THE BACK PAGE FINANCIAL FLUENCY T Alternative investments for HCPs BY MIKE MAGREEHAN he impressive run in stock prices this past decade has led many to question the sustainability of these high equity valuations. With the challenge of an ongo-ing low interest rate environment that punishes bond investors, we begin to see why many professional money managers have been shifting their investment allo-cations from the traditional “stock and bond” portfolio to increasingly include another asset class altogether. Alternative investments offer a strong solution for long-term investors within a well-diversified portfolio, as they aim to achieve attractive investment returns de-spite the headwinds and direction of public stock and bond markets. MIKE MAGREEHAN, BBA (HON), CFP® is an Investment Advisor with Canaccord Genuity Wealth Management in Waterloo, ON. Mike welcomes your comments and questions at 1-800-495-8071 or [email protected]. Visit LMwealth.com 28 Canadian Chiropractor April 2020 www.canadianchiropractor.ca © THANIT / Adobe Stock Alternative investments are a distinct asset class altogether and I’d suggest they are designed to be a complement to a tradi-tional balanced portfolio of public stocks and bonds. Examples of alternative investments include private equity, private real estate (i.e. commercial, apartments, long-term care), private debt (i.e. mortgages, factoring, business loans), real assets (i.e. infrastructure), or hedge funds (i.e. merger arbitrage or market neutral strategies). A deep-dive discussion into the intricacies of each of these very different mandates is vast and beyond the scope of this article. However, each strategy is interesting and provides its own unique aspect to a portfolio and is worthy of exploration. Alternative investments aim to provide the following key benefits: • Superior overall returns – a smoother investment expe-rience • Higher cash flow through a regular stream of rising income – this can be reinvested, allowing successful compounding WHAT ARE ALTERNATIVE INVESTMENTS? • Growing cash flow to maintain portfolio purchasing power – protection against inflation • Capital protection in times of stock market declines – less swings in portfolio value and less downside portfo-lio risk • Enhanced diversification benefits to reduce portfolio volatility and total risk – exposure to assets beyond the traditional sphere A review of the asset allocations of some of the world’s largest pension plans (i.e. Canada Pension Plan and On-tario Teachers) and endowment funds (i.e. Yale and Har-vard) reveal that there has been a significant shift under-way for over two decades toward an increased allocation to alternative investments. This so-called smart money has already moved into this asset class with great success as they’ve sought plan stability, higher income for their retirees, and superior returns, often with far less risk when compared to the emotional swings of traditional stocks and bonds. In their 2019 annual report, Canada Pension Plan’s
Chiropractic + Naturopathic Doctor April 2020: Page 28
