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ninepoint ALT THINKING MAGAZINE

WHY 60/40 IS NOT DIVERSIFICATION CONSIDERING PRIVATE DEBT STRATEGIES? 8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM

James FOX IN TIMES OF UNCERTAINTY, ALTERNATIVE THINKING IS VALUED...

PARTNERSâ&#x20AC;&#x2122; LETTER

THE EVOLUTION OF PORTFOLIO MANAGEMENT

WHY 60/40 IS NOT DIVERSIFICATION

ARE ALTERNATIVE INVESTMENTS FOR ME?

8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM

LIQUID ALT ALLOCATION GUIDE

WHY PRIVATE DEBT

CONSIDERING PRIVATE DEBT STRATEGIES?

WHAT IS TRADE FINANCE?

INVESTING IN TRADE FINANCE

“

“Alt Thinking” magazine captures some of the thinking that we believe will contribute to driving innovation in our industry.

”

John WILSON

4 NINEPOINT / PARTNERS’ LETTER

Uncertainty is the defining feature of our time In times of uncertainty, alternative thinking is valued

Ninepoint Partners manages unique alternative investment solutions that offer investors the benefits of better diversification. We target investment strategies

We are at a very interesting point in the history of investing. Arguably, the factors that go into investment decision-making have become more complex than ever before and, clearly, strategies that have worked in the past beg to be revisited.

that are uncorrelated to traditional asset classes, such as equities and bonds, with the goal of lowering overall portfolio

The rapid flow of information, brought on by new technologies, and the experiments in monetary policy over the last decade have distorted the way that markets respond to catalysts.

risk.

Equities and fixed income are becoming more correlated, forever changing the dynamics of the 60/40 portfolio. The length of the current credit cycle has made many investors justifiably nervous.

alternative income, real asset

Uncertainty is, perhaps, the defining feature of our time.

As a team, we have a long track-record of managing and alternative core strategies. Innovative thinking, and our ability to apply it to real-world

Most valued in times of uncertainty is original thinking. If the history of investing has proven anything, it is that our industry is vigorous, innovative, and adaptable. At a time of broad industry consolidation, we believe it will still be the independent asset management firms who drive innovation.

solutions, is what defines us.

â&#x20AC;&#x153;Alt Thinkingâ&#x20AC;? magazine captures some of the thinking that we believe will contribute to driving innovation in our industry. Alternative investments are becoming more accessible to the retail investor and they promise to restore needed stability to the portfolio through reliable income and better diversification.

and institutional investor

We welcome you to the discussion.

independent asset management

Ninepoint is an independent, employee-owned firm serving the investment advisor communities. With over $6 billion in assets and institutional contracts and 75 employees, we are among the largest firms in Canada.

James Fox John Wilson Managing Partners Ninepoint Partners LP

NINEPOINT / PARTNERSâ&#x20AC;&#x2122; LETTER 5

THE EVOLUTION OF PORTFOLIO MANAGEMENT

6 NINEPOINT / THE EVOLUTION OF PORTFOLIO MANAGEMENT

Modern Portfolio Theory produced the 60/40 portfolio An investment framework that can be used to create the best risk-adjusted returns for investors has long been the pursuit of portfolio managers.

Portfolio managers and academics have worked over the years to build an investment framework that can be used to create the best risk-adjusted portfolio for investors. The starting point for this approach has long been Modern Portfolio Theory, which was established in 1952 by Nobel Laureate Harry Markowitz. Modern Portfolio Theory (MPT) assumes that investors are risk averse – meaning they do not want to take risk without being compensated – and, as a result, the best possible portfolio is one that achieves the required amount of return while taking the least amount of risk: the optimal portfolio.

Modern Portfolio Theory

Portfolio Factoring

Endowment Model

Est. 1952 – Adopted in 70’s

Est. 1960 – Adopted in 80’s

Today

Risk-averse investors can construct portfolios to Investment Thesis

optimize returns based on a given level of market risk i.e. 60/40

Current Investor Base

Retirement Savings

MFDA Current Providers

One of the great outputs of MPT was the 60/40 portfolio which, composed of 60% equities and 40% fixed income, has long helped investors achieve these goals. The 60/40 portfolio was intended to give investors a balanced mix of assets that are relatively uncorrelated and can be assembled with relative ease. This approach brought about the significant rise of balanced mutual funds and ETFs focusing on broad market indices.

Low cost ETF Managers Robo-Advisors

Differentiating assets within broad classes (see next page

Allocating to Alternative

for examples), based on their

Assets can increase portfolio

characteristics, can highlight

efficiency because of their

opportunities to increase risk-

unique risk-return profiles

adjusted return Ultra-High Net Worth

Mass Affluent

Family Office

High Net Worth

Institutional Investors

Traditional Asset Managers Banks

Sophisticated Alternative Asset Managers

NINEPOINT / THE EVOLUTION OF PORTFOLIO MANAGEMENT 7

Traditional Allocation: 60% Equity and 40% Fixed Income

Portfolio Factoring: Fama-French Model Investing

Modern Portfolio Theory states that a risk-averse investor can construct portfolios to optimize expected return, given a level of market risk.

This investment framework introduces the idea of factoring the allocation beyond the 60-40 split in order to optimize the investor’s return, based on the level of risk they are comfortable with.

• The 60-40 Portfolio was designed to be a balance of capital growth and income for the average investor. • Modern Portfolio Theory developed a series of optimized portfolios given a universe of assets. • The 60-40 Portfolio, is a simplified approximation of a balanced efficient portfolio.

Portfolio factoring is intended to enhance diversification, generate above-market returns, and manage risk. While portfolio diversification was the goal of traditional portfolio allocation, the gains of diversification are lost if the selected securities move in lockstep with the broader market. Portfolio Factoring can offset potential risks by targeting broad, persistent, and long recognized drivers of returns that provide less correlation between asset classes.

40%

60%

Global Fixed Income

US Equity

US Equity ed Fix al e ob m Gl Inco

The Traditional Allocation Barbell

wt Gro

Investors must balance passive income versus capital growth from publicly traded assets:

Fixed Income

Equities

The Traditional Allocation Barbell

Equities

ries

su Trea

Large Cap

Ca all Sm

8 NINEPOINT / THE EVOLUTION OF PORTFOLIO MANAGEMENT

al ob es Gl uiti Eq

Fixed Income

Priv Equ ate ity

ies uit Eq

Int ern Eq atio uit na l y

Small Cap

Institutional investors use Alternative Asset allocations to enhance yield and diversify their portfolios.

al tion rna ap Inte all C Sm

Alternative Market Opportunities: Endowment Model

e vat Pri bt e D

ed Fix al e ob m Gl Inco

Bonds and Cash

Alternative

w Gro Fixed Income

Real Esta te

d Fixe e m Inco

Equities s

urie

Ab Re solu tu te rn

Large Cap

Ca all

e uctur

tr Infras

N Re atu so ra ur l ce s

e dg He nds Fu

al ob es Gl uiti Eq

s Trea

Private Market Opportunities within the Endowment Model

Alternative Assets provide vehicles for exposure to private markets where active management thrives. 10.0%

9.0%

Annualized Return

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0% 2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Portfolio Volatility Efficient Frontier

Optimal Portfolio

Factored Classic Allocation

Source: Thomson Reuters; theoretical 60/40 portfolio based on portfolios of index returns from 2013-2018.

Classic Allocation

NINEPOINT / THE EVOLUTION OF PORTFOLIO MANAGEMENT 9

Alternative Asset Allocations for Individuals

Average Allocation to Alternatives: Institutions vs. Individuals 69% 62%

Institutional investors have been quick to adopt alternative asset investments, while retail investors have lagged.

52%

50%

46%

Alternatives operate under different market conditions:

22% 5%

• Managers less constrained • Less efficient markets • Low correlation to public markets Most individual investors have not taken advantage of the full investment universe to optimize their portfolios.

Source: Blackstone, Global Pension Study 2018, Willis Towers Watson, OTTP, CPP, OMERS

The New Investor Barbell Balancing liquidity from public markets with private investments that generate additional yield and diversification:

Alternative Investments

Private Investments

Mutual Funds

Traditional Investments

The New Allocation Barbell

Alternative Investments

Exchange Traded

Real Estate

• REIT Funds • Direct Investment • Real Estate Sector • Private REITs Funds

• Public REITs • Closed-End Funds

Retail Access to Alternative Investments

Infrastructure

• Direct Investment • Infrastructure • Direct Investment Sector Funds Funds

• Infrastructure ETFs • Closed-End Funds

As Institutional allocations to Alternative Investments have grown, retail Investment Managers have taken note.

Commodities

• CTAs • Resource-Focused • Managed Futures Sector Funds • Direct Investment • Precious Metals Funds Funds

• Resource ETFs • Precious Metals ETFs

Private Debt

• Direct Investment • Private Debt Funds

Today there are several ways for a retail investor to access Alternative strategies and asset classes, many which feature liquidity more suitable to the retail environment.

• N/A

• BDCs

Private Equity

• Direct Investment • Private Equity Funds

• N/A

• Listed Holding Companies

Marketable Securities

• Traditional Hedge • Liquid Alt Funds Fund Strategies

• Hedge Fund Indexed ETFs • Closed-End Funds

NINEPOINT / THE EVOLUTION OF PORTFOLIO MANAGEMENT 11

WHY 60/40 IS NOT DIVERSIFICATION

“ 12 NINEPOINT / WHY 60/40 IS NOT DIVERSIFICATION

The question to examine is whether the give-up of return is justified by the diversification received.

”

How “alt thinking” can help you achieve better investment outcomes The challenge is to capture the full diversification benefit: to reduce portfolio risk without reducing expected returns. If your investment objectives have become more defensive in light of a late-cycle equity market and the risk of rising interest rates, you may want to explore whether a traditional 60% Equities / 40% Fixed Income portfolio offers you the kind of diversification that meets your expected investment outcome. Most investors understand that portfolio diversification is enhanced when three objectives are met: 1. Volatility (as measured by standard deviation) is lower; 2. Correlation between asset classes in the portfolio is lower, and; 3. Returns are sufficient to meet an investor’s objectives. The problem with the traditional 60/40 portfolio is that, in today’s markets, it has difficulty meeting all three of these objectives — It leaves the investor exposed to the possibility of either insufficient returns or higher portfolio risk. Asset allocation is challenging and finding innovative ways to reduce risk without reducing returns has long been the pursuit of institutional investors. It is time for retail investors to approach their portfolios in the same way.

Beyond 60/40 An investor who focuses solely on the magnitude of returns without regard to risk would own a portfolio of equities alone. However, for most investors, this results in exposure to an unacceptable risk of loss. Equity markets can experience sudden and large losses. The S&P 500 fell approximately 50% from peak to trough in the 2007-2008 financial crisis. At the other extreme, an investor focused solely on risk reduction would own a portfolio of guaranteed assets and government-backed securities — likely limiting returns to under 2% per year in today’s interest rate environment. The first step for the “alt thinking” portfolio manager is the capture of the full diversification benefit: that is, to reduce portfolio risk without reducing expected returns.

In Pursuit of Optimal Risk-Adjusted Returns To illustrate this, we use 30 years of historical returns to compare a 100% equity portfolio to two different portfolios: 1) a traditional 60/40 portfolio, and; 2) a portfolio that introduces both an alternative asset plus an alternative investment strategy.

NINEPOINT / WHY 60/40 IS NOT DIVERSIFICATION 13

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might be hoping for. The best portfolio diversification demonstrates more of a balance between the measures “change in correlation” and “change in volatility”.

