Speaker 1 (Megan Deeks)

Hi, I'm Megan Deeks, senior wealth advisor here at CIBC with Gundy, and we are having a conversation with Anthony Bergman of NewGen. Hello, Anthony. How are you? I'm pretty darn good. Thanks. How are you? I'm great. Great. Much for having me. Thanks for coming. Thanks for having a conversation with us today about alts. You know, let's demystify what is Alts and let's make it more approachable.

Speaker 2 (Anthony Bergman)

It sounds great. Why don't we start right there? Like, what are these things? What are alternatives?

Speaker 1

Tell me what what are alts?

Speaker 2

So I think the best way to describe alt investments is to say that they are non-traditional investments. Okay. So a traditional investment are things that you and your clients would know perfectly well stocks, bonds, GIC. totally.

Speaker 1

So everything that I buy now for clients that people feel comfortable with and happy.

Speaker 2

Yes. So alts would be things kind of like private equity, hedge funds, real estate. Yeah. We could extend it a little further. We could go and say wine collection, art or crypto.

Speaker 1

Yeah, like a musical instruments, whatever you want. Yeah. Okay.

Speaker 2

And the idea is these things just behave differently than the stocks and the bonds. Yeah. You know, my friend used this, and I'll. I'll piggyback off of it. If the traditional stocks and bonds and GICs are the main course of your meal, the alts are the sides and seasonings that add a little bit of balance and a little bit of flavor.

Speaker 1

A love spice.

Speaker 2

A.

 

Speaker 1

Little bit, a little bit of spice, but not too much spice. So when we talk about alts or like an alternative income strategy such as what we're discussing, things, you know, words that come to mind are diversification, income, protection. These are things that are super important to my clients. And, talk to me a little bit about each of those, those kind of categories and how those those are ALTS.

Speaker 2

So I would say though, you know, firstly, no to all to the same. Right. Let's get that out.

Speaker 1

Okay. Yeah.

Speaker 2

I would say that the reason people like alternatives are those three key words diversification, protection, income generation. Okay. So you know let's go through each of them. Let's say diversification. You know you don't want to put all your eggs in one basket.

Speaker 1

Absolutely not. The very heavy if it's one basket.

Speaker 2

That's right. And similarly like it can be hard you know, mentally or to withstand like it's the stocks and bonds are the core part of the portfolio. Yeah. What I've noticed over the last ten odd years is we've had a ton of periods of economic volatility and market turbulence. And in those periods, those stocks and bonds, which are supposed to be moving in different directions, tend to move in the same direction downwards.

Speaker 1

Right. And so then alts do what?

Speaker 2

So they're effectively supposed to behave differently. Okay. So let's use an example. You could have a hedge fund that goes up in value and stocks are going down in value. Okay. You could have a private debt product that continues to pay out its yield when income stocks are really being punished.

 

 

Speaker 1

So then move to income for me. Tell me tell me a little bit about the income side of things.

 

Speaker 2

Sure. So a lot of our clients in Canada, boomers, retired individuals, non-retirement individuals, a lot of them really enjoy income investing.

Speaker 1

Yeah, Income and in long-term growth is is kind of what you know we talk to clients about you know the growth of the portfolio. And then the income is there even when markets you know if markets are down. Sure.

Speaker 2

So the way they get that income is by stocks and bonds right. The stocks pay dividends. The bonds pay interest income. Yeah. The challenge with owning just those two things is that during those periods of volatility that we mentioned, the ride can be a little tumultuous, right. So there could be some cases where there are alternative income products that generate the same or maybe even more income for the client base with either the same or even less volatility.

Speaker 2

Right? So think of it as, you know, we use diversification. You know, earlier. Think of it as, you know, another pen in your pencil case, another shirt in your closet.

Speaker 1

Another tool in your toolbox. Exactly. We could go on. Yes. Tell me about protection.

Speaker 2

Yeah. Key I think that the word, you know, NewGen is a hedge fund. The word hedge fund has really been appropriated. It means a million different things right now. Yeah. Interestingly, the initial etymology of a hedge fund was to hedge out as much market risk as one could and generate strong returns in both up and down markets. Right.

