1.
2021 Strategic Outlook
A Year In The Shadow of Covid-19
Hosted by David Sung, President

2.
Quantitative Analysis of Investor Behaviour
The Dalbar Study
Source: Dalbar Quantitative Analysis of Investor Behavior, 2020. Returns as at Dec 2019
Average Asset
Allocation Fund
Investor
S&P 500 Inflation
20 Year 2.54% 6.06% 2.14%
+0.4%

3.
61%
37%
2% 0%
XYZ Bank
“Balanced” Asset
Allocation
Stocks Bonds Cash Other
This, does not equal… This.
Nicola Wealth – Beyond Stocks and Bonds

4.
$0.00
$500,000.00
$1,000,000.00
$1,500,000.00
$2,000,000.00
$2,500,000.00
$3,000,000.00
$3,500,000.00
$4,000,000.00
$4,500,000.00
Dec-99
Sep-00
Jun-01
Mar-02
Dec-02
Sep-03
Jun-04
Mar-05
Dec-05
Sep-06
Jun-07
Mar-08
Dec-08
Sep-09
Jun-10
Mar-11
Dec-11
Sep-12
Jun-13
Mar-14
Dec-14
Sep-15
Jun-16
Mar-17
Dec-17
Sep-18
Jun-19
Mar-20
Dec-20
Nicola Core
Performance (net of
fees)
60/40 Model Portfolio
(minus 1%
management fee)
S&P 500 (CAD)
MSCI World (CAD)
6.96%
4.29%
6.13%
5.07%
-2.67%
^ This is a blended benchmark of 4 indices minus 1% management fee: Citi World Government Bond, FTSE TMX DEX Universe Bond, MSCI World, S&P TSX Composite
^

5.
& planning is an ongoing process…
Everything starts with planning.
Identify and
discuss goals
and objectives
Investments
Beyond
Stocks &
Bonds
Retirement
Income
Modeling
Tax reduction
strategies
Business
structure &
succession
Planning
Collaborative
planning with your
accountant and
other advisors
Charitable
giving goals
integrated with
tax planning
Review of
insurance
needs for
business &
family
Will, Estate &
legacy
Planning
Is your investment portfolio
protected from volatility?
Do you know how much capital
you will require to meet your
retirement goals?
Have you considered how
you will create your legacy?
Is your insurance positioned as an
asset class and integrated with your
investment strategy?
Have you prepared your
family to manage this wealth?
Have you reviewed loans and mortgages
to reduce interest costs and determine
whether any may be tax deductible?
Do you have a succession
plan in place?
Is your plan being regularly
reviewed and adjusted to ensure
you’re on track?

6.
2021 Strategic Outlook
Rob Edel, Chief Investment Officer

7.
Our
Agenda
Investment Strategies
Shape of the Recovery

8.
Shape of the Recovery – Three scenarios
Economic Growth
Left Tail
Too Cold
Covid 3rd Wave
Deflation
Right Tail
Too Hot
Inflation
Higher Rates
Just Right
“Goldilocks”
Strong Growth
Low Interest Rates
Stimulative Fiscal
BCA Research:
Goldilocks and the two tails
?

9.
Shape of the Recovery – Left Tail and the Pandemic
Biden
100 million in 100 days
Did 230 million
Bloomberg – April 26, 2021
NYT – April 14, 2021
25% fully vaccinated
65% 65+yrs fully vaccinated
40% at least one jab
70% by June 8

10.
Financial Times – April 9, 2021 Bloomberg – April 19, 2021
Shape of the Recovery – Left Tail and the Pandemic
US still 60,000
New cases per day

11.
How well do vaccines work? When will we all get it?
Will we take it?
Economist – Feb 12, 2021 Bloomberg – Mar 31, 2021
The Daily Shot – Mar 29, 2021
Variants
B.1.1.7 - UK
B.1.351 - South Africa*
P.1 – Brazil
B.1.617 – India*
B.1.429 – California
B.1.232 – California
*Vaccine concerns
Shape of the Recovery – Left Tail and the Pandemic
Canada
Leaders