Portfolio 1: 60% Equities, 40% Bonds By adding 40% bonds to an equity portfolio we can reduce the overall portfolio risk of 14.2% (100% equity portfolio, in purple on the left below) by 61% to 8.8% (a 60/40 portfolio, in teal on the right), which reduces portfolio return by 18% from 10.4% to 8.8% (see table below). The question to examine is whether the give-up of return is justified by the diversification received. Using the calculations defined in the box below, it can be seen that 78% of the risk reduction in the 60/40 portfolio is achieved because bonds have a much lower volatility than equities (3.6% vs 14.2%). Only 22% of the risk reduction is due to the correlation differences between bonds and equities. That is to say, bonds and equities exhibit higher correlation than may be expected. If equity markets were to drop, based on the data below, bonds would be adversely affected as well. Therefore, the portfolio would not necessarily be as well buffered from adverse market conditions as the investor

60% Equities / 40% Bonds

16.0% 14.0%

14.2%

Standard Deviation

12.0%

22% -1.2%

78%

10.0%

8.8% -4.2%

8.0% 6.0% 4.0% 2.05 0.0% 100% Equity

Portfolio 1

Change in Correlation

Annual Return

Change in Volatility

Portfolio

Standard Deviation

100% Equity

10.4% 14.2%

100% Bonds

5.9%

60% Equities + 40% Bonds

8.8% 8.8%

3.6%

Quantifying the Diversification Effect* The correlation of returns lies at the heart of the diversification effect. When we diversify, we attempt to reduce risk by combining assets that have as low a correlation as possible without sacrificing too much return. When two assets are perfectly positively correlated, the total risk of the portfolio is the weighted sum of the individual risks. To determine the diversification effect, we compare actual results against the results of a theoretical perfectly correlated portfolio. In our 60% equities/40% bonds portfolio, for example, equities have a volatility of 14.2% and bonds, 3.6%. If they were perfectly correlated, the volatility of a 60/40 portfolio would be: (14.2 x 60%) + (3.6 x 40%) = 8.52 + 1.44 = 10.0% (rounded to one decimal place). Based on 29-year historical data, we know that the volatility of the actual portfolio is 8.8%, or a difference of 1.2 percentage points from the perfectly correlated portfolio (10.0– 8.8 = 1.2). Of the total 5.4 point reduction in volatility which comes from adding 40% bonds to an all-equity portfolio (see graph to left: 14.2 – 8.8 = 5.4), 1.2 points of that reduction can be attributed to a reduction in the portfolio’s correlation. The remaining 4.2 point reduction is due to the difference in asset volatilities and will likely act as a drag on returns.

* For illustrative purposes only

Source: Morningstar Direct. Equity represented by S&P 500 TR USD, Bonds represented by Bloomberg Barclays US Aggregate Bond TR USD; January 1990 – December 2018

NINEPOINT / WHY 60/40 IS NOT DIVERSIFICATION 15

40% Equities / 25% Long-Short / 20% Bond / 15% Gold

Portfolio 2: 40% Equities, 20% Bonds, 25% Long-Short Equity, 15% Gold

The long-short equity strategy takes long positions in stocks that are expected to appreciate and short positions in stocks that are expected to decline. The addition of gold to the portfolio is frequently observed among institutional investors who value the inflation protection qualities of the asset class. In the new portfolio, the diversification effect looks much better because the selected asset classes are less correlated while the magnitude of their volatilities are better matched to equities. Matching offsetting volatility magnitudes can be beneficial to smoothing out a portfolio’s performance across market cycles. The change in correlation at -3.0% is now very close to the change in volatility at -3.3%. The standard deviation of the portfolio is lower than the 60/40 portfolio at 7.9% (vs 8.8%), and the portfolio return is slightly ahead of the 60/40 portfolio. In this case, reducing the bond exposure by half in Portfolio 2 also has the benefit of reducing potential losses should bond yields rise. This alternative portfolio is a better diversified portfolio than the 60/40 portfolio presented on the page before. Indeed, the Sharpe Ratio (used to help investors understand the return of an investment compared to its risk) for the traditional 60/40 portfolio shown here is 0.92, while that for the alternative portfolio is higher at 1.02, meaning it delivers better risk-adjusted returns to the investor. While this portfolio is hypothetical and may not be suitable for all investors, it demonstrates how exploring the inclusion of alternative assets and/or strategies in a portfolio can deliver an outcome that may be more aligned with the goals of an investor: better diversification, lower volatility, and reasonable returns.

16 NINEPOINT / WHY 60/40 IS NOT DIVERSIFICATION

14.0%

14.2%

12.0%

Standard Deviation

In the second scenario, the “Alt Thinking” manager decides to add an alternative strategy (long-short equity) and an alternative asset (gold).

16.0%

-3.0%

10.0%

7.9%

8.0%

-3.3%

6.0% 4.0% 2.05 0.0% 100% Equities

Change in Correlation

Change in Volatility

Portfolio

Portfolio 2

Annual Standard Return Deviation

100% Equity 100% Long/Short Equity 100% Bond 100% Gold 40% Equities / 25% Long-Short 20% Bonds / 15% Commodities

10.4% 14.2% 11.3% 8.7% 5.9% 3.6% 5.2% 15.4% 8.9% 7.9%

Source: Morningstar Direct. Equity represented by S&P 500 TR, Long-Short Equity by HFRI Equity Hedge (TOTAL), Bonds by Bloomberg Barclays US Aggregate Bond TR, and Gold by S&P GSCI Gold TR, all USD; January 1990 - December 2018.

The Advantages of “Alt Thinking” By integrating uncorrelated and non-traditional assets and/or strategies into a portfolio, an investor may be able to achieve a greater diversification benefit than a traditional 60/40 portfolio provides and, ultimately, better risk-adjusted returns. It is up to the skill of the portfolio manager, then, to lower risk in a portfolio, preserve returns, and narrow the range of investment outcomes to those best suited to the investor’s objectives and risk tolerance. “Alt Thinking” brings investors a higher degree of confidence that, come the next downturn, their portfolios will preserve sufficient value to meet their future cashflow requirements, and will be positioned to benefit from the next upswing in the return cycle.

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ARE ALTERNATIVE INVESTMENTS FOR ME? “ 18 NINEPOINT / ARE ALTERNATIVE INVESTMENTS FOR ME?

Alternatives have the potential to stabilize your portfolio in ways that traditional asset classes are struggling to do.

”

Alternatives can contribute to more efficient portfolio construction Improvements in access, liquidity, and transparency are making Alternative Investments increasingly suitable for retail investors.

Whereâ&#x20AC;&#x2122;s the Smart Money Going?

What Are Alternative Investments?

Because of chronically low bond yields, extreme central bank intervention, and the threat of overheated stock valuations, the most sophisticated investors in the world are allocating more of their assets to Alternative Investments.

Generally speaking, Alternative Investments are any asset class that is not among the three traditional asset types (stocks, bonds and cash) and are used, among other objectives, to more fully diversify a portfolio.

They believe that Alternative Investments will give them a better chance of achieving sufficiently high returns to meet future obligations while protecting against excessive downside.

CPPIB 2019 ALLOCATIONS EQUITIES

10%

ALTERNATIVES

6% 6%

PRIVATE DEBT

Private Debt/Credit Private Equity ALTERNATIVE STRATEGIES

57%

OTHER

Commodities Real Estate Infrastructure OTHER ALT INVESTMENTS

33%

FIXED INCOME

ALTERNATIVE ASSETS

ALTERNATIVES BREAKDOWN

Long/Short Event-Driven Market Neutral Global Macro

24% 9%

12%

INFRASTRUCTURE Source: Canadian Pension Plan Investment Board, Annual Report, 2019

PRIVATE EQUITY REAL ESTATE NINEPOINT / ARE ALTERNATIVE INVESTMENTS FOR ME? 19

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no. 256

Mike Babcock is ready to forge on without Nazem Kadri. The Toronto Maple Leafs coach, with Game 3 of the opening round of the 2019 Stanley Cup playoffs against the Boston Bruins looming on Monday night, has no choice. Kadri, pictured, is facing a suspension after cross-checking Bruins forward Jake DeBrusk in the head/face in the third period of Boston’s 4-1 win at TD Garden in Game 2 on Saturday night. Kadri, a repeat offender, was offered an in-person hearing by the National Hockey League’s Department of

commen t

in thE dark

N A T I O N A L P O S T, T U E S D A Y, N O V E M B E R 2 0 , 2 0 1 8

Trust in the people’s justice

power Blackout hits millions in california. FP3 C a n a d a’ S B u S i n e S S V o i C e , F r i d a y , o C t o B e r 1 1 , 2 0 1 9

markEts up on start of u.s., china talks

scheer has challenging days ahead

KevIN C. COX / GeTTY IMAGeS

Tiger Woods celebrates with a roar after sinking his putt on the last hole to win the Masters at Aug A Augusta ugusta Na ugus National Golf Club on Sunday in Augusta, Ga.