 

Speaker 2

So, you know, while alternatives could be hedge funds, real estate, private equity and commodities, a number of different things. The hedge fund historically meant protecting client assets during these periods. Okay. NewGen really satisfies that model. Yeah. That's really what we are trying.

 

Speaker 1

To do. Okay. And so we've talked about diversification. We've talked about income. We talked about protection. All of these things are super important to, to my clients. One of the things again in this demystifying I would say is accessibility. Yes. Right. You know, I think this has been a strategy that has not been accessible to, you know, all investors.

 

Speaker 1

It's been, as you, you know, coined, I think in a previous conversation, we've had accredited investors. And so tell me a little bit about that.

 

Speaker 2

Yeah. So pre 2019 these alt products only available to accredited investor. So accredited investor means they have to have meaningful net worth. You know they have to satisfy an income hurdle. Okay. Is relatively high for a lot of people. Right. So post 2019 the Canadian regulators enacted a program called Liquid Alternatives. Okay. What this does is it aimed to demystify these alternative products.

 

Speaker 2

So if you were to participate in the liquid alternative mandates, which NewGen does, your product is able to be bought and sold every day. I prefer that you don't do that, but nevertheless, you can actually buy and sell.

Speaker 1

And understand that. Yeah.

 

Speaker 2

Yeah, the products get marked for they have a value that's any investor can see on a daily basis. Yeah. There are virtually insignificant to no hurdles to purchase in terms of, you know, you could be accredited, you could be non-accredited. As long as you're Canadian resident, you could best. Okay. From a disclosure perspective on a quarterly basis. The clients can see a significant amount of the underlying holdings, the geographic concentration.

 

Speaker 2

Yeah. You know, things along those lines, I think have really helped clients embrace these products.

Speaker 1

Yeah. And what about suggestions on, you know, exposure? Because I think have I think of this as a complement. Right. As you said, you know, a bit of spice, a bit of a, you know, a side salad. Sure. This is, this is something that we are not putting everything into. But what's kind of the recommended percentage of overall exposure?

 

Speaker 2

Yeah. I think, you know, if I was to use institutions, they are in a different mindset. They tend to be allocated from 20 to 40%.

 

Speaker 1

Okay.

 

Speaker 2

That's that's very high. I think for some people, I would say a lot of advisors are typically more like 5 to 20%.

 

Speaker 1

Beautiful.

 

Speaker 2

That being said, I think it's really client specific.

 

Speaker 1

Yeah. And just as you know, we would we would make a bespoke portfolio for any client based on what their goals and objectives are. This can just be a piece of the pie.

 

Speaker 2

I think the way I would frame this for you is you and your clients are on a wealth journey. And ideally, these alternative products help facilitate that journey and smoothing out the ride.

Speaker 1

I love a journey. I love that we're on a journey together. Yes. So then quickly tell me a bit about NewGen. So that for contextually for for course for where you come.

 

Speaker 2

NewGen, Toronto based alternative investment manager represent 1.2 billion in assets spread between four, long short products three equity long short products, one credit long short product. Right. Well, long short means is we buy securities that we think are going to go up in value. Those are the longs. Yeah. And we short securities we think are going to go down in value.

 

Speaker 2

Those are the shorts.

 

Speaker 1

Amazing. Last question I promise. What's the catch.

 

Speaker 2

You know I would say pre 19 the catch was limited transparency. Meaningful net worth required to access the vehicles. I think now the catch really is that, you know, the custodian or the fiduciary of this wealth needs to do proper due diligence on the NewGens of the world. And so for you, you know, I think is doing exactly what you're doing, which is completely understand the product, have an understanding of what the product is going to do in various scenarios and market up and down.

 

Speaker 2

Yeah. And does it make sense to be a part of your portfolio?

 

Speaker 1

Beautiful. Thank you so much. Anthony Bergman.

Speaker 2

Of course. Thank you for having me.

 

Speaker 1

Thanks for being here. So if you want to continue the conversation about an alternative income strategy, you know where to find me. Thanks.