The growing role of back to basics investing

It wasn’t so long ago that private investment opportunities were not available to most Canadian investors.
Regulations opened up the market as recently as January 2016, so it’s not a huge surprise that some investors remain a little reluctant to embrace private investments. It’s a market that appears to be ‘the unknown’ to many Canadians.

However, Clifford Fraser, Chief Operating Officer at Equiton, believes the mysticism that surrounds the private market will fade when people realize that they have unknowingly participated in the private markets through their involvement with public and workplace pension funds.

“Attitudes will change when investors realize that the smart money – the professional investors – have been in the private markets for a long time and have achieved much success,” Fraser says. “Most people are not happy with the returns they are receiving from the public markets and are looking for alternatives.”

Although most investors don’t have much knowledge of the private markets right now, Fraser expects that to change. He believes it’s just a matter of time before the average investor becomes more accepting of investments in vehicles like private real estate investment trusts (REITs). As awareness grows around how private markets can help investors achieve their financial goals, it’s a safe bet that more Canadians will start to reap the benefits.

“It’s the kind of back to basics investing that people need in their portfolios; a REIT is a hard asset that you can see and feel,” Fraser says. “It’s not a funky financial instrument run by an algorithm that is difficult to understand. It’s something that all investors can get familiar with on a fundamental level.”

The performance of Equiton’s private REIT is an example of the type of returns that are available if investors look in the right areas. The REIT has a target return of 7 – 10%, which is delivered in two forms. “We pay a monthly distribution, which currently has yield of 5%,” says Fraser. “The other portion of the return comes as the units in the REIT increase in value. We think of ourselves having an income and growth strategy combined.”