Tiger brings rings back bac his MasTers Ma Magic

John IvIson

andrew Scheer must have known there would be days like these. He’s been under pressure to clarify his position on same-sex marriage and abortion, amid growing evidence that he is becalmed in the polls. NatioNal Post of the 79 public polls in the M o N d a y, past six months, the conservaPril 15, 2019 atives have been leading in 65 of them. yet, it is Justin Trudeau’s Liberals that appear to have the momentum, despite the ethics commissioner’s report into the SNc-Lavalin scandal earlier this month. allegations about Scheer’s inWe take breaking iger Woods blazing to ing the roars. I feel like I got could barely walk. I couldn’t complete. And the race is on. big moment, just like the old nate social conservatism have victory in his Sunday red the full Masters experience.” sit. Couldn’t lay down. I real“A b ig ‘well done big done’ from me days. pop culture not helped in this regard. at the Masters, a scene The comeback goes be- ly couldn’t do much of any- to Tiger,” er,” Nicklaus er,” Nicklaus tweeted. “I Schauffele failed to birdie Tom SzczerbowSki / GeTTy imaGeS news and piece The conservative leadonce so familiar, was yond the two-shot deficit thing. ... To have the oppor- am so happy for for him and for the par-5 15th and scrambled er decided to address the fans cheer in Toronto’s Jurassic park during game 5 of the nBa finals at a scotiabank arena on June 10. he erased before a delirious tunity to come back like this, the game of golf never more stunning. golf. This is just for pars the rest of the way for it back togetherissue head-on in a press It was only two years ago audience that watched mem- it’s probably one of the big- fantastic!!!” a 68. gest wins I’ve ever had for at Augusta National that ories turn into reality. Woods now is three sho short Dustin Johnson made at nationalpost.conference in Toronto on Thursday, saying Trudeau It had been 14 years since sure because of it.” Woods needed a nerve block of the gold standard — 18 ma- three straight birdies late com/arts can’t run on his record so is President Donald Trump, jors — set by Nicklaus. just to hobble upstairs to the he last won the Masters — in the round, but he got go“I think 18 is a whole lot ing too late and had to setpla with Woods gone that who has played Champions’ Dinner,, unsure no one had ever go amp dredging up divisive issues his is Florida course, had two tw closer than people think,” tle for a 68 and a return to pla another long between green jackets. at h he would ever play that were settled by ParliaNo. 1 in the world. He had gone nearly 1111 years tweets of congratulations. Brooks Koepka said. round of golf. lf He had a fourth lf. four N A T I O N A L P O S Tment 14 years ago. Koepka, one of four playPark Jo LaCava, the caddie Joe major the 2008 Fenway ay P ark posted the news back surgery with hopes of since his last major, a video of Scheer’s views T U E S D A Y, AnDREW HARRER / BlooMBERg who stayed with Woods even ers from the final two groups Torrey U.S. Open at Torre T orrey Pines on on the scoreboard. simply playing pla with his two t N O V E M B E R 2 0 , 2 0on 1 8 same-sex marriage as a shattered ered left eg. A comeback for the ages? when he didn’t play for the who hit into the water on No. sha ft lleg. children, not chasing Jack a shatt Liu He, china’s vice premier, remier right, shakes remier, shake ha s hands with hake w Steven Mnuchin, Mnuch uchin, U.S. Treasury Tr secretary, as they arrive callow rookie mP in 2005 tter part of tw This was bigger. It rates among the best bett better two years, said 12, rallied with an eagle on Nicklaus in history. tor tory. for a meeting Thursday in Washington. day offi U. Trade Tra r da to begin trade talks, at the the office of ce of the the U.S. T de representative was released by Liberal Jesse snyder and sTuarT Thomson KAYLA REEFER / THE NEW YORK TIMES Woods never missed a shot because Woods has meant so theyy have ha talked about the re- the 13th, narrowly missed And now it’s all pieced ralph Goodale last week (it another eagle on the 15th tha mattered ma ered over the final much to so many in a sport cord. matt back together — his life, his that Handsome and confident, Michael B. Jordan has been touted as the next Will Smith should be noted, incidentalo T Tawa • The final blast of major economic “W “We’r “We’ree on 14 and I said, and was the last player with a back, even golf. lf A fallen he- seven holes, taking the lead he ruled for so long. Whether lf. or Leonardo DiCaprio, a homegrown star with worldwide ambitions. ly, that Goodale also opposed data before the federal election is out today ay ‘Let’s et’s get to 15.’ 15. You can’t be chance. ar Woods is a with a 5-iron to the fat ar, ro, a crippled star, fat of of the he can dominate it again is ‘Let’ changing the legal definition and economists are predicting a “raptors efef Masters champion again. on 14 1 and thinking about 18,” His birdie putt on the e n e r g y green on the par-5 15th for a still to be determined. CannaBiS of marriage in parliamentfect” may boost the numbers. He won his fifth green two-putt birdie, delivering Ca said. “But now we 18th from just outside 10 feet Cava LaCava Woods needed some help LaCa ary votes in 1995 and 1999). on Friday, Statistics canada will reveal veal jacket, his 15th major, but the knockout with an 8-iron to win this Masters. Six ta ng about 16. So missed, and he had to settle talking ix p la - can start talki lay playin the clip, Scheer exupdated numbers on the country’s economic — P.K . S u b b a n never with this much raw that ’re getting closer we’re closer.” for a 70. tha rode rode down the ridge by ers had a share of the lead at we’r on the cold reality plained why he couldn’t growth. Good news gives bragging rights to int o n the back nine, on emotion. It w as the firs was first time Woods “You want to play against the cup and settled two feet some point of naShville’S support the proposal, namethe incumbent Liberal government, but even en September RaChel Siegel ve-wa tie at won a major w ve-way The most ferocious fist away the best to surge ever play,” Koepka when trailing ay for for birdie on the par-3 and there was five-way Playoff SerieS ly the inability to conceive a sliver of bad news could allow the opposthe top when the final group going pump was when he walked 16th. ing into the final round. may said.be sign againSt dallaS. ma children. in Goodale’s exposé ition parties to pounce, arguing the governnWA S H I n g T o n • Top White House 26,496.67. 6.67 The S&P 5500 index was 6.67. wa way. of the 18th green, scooped Fr Francesco Mo off “You want to go toe-to-toe Molinari, the He tapped in for bogey ey and and was still on the 15th fairway. of something that happened ment has mismanaged the economy. “Y “You couldn’t have had 54-hole up 10-year-old son Charlie, a 2-under 70, and the celebra-hole leader, leader was still up housing with them. I can leave saying of offi cials met with Chinese Vice Pre- up 18.73 points at 2,9 officials 2,938.13, while in plain sight, he also cited economists and analysts polled by the more drama than we all had two embraced his mother and tion was on. o shots heading into the I gave it my all. He’s just good, Tom Blackwell mier liu He on Thursday ursda as Presi- the nasdaq ursday aq composite was up 47.04 leftists plan Scheer’s le et returning returning “WOOOOOOO!!!” Woods out there. And now I know heart 11-year-old daughter Sam. hear of Amen Corner. Corner market man.” “lifelong boycott of National Post suggest that the numbers will dent Donald T Trump signaled tha thatt a points at a 7,95 950.78. The S&P/TSX com7,950.78. f wh I’m why I’ balding,” ,” Wo ods said. Woods what it ’s screamed as he headed for An that’s when all hell “For them to see wha it’s Woods finished at 13-under And likely be rosy — owing partly to the “raptors The edmonton woman to equilibrium. to shUt down Pride events” as evidence of trade agreement ollow, g posite indexx closed up 4 ement m ay fol ffollow, low buoyin buoy may buoying 42.81 points at ing rroom oom with chants c “This stuf st uff is hard.” uff hard. stuff like to have their dad win a the scoring brok loose. broke 275 and became, at 43, the oldhis intolerance. effect” which juiced retail sales during the says she just wanted to get oranis, iderM oranis, HaiderMoranis, north rt American stock rth ock m arkets. 16,422.68. markets. est Masters champion since It didn’t used to look that tha Mo t major championship, I hope of “Tiger! Tiger! Tiger!” He Molinari’s tee shot HaiderMor on iderMor the streets in his press conference, team’s playoff run. a feel for who was applying wa when he was younger, er the par-3 12th never er, n that’s something they will never hugged more people, way had a Nicklaus won his sixth green The highly anticipated anticipa trade talks There’s hope h tha fate that fa of talks have Scheer said nothing has Statistics canada said a bump in sports to babysit her three young ts FP3 of britain everyone in his camp who healthier and the most popu- chance, hitting ,” Woods Woods said. hittin it g the bank and jacket at 46 in 1986. ittin never forget,” changed in the conservative merchandise in particular “coincided” with children. have a rush of conflicting not gotten any worse, said greg Tayha spawned spa figuree in the tumbling into Rae’s That has stood as AugusRae Creek for Who can ever forget this stood by him through a pub- lar sporting ffigur party under his leadership — the Toronto raptors playoff run, and gave a Now she has to respond in lor chief investment reports about whether the negotia- lor, officer of Puras brexit ta’s defining moment for lic divorce, an embarrassing world. da ey ey. day? double bogey. mPs have the right to express lift to overall retail spending numbers. in detail to a formal comtions would spur progress or be cut pose Investments, tments, even though the ca cable Woods lost his impeccable t’ hard to really t’s reall ea y feel bad mug shot from his DUI arrest eall Un then, Molinari Mo “It’s Until had years. their views but a Scheer-led The results, whatever they show, could plaint that she violated one ld protests short. U.S. took action ac recently to blacklist This one is sure to at least ver trailed in a round that about how I played because when he took a bad mix of image to a sex scandal, one of never in this year’s Black Panther, which though it was filmed in Philadel government would not reapplicant’s human rights — sharpen the divide between the two leading g kyle Buchanan rival it. the swif swiftes t most painkillers and the f four our b ack swiftest and shockback y, y,” said bega th I just witnessed history,” began early in threesomes to Stock markets got a lift Thursday some Chinese ese tech f firm firms. worked so spectacularly that Jor- phia like the first Creed, the dif open legislation on same-sex federal parties ahead of the election, as the by asking the man if he had moUnt. spor He lost finish “This is definitely, probSchauf one of surgeries, the most recent to ing downfalls in sport. nish ahead of storms. st Xander Schauffele, Colin MCClelland geoff ZoChodne as investors responded positively certain tainly don’t think t “I certainly anyone’s dan has now become one of the ference in how the city reacted marriage or abortion. children himself. conservatives seek to tap into economic anxhis health to back problems. pla three players who finished fuse his lower spine And then it seemed as ably one of the greatest comePage a9 ieties and the rising cost of living for voters it’s just the latest in a ers see ivison on a4 h e w oman w i t h t h e most famous young men in Holly- to Jordan was palpable. “He had after Trump said he will meet at the looking for an outright deal to come af “I had serious doubts afaf He went two years without though thou practically everyone backs I think anybody’s ever second. “It was really cool Even if Canadian federal T o R o n T o • Pot stocks slid braids thought she was wood. Still, don’t mistake his suc- jumped to being a superstar, a and as the Liberals tout their purported recstring of grievances edmonWhite House Friday with China’s out of thesee talks tomorrow tomo but even wha transpired a couple even playing pla major a major. d a chance, until Woods seen,” Koepka said. had coming down the stretch, all ter what and provincial governments on Thursday after Quebec being slick, but all the cess for contentment. “I’m starting megastar,” said Steven Caple Jr., ord of stable economic growth. ton’s James cyrynowski has The Associated Press o, Woods said “I o,” Now the comeback is truly delivered delive ke shots at the the historic holes, Tiger mak- of years ago,” the key vice-chairman. “Big day of negoti- a truce would be look looked at as good S&P/TSX S&P DJ Ind. increase their carbon taxes cannabis producer Hexo way across the restau- to learn as time goes on and I get who directed the sequel. “When but analysts warn that comforting ecofiled with the alberta Huit’s messy, ations with China,” Trump tweet- news and potentially enough to set 16,422.68 26,496.67 to US$75 a tonne they will Corp. issued a revenue rant at the Beverly Hilton, Mi- the things I’ve worked so hard for, we would go out, you could see nomic figures could overshadow risks that lie man rights commission, alie ed earlier in the day. da “They ey w ant to up a bounce in the mark markets,” he said want +42.81 +150.66 fall far short of reaching warning and pulled its guidchael B. Jordan had her clocked. there’s always going to be, 'What’s that he was still getting used to leging discrimination based ahead for canada, particularly amid an onloUd and +0.26% +0.5 +0.57% make a deal, but do I? I meet with in an interv rview. interview. ance for its coming fiscal greenhouse gas emission “There’s this Spidey sense I the next thing?'" he said. the attention.” on gender or other grounds, going trade battle between the U.S. and china hina Ugly. this is year, marking the latest jolt targets, says sa a new report by the Vice Premier tomorrow at The But Taylor Taylor warned that investors have now,” Jordan said, wiggling Handsome and confident, JorThe same is true for Adonis, usually when applying for that has sent stock markets tumbling. for a sector that has become the International Monetary a few fingers near his temple. Jor- dan has been touted as the next who begins Creed II with nearly babysitting jobs. “it certainly overstates the underlying ying White House.” use. later use.” la ter, Trump tweeted could face disappointment ter, d disappointme if nothing later, democracy increasingly sensitive to conFund. employers are barred strength of the economy,” said Sal Guatieri, sendan, who has portrayed two Mar- Will Smith or Leonardo DiCaprio, everything he aspired to in the first andreescU the talk ta talkss with China went “very well good comes out of the first meetings cerns over sluggish growth Countries that rely more under the province’s rights ior economist at bank of montreal. “we’re not vel superheroes on screen, was a homegrown star with world- film: a surrogate father (Stallone), in action. today. day.” day. y.” d’ two d’s tw largest econbetween thee world’s today.” roarsreferring intoto a third: Spider-Man, wide ambitions. He is so affably a loving partner (Tessa Thompson) and mounting losses. on coal than Canada will see Dollar Gold law from rejecting somegetting back to a 2017 three per cent growth rate nce July. July. July uly. In new ew York Y ork, the Dow Jones indus- omies since York, Hexo said it now expects a greater impact from carUS7 US75.22¢ US$1,494.80 one based on their family — that’s just not in the cards for canada.” whose instinct for nearby danger all-American that he topped a and the title that had eluded him. McParland, third roUnd trial average was up 150.66 points at Se Trade See Tr e on FP2 Trad net revenue for its 2019 bon taxes on their emission +US0.17¢ -US$11.30 status. economists widely expect to see three per is illustrated by squiggly lines rumoured studio shortlist to Wherever Adonis goes, he is greet at U.s.emerging open.from his head. +0.23% -0.75% 75 75% Page a10 fourth quarter, which ended levels because the monetanother complaint recent growth in the second quarter of 2019, 19, play Superman, but is still pos- ed as a hero, yet he is restless and ary bite will be deeper, er the er, July 31, to be between $14.5 sulted in a recommendamarking a significant uptick from the previviFor Jordan, that sixth sense is sessed of enough sex appeal and surprisingly unhappy. Told that he Page dT2 million and $16.5 million, and IMF says. Some would see a tion that a different mother ous two quarters when the canadian econconactivated whenever a fan is se- swag that Nicki Minaj used her is boxing’s new champion, Jordan’s US$75 a ton carbon tax balthat net revenue for its 2019 pay him $1,500 in damages, omy had essentially stalled. averaged out cretly trying to take his picture. recent People’s Choice acceptance wounded warrior snaps, “Then it’s not loon coal prices by 200 per fiscal year will be about $46.5 leading to a court battle that over the past year, however, the country’s y’s Though the woman appeared to speech to send a lascivious come- why don’t I feel like it?” MIKe eHRMANN / GeTTY IMAGeS ReDINGTON / GeTTY IMAGeS OilANDReW Natur Natural N atural atur al ga 2030, cent by 2 030, says sa the report, million to $48.5 million. he lost. growth rate is closer to 1.5 per cent, or well a coUp, be focused on her friends, she was on in his direction. It’s a surprising, subversive turn Tig Woods celebrates Tiger celebrat ebrates ebrat ates with his his girlfriend girllfr girl friend frie iend Erica Herma H Herman, erman, left erman, le left, ft ft,, and son Cha C Charlie harlie harlie A jubilant Tiger Woods Wo cele celebr celebrates withUS$53.55 caddie Joe LaCava after winning – M i c h a e l B. J o r d a n US$2.22 released Thursday. da day. This followed guidance a single father who failed below the bank of canada’s “target” two per holding her iPhone at the sort of Next up for Jordan is the box- for the character. “I related to that as he comes off of the 18th green in celebration at ation of his Mast Ma Masters ers win Sunday. Sunda the Masters by one o stroke at Augusta+US$0.96 National Golf-US$0.02 Club on Sunday. “Whereas a US$25 a ton Hexo offered in June that so please to hire cyrynowski now cent rate. angle that the 31-year-old Jordan ing drama Creed II, a sequel to feeling as an actor: I thought once uBer eats teams up with .8 .83% +1.83% -0.72% price would be more than suggested its Q4 revenue faces allegations of gender and it could get worse. repeated threats ts has come to recognize as a cam- his 2015 hit. Though the franchise I got enough money to buy a house calm down enough for some countries would double to around $26 celeBrity chef celeBrity chef rachae chae ra chael rachael ray bias. That case, and the by U.S. President Donald Trump in recent cent era trained on him, not them. continues Sylvester Stallone’s and a car that I would be happy,” (for example, China, India, million and that it was on family-status case, have been weeks to level trade tariffs against china has “I’ve just got to get comfort- Rocky movies, this new iteration Jordan said. “But why do I still feel — everyone. to serve meals. FP7 FP track to hit $400 million in and Russia) to meet their taken up by the Justice censent the global economy into a tailspin, trigable with that being my life now,” fits Jordan like a boxing glove: As unsatisfied? Why am I so hungry?” Paris Agreement pledges, net revenue for its fiscal 2020. tre for constitutional Freegering a number of central banks to cut their Higgins, Jordan said, his lips curling into a Adonis Creed, the ambitious athAs Caple observed, “Mike’s at the “Fourth quarter revenue in other cases (for example, doms, a conservative NGo. rate — and in turn spurring recession fears. half-smile. “After you do a Marvel lete stepping out of his late fath- top of his game right now, but he’s Australia and Canada) even is below our expectation and Page a10 see ComplainT on a6 see gdp on a5 er’s long shadow, Jordan toggles always searching for more.” film, things change.” guidance, primarily due to the US$75 a ton carbon tax Few actors would know that between muscular bravado and falls short,” the Washinglower than expected prodbetter than him. Jordan played a wounded, boyish vulnerability LEADING-MAN POTENTIAL uct sell through,” said Sebaston, D.C.-based lender said. When Jordan first moved to Los domestic total of US$127.9 Marvel’s Human Torch in 2015’s that is startling. tien St-louis, the company’s “Emissions are more responmillion and pushing worldCreed II was rushed into pro- Angeles, he was a teenage actor Fantastic Four reboot, which CEo. “We are making sigsive to pricing in coal-reliwide ticket sales to nearly raised his profile but didn’t quite duction this year, in the months with a promising resumé and no nificant changes to our sales ant countries such as China, US$400 million. work as a movie, and he was the after Black Panther became a control over his destiny. and operations strategy to India, and South Africa than A See JORDAN on B2 The New York Times comic-book foe Erik Killmonger billon-dollar phenomenon, and drive future results.” in other countries.” s.” s.

