should mean opportunity. When others have yet to see the value in an investment opportunity, it’s like fishing where the fish are, while others are fishing elsewhere.

Hot sectors

So, are there specific areas of investing in non-traditional bonds that are particularly appealing today? Yes. According to the CNBC article, current sectors that are attracting growth in non-traditional bonds include the environment (green bonds), foreign currency, and emerging markets, as well as state municipal bonds reaping the rewards of tobacco court settlements.

If nothing else, the area of alternative/non-traditional bonds should serve as a further reminder that opportunity awaits in the world of alternative investing as long as there’s a match between investors looking for the greener pastures of higher returns, and investment opportunities that specifically provide that in ways that constantly evolve over time.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Seeking investment insight

warren buffett

There is no shortage of proposed insight when it comes to investment success. Some people think it comes from knowing people. Others think it comes from hard work. Although those things are true, in and of themselves, they don’t constitute a formula for investing. You need more. Let’s take a closer look at what you should seek to reach your investment goals.

Larry Sarbit is CEO and CIO of Winnipeg-based Sarbit Advisory Services and is the sub-advisor on three funds for IA Clarington. In an article he has written for the Financial Post, Sarbit provides some insight into what constitutes a formula for investment success, and he does so by plucking some established wisdom from one of the most famous investors of all time, Warren Buffett.

Investing is like fishing

Well, actually, Sarbit’s first insight comes directly from Charlie Munger, vice chairman of the conglomerate headed by Warren Buffett, Berkshire Hathaway. Recently, Munger said that the first rule of fishing is to go where the fish are and that the second rule of fishing is to follow rule number one.

According to Sarbit, Munger used the example of China to make his point. Specifically, Munger spoke of a successful Chinese investor, Li Lu, who did very well by investing in China, which, metaphorically speaking, is where all the fishes are, from an investment standpoint. In other words, you need to find investments in places that haven’t been depleted of fish.

The circle of competence

Which brings us to another bit of Warren Buffet Wisdom that Sarbit points to, which is to stay within one’s own circle of competence, and Sarbit again used China as an example. He says he would never venture alone in China as an investor because he doesn’t know the language, the culture, or the type of governance to expect. Instead, Sarbit prefers to stay in places he’s familiar with, or partner with people abroad who actually know the domestic landscape.

In other words, Buffett, Munger and Sarbit are all preaching what we’ve been preaching here, too, which is to invest in places where other people aren’t, and to do so with either your own personal knowledge, or that of people you can partner with for long-term investment success.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

A truly long-term outlook

long-term economic outlook

There is never a shortage of short-term economic an investment prognostication to be found in the popular media. In case you haven’t heard, there’s eventually going to be a recession, never mind that recessions happen from time to time.

Of course, we’ve talked about such short-term prognostications here on these pages. If you went just by what you here in the popular media, including in the financial pages, you’d think we not only would have hit a recession by now, but maybe even a depression. That’s how bad things seem to get, if you look at the short-term.

Not day-to-day, or even a year

That’s why smart investors don’t just look at the short-term and, in fact, successful investors have to look at the bigger picture, too. However, even here, much of the popular media has a focus on yearly outlooks. If you were to do a Google search right now, almost all the investment and economic outlooks are for the year 2019.

But, as a forward-looking investor, you have to look even beyond 2019. What about 2020 and beyond? If you’re going to meet your investment objectives, you have to see that far ahead and then some.

So, if you start looking that far, you get to find information that others aren’t looking at. For example, Scotiabank provides a long-term economic outlook for the Canadian and U.S. economies, and it covers the period from 2018 to 2023. Its findings shed an interesting light on what the future might hold, always keeping in mind, of course, that the future is never certain. Good investors always know that.

The next few years

Specifically, the Scotiabank report states that, although short-term economic growth in North America should be higher than potential, the long-term outlook should see things coming back into equilibrium. This indeed confirms what we’ve been saying on these pages all along; that short-term fluctuations usually get evened out over the long-term, don’t they.