12.
Shape of the Recovery – Goldilocks “Just Right”
#4!

13.
Financial Times – April 14, 2021
Strategas – April 13, 2021
March Retail
Spending
+9.8%
Shape of the Recovery – Goldilocks “Just Right”

14.
Shape of the Recovery – Goldilocks “Just Right”
S&P 500
S&P/TSX
Mar 23, 2020
-34%
Feb 20, 2020
Apr 26, 2020
+91%
Feb 20, 2020
Mar 23, 2020
-37%
Apr 26, 2020
+77%

15.
Dovish Monetary Policy Record Fiscal Policy
Shape of the Recovery – Goldilocks “Just Right”

16.
BCA Research – April 1, 2021
March 23 Fed expanded QE to unlimited amounts
Fed Balance Sheet vs. S&P 500
Fed Cut Rates to 0%
Fed not planning
To raise rates
Through 2023
Shape of the Recovery – Goldilocks “Just Right”

17.
BCA Research – Mar 26, 2021
Financial Times – Feb 23, 2021
Martin Wolf – Biden’s Risky Experiment
Mar 6 2020 Coronavirus & Vaccine R&D $8 Billion 0.0% GDP
Mar 18 2020 Paid Sick Leave & UI Claims $192 Billion 0.9% GDP
Mar 27 2020 Cares Act $1.7 Trillion 7.9% GDP
Apr 21 2020 Payroll Protection Plan $483 billion 2.2% GDP
Dec 27 2020 Phase 4 $900 Billion 4.2% GDP
Mar 11 2021 American Rescue Plan $1.9 Trillion 8.8% GDP
Total $3.3 Trillion 24% GDP
Proposed American Jobs Plan $2.3 Trillion 10.0% GDP
Coming Soon? American Families Plan $1-2 Trillion? 5-10% GDP?
Shape of the Recovery – Goldilocks “Just Right”

18.
Shape of the Recovery – Goldilocks “Just Right”
WSJ – April 12, 2021

19.
Shape of the Recovery – Goldilocks “Just Right”
Strategas – April 21, 2021 May 29, 2020
CHEAP
EXPENSIVE
63 bps
180 bps
Valuation
Bad
Predictor
Valuation
Good
Predictor

20.
10 Treasury Yield
Shape of the Recovery – Goldilocks “Just Right”
10 Year US Treasury
10 Year US Treasury
10 Treasury Yield
10 Y Breakeven Rate
Danger Zone
Pre-pandemic

21.
BMO – Feb 24, 2021
Strategas – Mar 12, 2021
Shape of the Recovery – Goldilocks “Just Right”

22.
10 Year Started to Rise Earnings Peak Market Peak
The Daily Shot – April 13, 2021
Bloomberg
Shape of the Recovery – Goldilocks “Just Right”
S&P 500
10 Y US Treasury
Earnings
15 months
+260 bps
10 Year Started to Fall

23.
Shape of the Recovery– Right Tail (Inflation)
WSJ – April 26, 2021
Expected Inflation
Transitory Inflation?

24.
Shape of the Recovery– Right Tail (Inflation)
Bloomberg - April 12, 2021
Base Effect

25.
Financial Times – Jan 14, 2021
Financial Times – Mar 29, 2021
WSJ – Mar 25, 2021
Shape of the Recovery– Right Tail (Inflation)

26.
BMO – Mar 11, 2021
Goldman Sachs – April 6, 2021
Former Treasury Secretary Larry Summers
Reintroduced “Secular Stagnation”
Least responsible economic policy in 40 years
One third chance of significant inflation over next few years
Shape of the Recovery– Right Tail (Inflation)
$1,400
Checks
During the Pandemic
Americans +$1.8 trillion extra savings
3 Rounds of stimulus payments = $877 billion
Households saved 26%