nationalpost.com

drIvIng new Italy-built diesel puts ram in the driver’s seat. Page dT4

Male sitter’s complaint sparks rights hearing

Arts lIFE

‘didn’t get the job’

Is there a statute of limitations on movie spoilers? Page B1

FP How some retailers are finding ways around the global tariff disputes. FP3 I n d e x Classified diversions rememBering sporTs WeaTher World

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Player Safety not long after the game ended. The hearing Kadri af will be held on Monday. This, of course, comes after ainst was suspended for three games in the first round against the Bruins last year after he hit Boston forwa forward Tommy Wingels along the boards in Game 1. “Any time you cross the line, though, you have a chance to let someone else pla or not. So the way I make the decision whether you play look at it here today is we can’t worry about tha that now, just erry Koshan, Postm P Postmedia have to move on,” Babcock said. Terry

statcan data could ld sHarpen dIvIde between ween leadIng Federal partIes Ies

In thIs corner

there are no easy shifts out there, no easy games and no easy plays. pla it’s hand-to-hand combat comba bat out combat there.

brExIt

You start at a young age, going on auditions, and you think you did a good job and expect to get that role, and you don’t, and it’s a letdown, a disappointment. So you tell yourself to just do the work and disconnect, because you have no control over the outcome.

‘He’s always searching for more’

woods’ 15th Major triuMPh is the Most iMProbable itles wi of theM all aNd Puts NicKlaus’ 18 titles withiN reach

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THE SUMMIT ISN’T ENOUGH FOR MICHAEL B. JORDAN

markets

Even US$75 per tonne is a climate target miss

Senior or o officials fficials meet n Washingt Wa Washington et iin t mp tweets that at n eg iati egotiati ia as tru trump negotiations went very ell’ nt ‘‘very ry wel w well’

IMF report

Pot stocks slide as Hexo issues warning stock Falls 23%

InsIdE

InsIde

See car c carbon arbon on arb on FP2

See Hexo on FP4

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The Goal of Alternative Investments Alternative Investments permit more efficient portfolio construction with the potential to deliver on a range of desired outcomes: • Portfolio diversification • New sources of income • Enhanced returns

• Volatility & drawdown management • Interest rate risk management • Inflation risk management

Theoretical example using inversely correlated asset classes

smoother journey

YEAR 1

YEAR 2

YEAR 3

Traditional Asset Class

YEAR 4

YEAR 5

Alternative Asset Class

YEAR 6

Combined Average

This stylized diagram is for illustrative purposes only, and does not reflect suggested performance of any type

Market factors driving interest in Alternatives Several factors are driving interest in Alternative Investments among sophisticated investors:

MONTHLY ROLLING CORRELATION OF S&P 500 VS 10-YEAR US GOVERNMENT BONDS

•H igher correlations between traditional asset classes, exposing a portfolio to greater risk in a drawdown.

• The age of the current market cycle.

0.4 0.2

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

0 1988

•C reeping portfolio risk. As investors have sought to replace income in their portfolios due to falling government bond yields, substitutions have included longer duration bonds, high yield bonds, dividend paying equities, and preferred shares – all which may increase portfolio risk.

0.6

Correlation Coefficient

•L ow interest rates. Yields are low and income is hard to come by.

0.8

-0.2 -0.4

Less Correlated More Correlated

-0.6

Source: Morningstar and St. Louis Fed (FRED) , September 2019

NINEPOINT / ARE ALTERNATIVE INVESTMENTS FOR ME? 21

Common risks and offsets for retail investors The role Alternative Investments can play in a portfolio While the definition of Alternative Investments has broadened, “Alts” still suffer from the perception of being high-stakes, high-torque hedge funds. Today’s hedge funds are more focused on risk management and the broader set of Alternative Investments to which they belong are designed to provide stability to a portfolio through better diversification. That said, for retail investors interested in Alternative Investments, there are some important considerations:

When well managed, Alternatives have the potential to complement core equity and fixed income allocations by improving diversification, managing risk, providing income, and enhancing returns. A professional asset allocator can help determine if Alternative Investments will help a portfolio achieve its investment goals.

CORE STRATEGIES Access: In the past, investing in Alternatives required significant investment minimums. Today, a range of funds are available to give retail investors exposure to Alternative asset classes, with varying degrees of risk at more manageable levels.

seek to provide exposure to asset classes that are broadly representative of the market, such as stocks and bonds.

Liquidity: Some Alternative Investments can tie your money up for more than a year. However some Alt funds are now being structured to provide 30 day liquidity, while Liquid Alts can provide daily liquidity. In any case, Alternatives are best viewed from a longer time horizon.

DIVERSIFYING STRATEGIES

Transparency: Many Alternative Investments are privately traded, so there is limited information available on pricing, track records, and comparability (benchmarks). Good manager selection can help here, as can the visibility offered by Liquid Alt products. Alternative Investments

Private Investments

have the potential to deliver consistent returns and enhanced risk management. Institutional investors frequently make use of alternative investments to this end.

Mutual Funds

Exchange Traded

Real Estate

• REIT Funds • Direct Investment • Real Estate Sector • Private REITs Funds

• Public REITs • Closed-End Funds

Infrastructure

• Direct Investment • Infrastructure • Direct Investment Sector Funds Funds

• Infrastructure ETFs • Closed-End Funds

Commodities

• CTAs • Resource-Focused • Managed Futures Sector Funds • Direct Investment • Precious Metals Funds Funds

• Resource ETFs • Precious Metals ETFs

Private Debt

• Direct Investment • Private Debt Funds

• N/A

• BDCs

Private Equity

• Direct Investment • Private Equity Funds

• N/A

• Listed Holding Companies

Marketable Securities

• Traditional Hedge • Liquid Alt Funds Fund Strategies

22 NINEPOINT / ARE ALTERNATIVE INVESTMENTS FOR ME?

• Hedge Fund Indexed ETFs • Closed-End Funds

RESULT More efficient portfolio construction with investment outcomes (risk/return) better suited to an investor’s needs.

Sophisticated expertise. Focused results. BLG’s Investment Management Group is ranked by Chambers Canada as one of Canada’s best law firms for investment funds and asset management. No matter what kind of investment strategy and investment product you manage, it’s critical to have a legal team who can anticipate and respond to your needs with industry-specific expertise in hedge funds, pooled funds, private equity funds or alternative funds. Whether you are looking to set up or acquire an investment fund business in Canada, need help with understanding how to comply with regulatory requirements, or are looking to enter the Canadian market from abroad, BLG’s national team understands the business, regulatory and administrative issues that affect you. For further information, please contact: John Hall National Leader 416.367.6643 jhall@blg.com

Lynn McGrade Toronto 416.367.6115 lmcgrade@blg.com

Jonathan Doll Calgary 403.232.9659 jdoll@blg.com

Christian Faribault Montréal 514.954.2501 cfaribault@blg.com

Jason Brooks Vancouver 604.640.4102 jbrooks@blg.com

blg.com Canada’s Law Firm Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership.

BLG and its lawyers have a deep knowledge of the asset management business. The number of clients they have in the industry allows them to have their pulse on the most topical issues facing fund companies. Chambers Canada – Canada’s Leading Lawyers for Business

8 WA YS Unconstrained

Bond Funds Can Outperform

“ 24 NINEPOINT / 8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM

The current environment demands greater freedom and creativity to capture yield and protect the capital of investors.

”

Most bond fund managers are passive, tracking an index That approach worked during the 35-year bull market in bonds, but in this low interest rate environment more freedom and creativity are required to generate income and manage risk.

Interest rates remain low, making it challenging to earn income that meets investor requirements. And most of the ways conventional bond fund managers can add value tend to bring unwanted consequences. For example, investing in lower-quality bonds or longerterm bonds might enhance returns, but they can also lead to higher volatility and greater risk of loss. The reaction among some of the world’s leading investment thinkers has been to ease the constraints placed on bond fund managers. This has given rise to a new breed of “unconstrained” manager that is no longer required to mimic a narrow benchmark. These managers have greater flexibility to look for opportunities in new and different places. They can find value in unique issuers, roam the yield curve, jump on a timely play or move quickly to cash in ways

that others that must follow an index can’t. And they can backstop every move with risk management tools designed to make market downturns less damaging— and sometimes even profitable. As a result of their flexible mandates, unconstrained bond funds cannot be compared to a narrow conventional index. Instead, they seek a consistently positive return with less volatility than the index. This may be why, in the U.S., they have attracted assets at a much faster pace than other bond funds since 2013. Below is a snapshot of eight “performance levers” an unconstrained bond fund manager can pull in pursuit of better investment outcomes. In the following pages, we’ll take a closer look at how these levers work.

COMPARING STYLES OF BOND FUNDS CONVENTIONAL

UNCONSTRAINED

1. Asset allocation

Limited by index weightings

Unlimited

2. Duration Management

Limited by index duration

Unlimited

3. Credit Selection

Limited by mandate of the fund

Unlimited

4. Geographical Orientation

Limited by mandate of the fund

Unlimited

5. Currency Exposure

Limited by mandate of the fund

Unlimited

6. Short selling

Allowed but rarely used

Allowed

7. Options Strategies

Allowed but rarely used

Allowed

8. Leverage Enhancement

Not allowed

Allowed on Liquid Alt

NINEPOINT / 8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM 25

Lever 1: Asset Allocation Unconstrained managers are not constrained by a narrow benchmark. That means they can be highly tactical in their asset allocation. They can have any weighting in any fixed income asset class, including cash, without restriction. This table shows you the relative performance of seven fixed income asset classes over a seven-year period. You will note that more than one of these asset classes has been both the best-performing and worst-performing over the period. An unconstrained manager has the freedom to move in and out of these asset classes at will, changing the characteristics of the portfolio to be defensive or opportunistic.