In addition, the report states that the short-term uncertainty surrounding NAFTA negotiations would have no lasting effects. The report was actually written before NAFTA was successfully renegotiated, but it was prescient, wasn’t it. It actually stated that the negotiations would be successful, and it was right.

Where else have we been hearing that the world wasn’t going to end because of short-term trade negotiations? Right here, and that’s because a focus spanning years should be what investors adopt instead of a week-to-week habit of panic attacks from reading sensationalized headlines.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Are you considering equity financing?

investing equity ownership

It’s one thing to believe in private investing and tout it as a viable and profitable investment alternative. It’s another thing to engage in specific practices that allow for its successful implementation. In order to do private investing well, there are certain things you need to do well, and that certainly rings true in the area of equity financing.

Of course, equity financing involves investors essentially taking equity/ownership of a venture or company in exchange for investment dollars. As with most investment transactions, both sides of the equation can benefit from equity financing.

The advantages of ownership

On the one hand, companies and ventures are not required to give cash back on a schedule, as would be the case with debt financing or loans. This frees up the company or venture to keep the cash within the company or venture. This is specifically ideal for companies or ventures that are growing and need the cash to do just that.

On the other hand, regarding equity financing, investors get the benefit of ownership. This means that they can have a say in the running of the company or venture, especially if it falls within their area of expertise. It also means that equity investors receive a share of the profits — when they happen.

These are the reasons why equity financing frees up cash for the company or venture, while any financial returns often come at a later date. Yet there are some considerations investors in equity financing should make when considering investment options.

Know what you’re investing in

First, any investor should get a firm assessment of a company or venture’s financial numbers. As much as this may seem obvious, with private investing, financial disclosure isn’t as regulated as it is in the public markets, which means you have to do you due diligence: What are the company’s working capital, fixed costs and marketing needs? What are the company’s financial objectives, and do they fit with your own investment objectives?

Second, just where do you fit in with the company or venture. How much control of the company do you want? What do you think of the management that’s currently in place? What say will you have in any future management changes, if any are needed.

These are the kinds of considerations investors should engage in when they decide to put their own money into the ownership of an investment opportunity. After all, it is your money. Make sure you invest it wisely.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

What exactly is an “alternative asset?”

alternative asset definition

Alternative investing has grown in popularity over the years, for a variety of reasons. The most obvious reason is a desire to look away from traditional public investing, such as the stock markets. One of the keys to successful investing is to find an edge that isn’t available to others. That’s why alternative investing has succeeded because it’s, in part, the desire to seek uncommon investment opportunities.

But, in investing, it’s important to get the terminology right because a failure to do so can quite literally mean making bad investment decisions, which means losing money. None of us want to do that, do we.

Specifically, there might be some confusion as to what the term alternative investing refers to or, even more specifically, what the term alternative assets refers to. So, let’s take a closer look.

Not found in traditional markets

Alternative assets are essentially anything you won’t find in the traditional public markets. Stocks and bonds are most commonly associated with the public markets. That definition of alternative assets can leave wide open a lot of possibilities, can’t it, so the term alternative assets can be defined even further or, more accurately, divided even further.

One form of alternative asset essentially consists of rare holdings, or things people collect. So, examples of such alternative assets include things like rare coins or art. Now, many people wouldn’t necessarily consider such items as forms of investments, but they are. They tend to appreciate in value over time, and people who specialize in this type of investment can certainly benefit from high returns.

Another type of alternative asset is one that’s generally associated with professional investing, but not with traditional investing. So, examples of such professional types of alternative asset management include hedge funds, private equity, and other established alternatives that would be familiar to professional private investors.

More connected to investments

Now, real estate can also be considered a form of alternative asset, and we’re not talking about buying and selling properties for personal or business use, but for the purpose of buying and selling in order to make a return. This is probably one of the oldest forms of alternative investing, around which an entire industry of expertise has developed.

Yet, regardless of the type of alternative asset being invested in, there are some important common characteristics. In many cases, investors are seeking the kinds of returns you won’t find in public markets. In addition, alternative assets can involve a kind of personal expertise and connection you also won’t find in public markets. And the more knowledgeable and connected you are to an investment, the more likely you are to reach your investment objectives.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.