27.
Financial Times – Mar 22, 2021
“A government that robs Peter to pay Paul can always count on the support of Paul”
George Bernard Shaw
Pew Research – March 1-7
70% US Adults Favor
$1.9 trillion COVID-19 economic aid bill
Shape of the Recovery– Right Tail (Inflation)
Federal Reserve’s Role
Keep interest rates low so Biden can spend
Run economy hotter to increase minority participation

28.
Barron’s – April 5, 2021
Value Stocks
More earnings sensitive
Bernstein – Feb 9, 2021 Benefit More (lose less)
as rates rise
Benefit More
as rates fall
Growth Stocks
More interest rate sensitive
Investment Strategies – Equity Duration
Inflation
Profit
Margin

29.
Strategas – Mar 22, 2021
29.2%
73.4%
The Daily Shot – Mar 31, 2021
Investment Strategies – Equity Duration

30.
BCA Research – Feb 25, 2021
Bond Yields Up
(Bond Prices Down)
Stocks Up
Stocks Down
Bond Yields Down
(Bond Prices Up)
Inflation – Low
and predictable
Correlation
Stocks-Bond
Yields positive
Inflation > 2%
Stocks-Bonds
Correlation neg
Yields Up
Stocks Down
Stocks go down
So do Bonds
Investment Strategies – Bond Alternatives
Inflation
`
Stock
Bond
Yield
Correlation

31.
The Daily Shot – Mar 29, 2021
Investment Strategies – Bond Alternatives
Infrastructure
Real Estate
WSJ – April 22, 2021
WSJ – April 20, 2021

32.
• Goldilocks good for market
• Left Tail risk eliminated
• “Goldilocks” market is expensive
• But manageable if rates stay low
• Risk is Right Tail “inflation” risk
• Potential for correction
• Longer term risks
• Need to re-think portfolio
construction
Summary

33.
2021 Strategic Outlook
John Nicola, Chairman & CEO

34.
Are Happy Days Here Again?
Who Prevails
Bulls or Bears?

35.
Bubble Bubble Toil and Trouble
(1-yr returns Mar 31/21)
NYSE 61% Hang Seng 29%
London FTSE 32%
TSX 50%
Euro Stoxx 51%

36.
Dot Com Bubble
-48%
Great Financial Crisis
-54%
Covid-19
-32%
Index return Jan 2000 - Apr 2021 = 2.67% (5.9% incl dividends $CAD)
S&P 500 2000 - 2021

37.
Peak Feb/Mar 2000 - Recovery Oct 2017
Total return Jan 2000 - Apr 2021 = 3.5%/yr.
Nasdaq 2000 - 2021

38.
“It is advisable for one that he should divide his money
in three parts, one of which he shall invest in real
estate, one of which in business, and the third part to
remain always in his hands.”
– The Talmud
NW Core Asset Allocation

39.
-5.7%
-10.8%
5.8%
7.5%
45% less volatility

40.
Investing Well: Canada’s Pension Plans

41.
As of November 2020, 96% of large
plans (characterized as those with over
$5 billion in assets) and 73% of plans
overall either held alternatives or
intended to add them within the next 12
months
Aon’s Erwan Pirou, the chief investment
officer of the retirement solutions group,
said his company’s clients are interested
in diversifying their risk by putting more
money into real assets such as real
estate and infrastructure, or into other
“opportunistic” strategies.