RANKING THE ANNUAL RETURNS OF FIXED INCOME ASSET CLASSES US High Yield Bonds

US High Yield Bonds

US Corporate Bonds

2014

2015

2016

US Gov’t 20+ Year Emerging Markets Bonds Bonds

US High Yield Bonds

Canada Corporate Canada Gov’t 20+ Canada Gov’t 20+ Year Bonds Year Bonds Bonds

US Corporate Bonds

Emerging Markets Emerging Markets Emerging Markets Canada Corporate Emerging Markets Bonds Bonds Bonds Bonds Bonds US Inflation-Linked Gov’t Bonds

US Corporate Bonds

2017

2018

US Gov’t 20+ Year Emerging Markets Bonds Bonds US High Yield Bonds

Canada Gov’t 20+ Year Bonds

US Corporate Bonds

Canada Corporate Bonds

US Inflation-Linked Canada Corporate US Inflation-Linked Gov’t Bonds Bonds Gov’t Bonds

Canada Corporate US Inflation-Linked Canada Corporate US Gov’t 20+ Year Canada Corporate US Inflation-Linked US Gov’t 20+ Year Bonds Bonds Bonds Gov’t Bonds Bonds Bonds Gov’t Bonds Canada Gov’t 20+ Canada Gov’t 20+ US Inflation-Linked US Inflation-Linked US Gov’t 20+ Year Canada Gov’t 20+ Year Bonds Year Bonds Bonds Year Bonds Gov’t Bonds Gov’t Bonds US Gov’t 20+ Year US Gov’t 20+ Year Bonds Bonds

US High Yield Bonds

Source: Ninepoint Partners, ICE Bond Indices

26 NINEPOINT / 8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM

US High Yield Bonds

BEST PERFORMING

2013

Canada Gov’t 20+ Emerging Markets Year Bonds Bonds

US Corporate Bonds US High Yield Bonds

WORST PERFORMING

2012

Lever 2: Duration Management

Lever 3: Credit Selection

Unconstrained managers can increase or shorten the duration of their portfolio in response to the interest rate outlook.

Unconstrained managers understand that the global fixed income market is not perfectly efficient.

In a falling-rate environment, they may increase duration to capture more upside. In a rising-rate environment, they may shorten duration to reduce the risk of loss. This chart gives you a quick rule of thumb for estimating the impact of duration:

This means that it is sometimes possible to invest in illiquid bonds or lower quality credit that can add return without adding equal risk. When these opportunities emerge, unconstrained managers can take advantage of them to improve risk-adjusted returns.

DURATION AND THE IMPACT OF A CHANGE IN INTEREST RATES 1% Increase in Interest Rates Impact on Portfolio Value

1% Decrease in Interest Rates Impact on Portfolio Value

3 years

-3%

+3%

5 years

-5%

+5%

10 years

-10%

+10%

Portfolio Duration

For illustrative purposes only

Conventional bond fund managers have to construct their portfoliosâ&#x20AC;&#x2122; duration to mirror that of their index. The Bloomberg Barclays Canada Aggregate Index is the benchmark most commonly used by Canadian bond managers. The duration of this index has steadily increased as interest rates have fallen over the years and is currently at approximately 8.3 years*. This means that these funds, traditionally viewed as safe, have in fact a high degree of interest rate sensitivity and can become more volatile. * Source: Bloomberg

AUTO CREDIT During the financial crisis, the credit rating of bonds backed by auto loans were downgraded. This forced traditional bond funds to sell. But unconstrained managers had the option to continue holding these bonds or buying them at lower prices during the sell-off.

CROSSOVER BONDS Crossover bonds possess a split credit rating, yet have risk characteristics similar to investment grade bonds. These are bonds of companies in transition. Unconstrained bond fund managers have no limitations on owning these securities.

THREE EXAMPLES OF UNCONVENTIONAL CREDIT OPPORTUNITIES

ENERGY SECTOR Most funds that track a high yield bond index had significant exposure to the energy sector. During the steep decline in oil prices, unconstrained bond funds had the ability to reduce exposure, exit the sector, or buy these bonds at lower prices.

For illustrative purposes only.

Credit quality is one of many factors prescribed by an index. This can prevent conventional bond fund managers from taking advantage of certain opportunities, and it can also force them to sell or remain in areas of the market that are likely to underperform. Flexibility around credit quality is another important lever that the unconstrained manager can pull.

NINEPOINT / 8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM 27

Canada

Lever 4: Geographical Orientation Unconstrained managers can invest anywhere in the world. Although Canada is generally a desirable market, it makes up a thin slice of the global pie. The face value of all Canadian bonds outstanding was about USD$1.8 trillion at September 10, 2019, or just 3.2% of the $56 trillion global total, as the graph to the right illustrates.

Rest of the World U.S.

Being able to cross borders gives unconstrained managers better diversity and the ability to pursue value wherever it may be found. This is in contrast to conventional managers who may be tied to an index with undesirable traits.

Euro Zone U.K. Source: Bloomberg, Barclays Bond Indices

Lever 5: Currency Exposure Unconstrained managers can buy bonds denominated in almost any currency. Interest rate or currency differentials are often higher and more attractive elsewhere in the world, producing higher yielding securities when converted back to Canadian dollars.

US Government 10-year

German Government 10-year

French Government 10-year

Canadian Government 10-year

2.07%

-0.38%

-0.12%

1.45%

Currency

USD

EUR

CAD

Yield (in $CAD)

1.25%

1.89%

2.16%

1.45%

8.7 years

10.1 years

9.6 years

8.8 years

AAA

Issuer Yield

(domestic currency)

Duration Credit Quality

For illustrative purposes only. As of July 26, 2018. Assumes 1-month currency hedge.

28 NINEPOINT / 8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM

Lever 6: Short Selling

Lever 7: Options Strategies

Unconstrained managers have the freedom to utilize short selling.

Unconstrained managers can use options to reduce losses and enhance returns.

In essence, short selling means “selling high and buying low.” You borrow a bond from a broker, sell that bond in the market, re-buy it for a lower price at a later date, give it back to the lending broker, and keep the difference (minus interest) as a profit. Here are two scenarios where an unconstrained manager may use short selling.

The two basic types of options are puts and calls. When you buy a put option, you are buying the right to sell an asset—such as an individual bond or a bond index ETF— at a specified “strike” price before a certain expiry date. Call options are the opposite—they give you the right to purchase an asset at a certain strike price before the expiry date. Unconstrained managers can buy or sell puts and calls either to be defensive or opportunistic.

TWO SHORT-SELLING STRATEGIES

Sometimes, an unconstrained manager will simultaneously buy or sell a number of put and call options at the same time with the goal of improving the overall risk/reward profile of the portfolio. Strategies using multiple options are often aimed at reducing the portfolio’s downside potential in exchange for a small reduction in its upside potential.

ANTICIPATING A RISE IN CREDIT SPREADS

ANTICIPATING A RISE IN INTEREST RATES

If an unconstrained manager anticipates that a corporate bond’s price will fall, he or she can protect against loss by shorting that credit security.

If an unconstrained manager anticipates that interest rates will rise and government bond prices will fall, he or she can protect against loss by shorting the government bonds.

Unconstrained managers can use short selling to seek profits and to manage credit and interest rate risk. These strategies can be used to capture returns from securities that are expected to decline in value, or as a pre-emptive move against market declines.

TWO OPTIONS STRATEGIES DEFENSIVE

Buying Puts to Reduce Losses If an unconstrained manager thinks the bond market is at risk of a decline, he or she can purchase a put option on a bond index ETF. If the index declines below the strike price, the option should rise significantly in value. The manager can then exercise the option and realize a profit that can help offset the overall impact of a market decline.

OPPORTUNISTIC

Buying Calls to Enhance Returns If an unconstrained manager expects a bond to rise in value but wants some downside insurance, he or she can purchase a call option on that bond. If the bond fails to rise above the strike price before expiry, the only loss will be the cost of the option. But if it rises above the strike price, the manager can exercise the option and realize a significant profit.

NINEPOINT / 8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM 29

Lever 8: Leverage Enhancement Within the Liquid Alternative Fund format, unconstrained managers can use leverage to enhance returns.

Buy

IG Corp Bond

Corporate bond returns are made up of two components: 1) government bond yield (the interest rate risk), and;

3.0%

2) the credit risk or spread (compensation for probability of default).

Gov’t Bond 1.5%

Leverage Credit

3.0%

1.5%

Duration

10 years

5 years

Leverage

n/a

Total Yield

IG Credit Spread 1.5% Gov’t Bond 1.5%

Unlevered Corporate Bond Credit Spread / Yield

3.0%

Credit Duration

10 years

Interest Rate Duration

10 years

0 years

For illustrative purposes only.

Same yield, less interest rate risk

Thoughts on implementing an unconstrained bond strategy Unconstrained bond funds have at least eight different performance levers that are not available to conventional bond funds. The financial crisis, record-low interest rates, and a 35year old bull market in bonds have created a unique environment—one that demands greater freedom and creativity to capture yield and protect investor capital.

30 NINEPOINT / 8 WAYS UNCONSTRAINED BOND FUNDS CAN OUTPERFORM

Net

IG Credit Spread 1.5%

By buying a corporate bond and then selling short the corresponding Government bond, the unconstrained manager synthetically creates a corporate hybrid security that generates higher yield with no interest rate risk.

Using leverage effectively and intelligently...

Short

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“We chose Obsidian Suite to streamline the otherwise very manual process of subscribing people into our funds… With Obsidian’s SmartDocs, our clients can now use pre-populated web forms and eSignatures to subscribe into our funds, and the system prevents any errors & omissions.”

Law re nce Par k Ass e t M a n a g e m e nt

99% Time reduction By asking only relevant questions, reusing elds in a client’s KYC vault, and facilitating e-signatures a sub doc or KYC update can be done in seconds

Why work with us ? AIMA members now get up to a 30% discount with Obsidian Suite to digitize their operations. Obsidian Suite provides end to end digitization of investment operations, helping firms gear up for the competition of tomorrow. With an integrated CRM, investor portal, automated reporting, subscriptions, and KYC, Obsidian empowers your staff to do more… much more.

Elimination of errors & omissions Rule based web forms are automatically generated from any custom sub doc. A client is only asked relevant questions, however, will not be allowed to proceed until the document is 100% complete

More AUM, more data Reducing the time between a client’s decision and a signature results in higher conversions, more opportunities, while allowing you to analyze your client data and automate KYC reminders

LIQUID ALT ALLOCATION GUIDE “ 32 NINEPOINT / LIQUID ALT ALLOCATION GUIDE

Canadian investors now have access to a broader investment toolset to better meet their investment objectives.

”

New Risk Management Tools for Retail Investors As investors face more complicated market dynamics, every investor needs to explore what role Liquid Alts can play in their portfolio. Allocating Alternative strategies to a portfolio has long been recognized by institutional investors as a path to improved portfolio diversification, with the goal of lowering volatility without necessarily sacrificing returns. With the introduction of Liquid Alts to Canada, retail investors now have access to a broader investment toolset to better meet their investment objectives.

Market Cycle Performance Tech Bubble Aug98-Dec99 30.00%

Tech Crash Jan00-Dec02

Debt Run-Up Jan03-Dec07

Credit Crisis Jan08-Dec08

Post-Crisis Bull Market Jan09-Aug19

25.02%

20.00%

15.52%

15.39%

13.23%

12.35%

10.00%

10.67%

9.66% 10.29%

10.16%

5.42%

4.49%

2.51%

8.24%

3.93%

0.00% -0.78% -4.36%

‐10.00% -13.04%

-15.22%

‐20.00%

-21.35%

‐30.00% -35.56%

‐40.00%

Equities

Bonds

60% Equities / 40% Bonds

ALT Portfolio

Through various market cycles, it can be seen that alternatives do not always outperform equities, but can be effective when used defensively to help manage portfolio risk. Full Period Standard Deviation

Full Period Compound Annual Returns (Aug 98 - Aug 19) 9.00% 8.00%

(Aug 98 - Aug 19) 16.00%

7.88% 6.73%

7.00% 6.00%

6.45%

5.01%

5.00%

14.00% 12.00%

8.97%

10.00%

6.87%

8.00%

4.00%

6.00%

3.00% 2.00%

4.00%

1.00%

2.00%

0.00%

14.99%

Equities

Bonds

60% Equities/ 40% Bonds

ALT Portfolio

0.00%

3.41%

Equities

Bonds

60% Equities/ 40% Bonds

ALT Portfolio

Source: Morningstar Direct. 60/40 Portfolio: Equity represented by 60% S&P 500 TR, Bonds by 40% Bloomberg Barclays US Aggregate Bond TR. ALT Portfolio: Equity represented by 40% S&P 500 TR, Long-Short Equity by 25% HFRI Equity Market Neutral TR, Bonds by 20% Bloomberg Barclays US Aggregate Bond TR, and Gold by 15% S&P GSCI Gold TR, all USD; August 1998 - August 2019.

NINEPOINT / LIQUID ALT ALLOCATION GUIDE 33

LIQUID ALT ALLOCATION GUIDE As investors face more complicated market dynamics and as Liquid Alts become a consideration, investors need to explore what role this asset class can play in their portfolio. This guide is intended to provide more detail on what effect Liquid Alt strategies can have on an investment strategy.

Liquid Alt Strategy*

Strategy Description

Long/Short Equity

Equity securities and derivatives combining long positions with short positions via ETFs, options, or short stock positions.

Long/Short Credit

â&#x20AC;&#x153;Unconstrainedâ&#x20AC;? bond funds invest with a high degree of flexibility, frequently using duration, credit, geography, currencies, short selling, and options to try and achieve returns that are uncorrelated to the market.

Market Neutral

Funds that seek to provide positive returns in rising or falling markets by matching long and short positions in different stocks, while attempting to avoid risk from exposure to sectors, market-cap ranges, investment styles, currencies, and/or countries.

Managed Futures

An actively managed portfolio of futures contracts (agreements to buy or sell a commodity or asset at a predetermined price at a specified time in the future) with exposure to markets such as commodities, energy, agriculture and currency.

Multi-Strategy

These funds combine different alternative strategies, such as those listed above. They may have fixed allocations to set strategies, or vary their approaches depending on market conditions.

S&P 500 Total Return Index

Tracks both the capital gains of the stocks within the S&P 500, and assumes that any cash distributions, such as dividends, are reinvested back into the index.

34 NINEPOINT / LIQUID ALT ALLOCATION GUIDE

Potential Income

Capital Preservation

Downside Protection

Diversification

Growth

Strategies Outcome Goals



 



 



10-YR 10-YR Standard Correlation Deviation† to S&P500† Portfolio Application 0.96

Can offer capital protection because the strategy is intended to be neutral to the market, generating positive returns whether markets rise or fall.

5.71

0.47

Offers diversification benefits to a portfolio, with potentially stronger returns and better downside protection than traditional bond funds because of the strategy’s more flexible investment mandate.

3.73

0.50

Often viewed as a bond alternative, Market Neutral funds are designed to earn absolute returns, like a T-bill but with more aggressive returns, in any market.

0.20

A strong portfolio diversifier, Managed Futures, which trade in commodities and foreign currency futures, can outperform stocks and bonds during times of inflationary pressure. They also have the flexibility of taking long and short positions, giving them the potential to protect capital during volatile or downward-trending markets.

0.91

Offers a diversified portfolio of managers with the objective of lowering the risk of investing in an individual manager. By allocating across multiple strategies, these funds provide a “one-stop shop” approach to investing in alternatives, relieving the investor of navigating the complex issues of strategy, manager, and fund selection.

1.00

Equities provide the best opportunity for growth over the long-term but are a more volatile asset class that most investors prefer to diversify with additional asset classes such as fixed income.

9.68

8.79



5.75

12.73

* Morningstar mutual fund asset categories. †Source: Morningstar Direct. Liquid Alt Strategy standard deviation and correlation to S&P500 TR represented by Morningstar mutual fund indices for US Fund Long-Short Credit, US Fund Long-Short Equity, US Fund Managed Futures, US Fund Market Neutral, US Fund Multi-alternative, Quarterly from September 2009 – September 2019 in USD, the maximum period of data available.

NINEPOINT / LIQUID ALT ALLOCATION GUIDE 35

LIQUID ALT ALLOCATION GUIDE While Alternative Assets have long been available as liquid mutual funds, it bears including them in this allocation guide. While not necessarily â&#x20AC;&#x153;liquid altsâ&#x20AC;? under the definition recently approved by the CSA, these asset classes are considered alternative, and they are liquid to the degree that they are available in mutual fund structures.

Liquid Alt Asset*

Asset Description

Commodities

Used in the manufacture of a wide range of products, commodities are raw materials that include agricultural products such as wheat and cattle, energy products such as oil and natural gas, and metals such as gold, silver and aluminum. Mutual funds and ETFs offer highly liquid access to commodities and commodity indices.

Real Estate

Real estate investing is a financial interest in property. Liquid investments in real estate are generally limited to public, equity-based investments in securities like REITs, where a larger entity manages a direct real estate portfolio on your behalf, or a real estate-based mutual fund or ETF that contain REITs and/or real estate-related equities.

Infrastructure

Infrastructure investing is a financial interest in physical systems such as transportation, communication, sewage, water and electric systems. Modern payment and data networks are also considered by some to be infrastructure assets. Liquid investments in infrastructure are generally limited to mutual funds or ETFs which contain infrastructure-based equities, or ETFs that track infrastructure indices.

Currency

The foreign exchange (forex) market allows investors to buy, sell, and speculate on foreign currencies. Most of the movement in the currency market comes down to interest rates, global economic conditions, and political stabilities. Other than direct trading, exposure to foreign currencies can be achieved through mutual funds which invest in foreign bonds which earn interest denominated in the foreign currency, investment in equities with significant foreign business so that overseas revenue and profit can benefit from currency differentials, and through currency ETFs which enable speculative trades on spot exchange rates.

S&P 500 Total Return Index

Tracks both the capital gains of the stocks within the S&P 500, and assumes that any cash distributions, such as dividends, are reinvested back into the index.

36 NINEPOINT / LIQUID ALT ALLOCATION GUIDE

Inflation Protection

May Produce Income

Capital Preservation

Downside Protection

Diversification

Growth

Assets Outcome Goals

 



 

10-YR 10-YR Standard Correlation Deviation† to S&P500† Portfolio Application

0.59

Despite the most recent performance challenges, commodities still offer the potential benefits of inflation protection, improved portfolio diversification, and enhanced risk-adjusted returns. Many institutional investors favour actively managed commodities in their asset mixes for these reasons. Liquid investments in commodities will most often be equity-based and may therefore be more correlated to equity markets.

0.67

Real estate is considered a good portfolio diversifier, can enhance portfolio yield, and serve as an inflation hedge because, typically, rents are indexed to inflation. Liquid real estate investments, however, tend to be equity-based rather than direct investments in a physical asset, and are therefore a little more highly correlated to the movement of equities. ETFs which track a broader real estate index can be a good way to get liquid exposure to more direct real estate assets.

0.69

Like real estate, infrastructure is considered a good portfolio diversifier and inflation hedge that can offer stable cash flows. However, liquid infrastructure investments tend to be equity-based and therefore more correlated to stocks. ETFs which track a broader infrastructure index can be a good way to get liquid exposure to more direct infrastructure assets.

7.35

0.49

For individuals who invest mostly in home market securities, foreign exchange (currency trading) can add a layer of diversification to traditional stock and bond portfolios by hedging against economic events that might undermine normal trading. While forex trading is highly liquid, investing in currencies can be risky, especially during volatile economic times.

12.73

1.00

Equities provide the best opportunity for growth over the longterm but are a more volatile asset class that most investors prefer to diversify with additional asset classes such as fixed income.

14.69

15.25

14.67

* Morningstar mutual fund alternative asset categories. †Source: Morningstar Direct. Liquid Alt Asset standard deviation and correlation to S&P500 TR represented by Morningstar mutual fund indices for Morningstar US Fund Commodities Broad Basket, Morningstar US Real Estate TR USD, Morningstar Gbl Infrastructure OP NR USD, Morningstar US Fund Multicurrency, quarterly from September 2009 – September 2019 in USD, the maximum period of comparable data available.

NINEPOINT / LIQUID ALT ALLOCATION GUIDE 37

WHY PRIVATE DEBT MARKET OUTLOOK

“ 38 NINEPOINT / WHY PRIVATE DEBT

Investment consultants recommend choosing Private Debt investments based on the manager’s experience with the strategy.

”

The Private Debt Industry Is Rapidly Expanding The growth in private debt financing is largely attributable to a continuing retreat by banks from loan markets under the pressure of tougher capital rules. Source: 2018 Preqin Global Private Debt Report.

A perfect storm of cash-hungry mid-market firms who are unable to secure conventional loans, plus investors searching for alternatives to low yielding bonds and volatile equities has injected tremendous energy into the Private Debt space. Here’s what it looks like:

In 2019 the Canada Pension Plan allocated significantly to Private Debt CPPIB 2019 ALLOCATIONS

Private Debt AUM has more than tripled since 2007

EQUITIES 761

800 700

654

Million $

10%

587

600

526

500

450

400 300

197

200

238

271

317

348

33%

FIXED INCOME

ALTERNATIVES

459

380

57%

ALTERNATIVES BREAKDOWN

100 0 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: Preqin Online Products, 2019.

Investor views on the performance of their Private Debt investments over the past 12 months

OTHER

6% 6%

PRIVATE DEBT

73%

INFRASTRUCTURE

15% 12% Met Expectations

24%

Exceeded Expectations

Fell Short of Expectations

12%

PRIVATE EQUITY REAL ESTATE

“The CPP is sustainable for the next 75 years... Investment income over the three years since the previous review was 248% higher than expected.” Source: CPPIB 2019 Annual Report

Source: Preqin Investor Survey, 2019.

NINEPOINT / WHY PRIVATE DEBT 39

Direct Loans have outperformed High Yield, with less volatility

Senior Debt is the safest part of the capital structure

PRIVATE DEBT VS. HIGH YIELD RETURN CUMULATIVE RETURN FROM SEPTEMBER 2004 – SEPTEMBER 2017 Cliffwater Direct Lending Index

HIGHEST PRIORITY

Bloomberg Barclays 1-5 year High Yield

Senior Debt*

350% 300%

Subordinated Debt

250% 200%

Mezzanine

150% 100%

Preferred Equity I

Equity

201

200

201

1 201 2

201

4 200 5 200 6 200 7 200 8 200 9

50% I

Source: Cliffwater Direct Lending Index, Morningstar.

LOWEST PRIORITY

Two distinct approaches to Private Debt investing

RETURN MAXIMIZING

Distressed debt, structured equity and specialty finance

CAPITAL PRESERVATION*

*Ninepoint Partners’ current Private Debt strategy.

“Although the perception of the private debt sector can sometimes be characterized as being more risky than traditional bank debt, the number of private credit funds opting for a more conservative ‘senior secured’ structure suggests the contrary.” Source: CPPIB, May 2018.

Over half of current Private Debt investors intend to increase their allocations

Increase Allocation Maintain Allocation

Source: Prequin Investor Interviews, 2019.

40 NINEPOINT / WHY PRIVATE DEBT

47%

Deacrease Allocation

Direct loans (levered and unlevered)

*Ninepoint Partners’ current Private Debt strategy.

48%

Investment consultants say experience with fund strategy is key to Private Debt manager selection Experience with Fund Strategy

100%

Team-Level Performance Track Record

93%

Firm-Level Performance Track Record

87%

13%

Sizeable GP Commitment to Fund

67%

33%

Attractive Fund Terms/Fees

67%

33%

Firm Presence in Investment Market

67%

33%

Returning Investor Base

47%

Team Previous Fundraising Success

40%

Unique Fund Strategy

33%

Successful First Close

33%

Firm Previous Fundraising Success

33%

Firm Presence in Fundraising Market

27%

Fund Pre-Seeded with Assets

27% 0%

47%

13%

60%

54%

13%

40%

27%

40%

33%

33% 20%

13%

40%

40% 60%

80%

100%

Proportion of Respondents Source: Prequin Investment Consultant Survey, November 2017.

Very Important

Private Debt can be viewed as a defensive asset class Benefits  An innovative way to generate income  Low volatility  Equity-like returns Typically floating rate loans Collateralized by assets Safest part of capital structure (Senior Debt) Non-correlated to traditional asset classes L ower historical default and loss rates than high-yield bonds  C apital preservation with strong long-term performance     

Somewhat Important

Not Important

Challenges  Illiquidity  Transparency  L imited information available on track record of the asset classes  L ack of comparability with other asset classes in private and public markets  No linear deal flow resulting in cash drag

A good manager can help you take advantage of the benefits while mitigating the challenges.

NINEPOINT / WHY PRIVATE DEBT 41

CONSIDERING PRIVATE DEBT STRATEGIES? 12 NINEPOINT 42 NINEPOINT // 2019 CONSIDERING OUTLOOK FOR ALTERNATIVE BONDS INVESTMENT STRATEGIES?

Manager Selection and Oversight are Essential Alternative investments are less transparent than public equities or bonds, have few benchmarks, little or no secondary markets, and are relatively illiquid. As the investment universe evolves, so do investors. Investors are becoming increasingly knowledgeable even while investment options are becoming increasingly complex. Using a simple formula for equities and fixed income in differing proportions, hoping to generate alpha while controlling beta, is becoming harder to do. Investors today are realizing that they need to diversify away from public securities — and one good way to do that is to include an allocation to alternative strategies. A growing category of alternative investments is private investments in debt, equity, real estate, special situations, among others, that have little or no correlation to publicly traded securities. They are less volatile and less market-driven than equities yet can often provide attractive returns, particularly for those who remain patient. It’s no wonder that significant institutional capital is expected to continue flowing into this asset class, as shown in Figure 1.

In general, however, alternative investments are less transparent than public equities or bonds, have no meaningful benchmarks, have little or no secondary markets and are relatively illiquid. As a result, strategy and manager selection along with ongoing oversight are critical. Nowhere is oversight and careful selection more important than in the fastest growing segment within alternative investments — private credit or private debt as it is also known.

Behind the Rise of Private Debt Why is so much capital flowing into private debt? There are several reasons, which are best understood within a historical context.

Figure 1: Projected Growth of Alternative Assets

2018

2023

Natural Resources $0.2tn

+300%

$0.8tn

Infrastructure $0.5tn

+100%

$1.0tn

Private Debt $0.8tn

+75%

$1.4tn

Private Equity $3.6tn

+36%

$4.9tn

Real Estate $0.9tn

+33%

$1.2tn

Hedge Funds $3.6tn

+31%

$4.7tn

Source: Preqin, 2019

Assets under management in Private Debt have grown more than threefold over the past 10 years and now exceed $800B. Source: Preqin, 2019

NINEPOINT / CONSIDERING ALTERNATIVE INVESTMENT STRATEGIES? 43

The financial crisis of 2008-10 had a meaningful impact on the financial sector. Increased banking regulation moved banks out of the business of mid-market lending, creating a broad range of opportunities for non-bank lenders. For investors, the rise of private debt has been positive, creating the potential for: • A reliable income stream;

Increased capital flow into private debt, while good in one sense, is creating a frothy market where there is pressure on pricing, covenants and structures, suggesting that some Private Debt managers may accept lesser-quality deals and lower returns. Figure 2 illustrates the increase in pressure on pricing in the private debt space.

Investing in Private Debt in the Current Environment

• Diversification into proprietary private transactions; • Little or no correlation to public markets (equity or fixed income); and • Attractive yields — typically 6% to 9% unlevered and 9% to 12% levered.

Reasons for Caution While private debt has attractive benefits, it is important to bear in mind that we may be approaching the end of a credit cycle. Rising interest rates, indications of stagflation and inverted or flat bond yields are all pointing to a broad contraction in equity markets, the results of which could have a spillover effect across the economy. This could include private loans.

When investing in any alternative asset or strategy, patience is a virtue. When that alternative asset is private debt, other important factors include: • A long-term focus. Don’t let short-term movements in markets dictate your goal and strategy. • Due diligence. Choose a manager or strategy with a long history of performance that includes one or more downturns. Do not get taken in by strategies that have done well over the past two to four years — as we all know, it’s easy to look skilled in a bull market. • Discipline. How well have managers stayed on course? It is important for a manager to demonstrate no strategy drift in uncertain markets.

Figure 2: Private Credit Net IRRs and Quartile Boundries by Vintage Year 25%

TOP QUARTILE NET IRR BOUNDRY MEDIAN NET IRR BOTTOM QUARTILE NET IRR BOUNDRY

NET IRR SINCE INCEPTION

20%

15%

10%

0% 2000

2001

2002

2003

2004

2005

2006

2007

2008

VINTAGE YEAR 44 NINEPOINT / CONSIDERING ALTERNATIVE INVESTMENT STRATEGIES?

2009

2010

2011

2012

2013

2014

2015

Source: Preqin Q4/2018

What sets Canadian Institutional Investors Apart? In 2019, CIBC Mellon published “The Race for Assets: Canada vs. the World”, a study of 50 Canadian Institutional Investors attitudes and plans for investment into alternative asset classes.

Canadian investors are leading a global shift to alternatives: allocation expectations over next 12 months

Rising Allocations

58%

Increase

53%

42%

Maintain

35%

Decrease

12%

Canada vs. the World

Leading differences setting Canadian investors apart from investors in other countries: 1

Higher priority on co-investment and direct investment

Greater tolerance of investments requiring long hold periods

Greater emphasis on the use of technology to lower costs

Greater demand for lower fees from investment managers

Greater focus on environmental, social and governance issues

Canadian institutional investors’ satisfaction with private debt / loans investment performance:

24%

72%

Better than expected

As expected

Worse than expected

To learn more, contact: Jon Lofto at 905 755 7123 Download our research: www.cibcmellon.com/raceforassets

©2019. A BNY Mellon and CIBC Joint Venture Company. CIBC Mellon is a licensed user of the CIBC trade-mark and certain BNY Mellon trade-marks, is the corporate brand of CIBC Mellon Trust Company and CIBC Mellon Global Securities Services Company and may be used as a generic term to reference either or both companies.

L EADER I N MI DDLE MAR KE T P R I VAT E CR E D IT Monroe Capital LLC is a private credit asset management firm specializing in direct lending and opportunistic private credit investing. Since 2004, the firm has provided private credit solutions to borrowers in the U.S. and Canada. Monroe’s middle market lending platform provides debt financing to businesses, special situation borrowers, and private equity sponsors. Investment types include cash flow, enterprise value and assetbased loans; unitranche financings; and equity co-investments. Monroe is committed to being a value-added and user-friendly partner to business owners, senior management, and private equity and independent sponsors.

2019 BEST U.S. DIRECT LENDING FUND of the YEAR

2019 SMALL MIDDLE MARKETS LENDER of the YEAR, AMERICAS

Chicago

•

Atlanta

•

2018 LOWER MID-MARKET LENDER of the YEAR

Boston

•

2018 LENDER of the YEAR

Los Angeles

•

New York

2016 LENDER FIRM of the YEAR

•

2015 SMALL BUSINESS INVESTMENT COMPANY (SBIC) of the YEAR

San Francisco

To learn more about Monroe Capital, visit monroecap.com

• Safety. Senior loans with first lien on company assets offer the safest risk-return profile. While junior loans, subordinated debt, and mezzanine debt will provide higher potential yields, they are progressively more illiquid and may be susceptible to increased risk in turbulent markets. • Security. The right covenants will help provide protection against worst-case scenarios. Managers must underwrite transactions at base case with adequate covenants such as fixed-charge coverage, minimum EBITDA, maximum CAPEX, pledge of shares, and personal guarantees. • Management infrastructure. People, processes and systems play a key role in a manager’s ability to manage and scale loan portfolios. • Deep manager experience. It is critical for the manager to have a credit or workout team with strong tenure in loan workouts and restructuring. A good manager is one that has been in the private debt area originating, underwriting and managing loans through many credit cycles.

Ongoing Oversight is Essential While initial due diligence on a manager is very important, it is even more important to have ongoing oversight. Private debt is a very transactional; it is a loan-by-loan business. With continuous change in borrowers’ businesses, managers must proactively monitor loans and supporting collateral and be prepared to act if any borrower strays from the agreed terms of the loan. As part of oversight it is important to: • Review the loan term sheet, commentary, collateral audit reports, inventory appraisals, market studies and quality-of-earnings report. • Review the loan portfolio monthly, including loan status, risk ratings, covenants, defaults, and workouts.

Finding an optimal allocation to alternative investments How much of an investor’s portfolio should be allocated to alternative investments? The answer depends on individual circumstances, but in most cases will range from 10% up to 50% for more advanced investors, with roughly two thirds drawn from fixed income and the remaining one third from equity. Allocating less than 10% would have little effect on overall performance while allocating more than 25% could affect liquidity and risk profile. Please consult your professional asset allocator for your specific situation. • Review the loan agreement. A good credit agreement provides the legal framework for managers to exercise their rights should things not work out. • Monitor non-performing loans. This includes examining status, exposure, exit plan and potential loss (or gain) on realization. • Monitor operations and controls. Manager infrastructure, process, controls and board mandates should be reviewed periodically by a qualified thirdparty firm. As the famous saying goes, “the devil is in the details,” and when it comes to private debt, true oversight involves asking the right questions at the right time and proactively evaluating and managing risk. As this asset class is used to stabilize and diversify more retail portfolios, finding the right manager to provide this oversight for you will be a critical factor in your success.

NINEPOINT / CONSIDERING ALTERNATIVE INVESTMENT STRATEGIES? 47

WHAT IS TRADE FINANCE? “ 48 NINEPOINT / WHAT IS TRADE FINANCE?

Trade finance provides a credit facility to businesses to improve their cash flow and working capital and puts the company in a better position to grow.

”

Trade Finance is Private Debt that includes Factoring and Supply-Chain Financing Trade finance represents a broad category of short-term credit facilities that companies rely on in order to participate in global trade. As the world becomes increasingly interconnected, global trade has become vital to the growth of the economy and to small and medium sized enterprises (SMEs). These SMEs are having to deal with new challenges, including subpar liquidity, cash flow, regulatory requirements, political instability and credit risk as they negotiate the many nuances of domestic and international trade. Trade finance provides short term credit facilities to businesses to improve their cash flow and working capital putting the company in a better position to grow. Trade finance deals can also provide letters of credit or insurance to protect the parties from non-payment, counterparty risk or damaged goods.

What Is Trade Finance? Trade finance represents a broad category of short-term credit facilities that companies rely on in order to participate in global trade. It provides credit to borrowers that need working capital to sustain their business. Loans provide borrowers the working capital needed to support manufacturing, processing, distribution and related activities. These loans typically range from 30 to 90 days, with annualized interest rates targeted in the mid to high teens (13% to 18%). The most common forms of trade financing are factoring and supply chain financing.

NINEPOINT / WHAT IS TRADE FINANCE? 49

Factoring Factoring is when a vendor sells its accounts receivable (outstanding invoices) to a lender at a discount. This transaction provides the vendor with immediate cash and improves its working capital. The lender receives payment for the receivable directly from the customer. The lender’s discount on the accounts receivable is earned because they assume risk of non-payment on the receivables.

Accounts receivable factoring

Food Export Company (vendor)

1. Deliver goods and; 2. Invoices Customer (becomes A/R for FoodCo)

Customer

3. Sell Account Receivable to Lender at a discount 5. Lender holds receivable to term, then receives full payment

4. Immediate payment of discounted invoice

Lender/Trade Financier

against default. In this example, since the trade financier has advanced only 90% of the invoice, the transaction is 100% insured. Janice’s customers then direct the payment of the invoice amount directly to the trade financier. All parties benefit from the arrangement; however, the burden of trade financing fees lies with the vendor.

Supply-Chain Financing In supply-chain financing, the burden of trade financing fees lies with the borrower. The lender purchases inventory on behalf of the borrower and then immediately resells it to them, creating an account receivable. The borrower pays the lender, plus fees, on the due date. Note that the lender doesn’t actually take ownership of inventory, so there is no inventory risk. Once again, all parties benefit. The supplier of goods gets paid immediately (by the trade financier) on the full invoiced price. The borrower receives the inventory immediately but extends the payable date. This creates a business advantage for the borrower by minimizing the upfront capital required to operate the businesses.

Supply chain finance

• Outcome for borrowing company: Quicker conversion of receivable to cash to fund operations and growth.

Example Janice and her family run a food-exporting company from their farm in Alberta. When she ships goods to a customer, it can take as long as 60 or even 90 days before Janice gets paid. Rather than wait for customers to pay their invoices, Janice can factor her receivables through a trade financier (lender) and generate working capital much faster. Janice sells goods as usual, ships to her customers and invoices them directly. The trade financier will advance against the outstanding invoice less 10%. While the invoice is outstanding, an insurance policy on 90% of the original invoice is taken to protect 50 NINEPOINT / WHAT IS TRADE FINANCE?

1. Enters into Purchase Agreement Biodegradable Products Company (borrower)

Lender/Trade Financier 4. Pays principal plus accrued fees to Lender

2. Purchases required inventory

3. Delivers the goods

Supplier

• Outcome for borrowing company: Better repayment terms and buying power than they could achieve on their own.

Example Raj needs to purchase supplies for his company, which manufactures biodegradable products. Rather than purchasing directly from his supplier, he enters into a purchase and sales agreement with a trade financier (lender). The trade financier buys the inventory from Raj’s supplier, has the goods sent directly to Raj, and then sends him an invoice for the goods, plus fees. An insurance contract is also placed on 90% of the invoiced amount (original purchase price plus fees), protecting the original investment from borrower default. Raj pays the principal plus fees to the trade financier before the due date on the invoice.

Underwriting As with any credit facility, underwriting plays a key role in trade finance. Similar to underwriting assetbased loans, where the primary focus is on the value of collateral and its collectability, trade finance transactions are evaluated in terms of the following: Business/Industry • Borrowers should be operating as a going concern in a stable industry and a track record of at least several years, with a recurring, high-quality customer base. • Operational/financial procedures should be well documented and adhered to. Repayment controls must be in place to further reduce risk. • A strong management team with a robust corporate structure is critical. • There should be multiple exit strategies to ensure collection of the principal invested.

Financials • The borrower should have strong financials and ratios with low risk of insolvency. Accounts receivable should have good payment history with short cash conversion cycles. • Borrowers should not be highly leveraged. Collateral and security • To protect the principal invested, it is vital for the lender to be at the top of the capital structure which means the lender gets paid first in the event of a default or bankruptcy. • Scenario and stress test analyses should be performed to estimate the value of the collateral in different environments. Geography • The lender needs to be aware of potential risks relating to trade tariffs/law and political uncertainty in certain regions. Counterparty Risk • Customer credit worthiness and payment capability of borrowers is critical to evaluating a trade finance transaction. NINEPOINT / WHAT IS TRADE FINANCE? 51

Mitigating Risk

Insurance

Properly structured financing and strong legal documentation are critical to protecting lenders’ interests. Certain risks that arise in trade finance transactions can be mitigated through:

Insurance plays an important role in trade finance. It safeguards lenders against non-payment by borrowers and customers due to insolvency or bankruptcy. When borrowers request trade financing, lenders will generally work with an insurance company in parallel to their own underwriting process to ensure the transaction is fully insured. The insurance company will conduct its own due diligence on the borrower, determine their creditworthiness and if approved, assign a policy with credit limits. The borrower can request additional coverage on new buyers if required. The coverage terms will differ depending on the policy but generally range from 75% to 95% of the invoice amount for factoring transactions and principal (value of the purchase order), and accrued interest for supply chain transactions. Premiums are generally paid by the borrower.

•F irst lien security interest against accounts receivable and/or inventory: ensuring the lender gets repaid before all other debt holders. • P ersonal/Corporate guarantee: a guarantee, generally by owners or related corporation, of payment for a loan in the event of default. •V alidity guarantee: a guarantee that the information submitted on borrowing base certificates or factored invoices is true and accurate. The borrower can be held liable for fraud or misrepresentation. •C onfession of judgement: a written agreement signed by the borrower (defendant) that predetermines and accepts liability and amount of damages. It is used to speed up normal court proceedings when borrowers default. This is valid only in certain states in the United States. •C redit insurance: generally purchased by the borrower as insurance against non-payment by borrower’s customer. • Cash dominion or lock box: a control arrangement where the borrower’s cash from payments against accounts receivables are sent to a bank account controlled by the lender.

52 NINEPOINT / WHAT IS TRADE FINANCE?

When there is high risk of non-payment, the lender will establish a workout plan and file a claim with the insurance company for payment. The policyholder will generally pay the claim benefit within 60 to 180 days from the date of loss. Insurance companies typically pay the Loss Payee; Loss Payee on policies should always be the Lender.

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Unlocking working capital for middle and lower middle-market companies

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Highmore Trade Finance provides innovative trade finance programs for middle and lower middle-market companies across a range of industry groups to enable them to release capital from their accounts payables and receivables in order to accelerate business growth.

Highmore is sub-adviser to the Ninepoint Trade Finance Fund Highmore.com

INVESTING IN TRADE FINANCE “ 54 NINEPOINT / INVESTING GLOBAL TRADE IN TRADE FINANCE FINANCE FUND

Participating in trade finance funds is one solution for investors seeking uncorrelated and higher risk-adjusted returns for the fixed-income portion of their portfolio.

”

Investor Considerations Since the financial crisis of 2007-08, low interest rates have resulted in anemic returns in the fixed-income market. Participating in trade finance funds is one solution for investors seeking uncorrelated risk-adjusted returns for the fixed-income portion of their portfolio. Historically, trade finance has been priced anywhere between 50 bps and 800 bps above LIBOR*. By comparison, commercial paper has typically returned 3 to 6 bps above LIBOR for the same 30- to 150-day exposure. Source: Insight Investments, The Trillion Dollar Trade Finance Opportunity, 2018.

The Question of Risk Trade finance lenders can charge borrowers higher fees to capture the increased risk and higher degree of due diligence required for such transactions. There is also a biased view that Small and Medium Enterprises (SMEs) are all higher risk operations. Many are not and the primary reason banks avoid lending to these businesses is most often that they do not meet the banksâ&#x20AC;&#x2122; underwriting criteria,

regulatory challenges and liquidity challenges. According to the International Chamber of Commerce, from 2008 through 2017, the default rate by exposure has been less than 26 bps (see table below). Even in default, trade finance products have historically high recovery rates, with most transactions achieving a minimum recovery rate of 81% (see graph on next page).

Total exposure and default rate by exposure, by product (2008-2017) Total Exposures (USD K)

Defaulting Exposures (USD K)

Default Rate by Exposure (%)

Import Letters of Credit

2,829,524,561

2,040,686

0.07%

Export Letters of Credit

1,677,581,599

496,472

0.03%

Loans for Import/Export

5,767,651,190

11,048,204

0.19%

Performance Guarantees

2,163,013,401

5,314,511

0.25%

Source: ICC Trade Register 2018.

* LIBOR is the basic rate of interest used in lending between banks on the London interbank market and also used as a reference for setting the interest rate on other loans.

NINEPOINT / INVESTING IN TRADE FINANCE 55

Distribution of recovery rates across trade finance products (2008-2017) Recovery rates 0%

1-20%

21-40%

41-60%

61-80%

81-99%

100%

100+%

Share of total (%) Import LC

73.1% 7.0% 0.5%

15.1% 0.0%

1.1%

3.1%

0.1%

Export LC 53.4% 6.9%

0.0%

12.1% 0.0%

15.5%

12.1%

0.0%

Loans for Import/Export 47.6% 8.4%

21.4%

14.3%

3.6%

4.1%

0.3%

0.4%

Performance Guarantees

70.5% 5.9% 0.0%

10.4% 1.1%

7.9%

4.0% 0.2%

Source: ICC Trade Register 2018.

Given that trade finance is based on trade flows, the product is cyclical in nature. Default rates are expected to increase during recessionary times. To further ensure principal is protected, it is essential to be senior secured with ample collateral coverage. Having credit insurance and personal guarantees further mitigates some of these risks. In a strong growth environment, fixed-income products are more prone to interest rate risk. However, trade finance transactions are shorter in duration which typically mutes the impact of rate movement on an investment portfolio. In addition to being very low in duration, loans are generally priced at a higher rate (mid to high teens), which minimizes the effect of the underlying interest rate on the actual yield.

56 NINEPOINT / INVESTING IN TRADE FINANCE

Liquidity is not a critical concern in the trade finance space. Trade finance transactions are made against self-liquidating assets that typically convert to cash in 30 to 120 days.

Methods of Access Investors can access opportunities in trade finance through three avenues: Replication Replication occurs when an investor or investment fund seeks to directly recreate the banks’ traditional trade financing activities on their own. By originating, underwriting and managing a portfolio of loans, the investor can achieve the full yield and return on investment that this strategy can deliver. This approach requires an expert team that understands the industry and regulations associated with the movement of assets between jurisdictions. Replication can also be costly and suffer from concentration risk if not enough capital is deployed to a diverse set of borrowers. Participation Participation is a form of trade finance investment that allows banks to optimize the risk structure of their trade finance loan book by selling a portion of their portfolio to investors. The investor gains access to a piece of the investment and thus achieves the sought- after yield by piggybacking on the bank’s transaction infrastructure. However, participation is reliant on the bank’s portfolio and its willingness to participate. As a result, the economics of the transaction are less favourable for the investor than full replication. Regulatory relief Regulatory relief investments allow for risk-sharing between investors and banks. The investor accepts a prespecified level of first loss on the portfolio. A First-loss policy is a type of insurance that provides only partial insurance coverage. This agreement passes some of the risk to investors in exchange for a portion of the returns. The high minimum investment, however, creates a barrier to entry for most investors.

Structured Trade Finance Fund

Trade Finance Loan Book

Borrowers

Traditional Lenders

Structured Trade Finance Fund

Trade Finance Loan Book Syndicated

Borrowers

Traditional Lenders

Structured Trade Finance Fund

Trade Finance Loan Book 1%-7% loss layer

Borrowers Source: Cambridge Associates, Trade Finance: An Expanding Opportunity for Institutional Investors, 2018.

For many individual investors, a replication model is likely to be the best choice as it requires less knowledge about the trade finance space. Once a preferred manager is identified, an investor can rely on his or her expertise. Generally, managers will provide investors with transparency, so there is full disclosure on the characteristics of the portfolio. NINEPOINT / INVESTING IN TRADE FINANCE 57

Evaluating Trade Finance Managers With many managers entering the trade finance space, it is important to identify those that are best-in-class to ensure strong risk-adjusted returns and prevent loan loss. The top-tier managers in this space should have the ability to source and maintain a pipeline of trade finance transactions, expertise in portfolio monitoring and experience with loan workouts and default. Pipeline management. Without a sustainable and well originated pipeline, a manager will have difficulty deploying cash efficiently, and investor returns may be affected. The recent regulatory changes have resulted in a fragmented market where many transactions are originated through proprietary networks built on relationships. In order to build a sizable pipeline, the manager must have infrastructure and presence across various regions. It is vital for a manager to have reach, not only to replace maturing transactions but also to expand the portfolio. A large pipeline of transactions allows a manager to be more selective of their investments and sustain negotiating power in order to maintain strict covenants and higher yield. Portfolio monitoring. It is crucial for managers to be proactive. Monitoring changes on every invoice requires significant resources and a manager must have a system in place to flag key risks. Look for a strong operational system that allows the manager to easily monitor their portfolio. The system should be built to handle the existing portfolio and accommodate growth.

Conclusions A rapidly changing market and increasing global trade flows have left a void to be filled in the SME space. For individual investors, replication models typically represent the best route to participate in trade finance investment opportunities, providing liquidity, given the short duration of the product. To achieve the strongest risk-adjusted returns, it is vital to select best-in-class managers with experience in the trade-finance space. Doing so will provide investors with a greater likelihood of achieving low correlation to public markets and strong diversification benefits to their portfolios.

Managing defaults. It is inevitable that managers will experience default, which is why they must have experience in workouts. Defaults and workouts can be quite complicated, and managers must have the knowledge and expertise to take the necessary steps. A strict workout process will help ensure the highest level of recovery in the most expedient manner. There should be minimal loan losses in senior secured trade finance given that it tends to be overcollateralized, protected with insurance and have short-duration, self-liquidating assets.

NINEPOINT / INVESTING IN TRADE FINANCE 59

is proud to sponsor the 2019 Alt Thinking Investment Forum Waygar Capital is an asset-based lender that provides financial solutions to mid-market companies, with a focus on lending to companies in the Military, Defence

and Security sectors.

Waygar Capital is sub-advisor to the Ninepoint Canadian Senior Debt Fund. WaygarCapital.com

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The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP (“Ninepoint”) and are subject to change without notice. Ninepoint makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. This document is for information purposes only and should not be relied upon as investment advice. We strongly recommend that you consult your investment professional for a comprehensive review of your personal financial situation before undertaking any investment strategy. Information herein is subject to change without notice and Ninepoint is not responsible for any inaccuracies or to update this information. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Funds may be lawfully sold in their jurisdiction.

NINEPOINT / TO COME 61

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The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Funds may be lawfully sold in their jurisdiction. The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering or tax, legal, accounting or professional advice. Readers should consult with their own accountants and/or lawyers for advice on the specific circumstances before taking any action.