42.
Our Real Estate Platform
Nicola Canadian
Real Estate LP (2005)
 59 Properties of office, retail,
industrials, storage, seniors & multi-
family use
 GAV: $1.53B | NAV: $789M
 Return Since Inception 9.1%
Nicola US
Real Estate LP (2010)
 86 Properties of office, retail, industrial
& multi-family use
 GAV: $2.1B USD | NAV $970M USD
 Return Since Inception: 10.8%
Nicola Value Add
Real Estate LP (2014)
 47 Properties in development for
office, retail, industrial & residential use
 NAV $359M
 Return Since Inception: 14.1%
Valued at over $5.0B in gross assets
($2.6B client equity)

43.
Half full or
Half empty

44.
Will this reduce
demand for space

45.
Future Questions
• Will North American population increase
faster than Europe or Asia?
• Will the overall economy be bigger?
• What role will technology play in terms
of how we learn, work, and buy?
• Will certain regions in North America
grow faster than overall growth?
• What impact will demographics have?
• How long will financing rates remain
low?
• What % of my portfolio should be
investment grade real estate?
• What are my expectations of total
returns in bonds, stocks, and real estate?
As of April 2021
Requests for sub-leases are being
withdrawn and appraisals in some markets
and asset classes are recovering

46.
Returns for Real Estate Pools (Dec 2020)
2.20%
7.20%
9.50%
8.0%
10.9%
14.5%
8.9%
11.2%
0.0%
6.40%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Canadian Income US Income Value Add
1 year 5year 10 year YTD 2021
97.6% rents
collected 2020

47.
NW Private Real Estate vs. Public REITS
+17% -80% -80%
+27%

48.
Private Equity · Infrastructure · Private Debt · Farmland
Extensive Asset Classes

49.
Better risk adjusted returns
Greater Risk
Greater
Return

50.
• $460M of assets
• 9-year history
• Funds 93% fully invested
(smaller cash float
impact)
• 5-year returns 10.5%
(3.2%/yr. more than CDN
equity)
• Significant increase in
direct investments
(almost 50% by Q2 2021)
• Major directs include
MDA, Vendasta, Corfin

51.
Renewable Energy: Not just SRI - Disruptive Technology
• SWB could be 100% of US electrical grid by 2030
• This would apply to most other developed countries
• Not just cleaner but cheaper. Massively disruptive technology
(think Blockbuster and Netflix)
• Growth rates will be exponential
• Most countries, states, and provinces are fossil fuel dependent

52.
+59% since Sep 2019
-8% YTD
Invest using Dollar Cost Averaging

53.
• Created 1997 for our clients
• Manages 150+ Donor Advised Funds
• $120M of Assets under management
• NW pays 100% of all operating,
governance and administrative costs
• Can accept appreciated public company shares as gifts
(Tax savings can be as high as 80%)

54.
54% of taxes are paid by the top 10% of income earners.
21% of taxes are paid by the Top 1%.
If this is not fair, then what is the right number?

55.
• Marginal Tax rates at the highest level
• Capital gains inclusion rate
• Wealth Tax

56.
Customized approach based on your situation

57.
Will doubling the national debt in both Canada and the US
create an insurmountable burden for future generations ?

58.
Federal debt has doubled

59.
US 13th 105%
Canada 26th 89%
Someone’s debt is
someone else’s
asset
Not repaid
Still outstanding

60.
Is this where we want to be number 1?

61.
Debt is rarely reduced
This is now here
March 2021
If we run deficits 90% of the
time how can our debt ratio
stay the same or drop?

62.
Welcome to Extravaganation
Our Motto: Only a Borrower Be
$1,000,000
$20,000 $20,000 $40,000
$1,040,000
GDP Year 1 Real Growth Inflation
Growth
Total
Growth
GDP Year 2
Economic Growth $000,000’s
$500,000
$30,000
$530,000
Debt Year 1 Deficit Debt Year 2
Debt/ Deficits $000,000’s
Debt/GDP=49.5%
Growth>Deficit
Deficit =6% of debt 3% of GDP
Debt/GDP=50%

63.
40%
WWI
20%
WWII 30%
Debt Crisis
7%

64.
Asset Allocation is the Key Private Assets Add Value
Debt will be Rising And so will Taxes
Do your planning now and stay
truly balanced in your portfolio

65.
This presentation contains the current opinions of the presenter and such opinions are subject to change without notice. This material is distributed for informational purposes
only and is not intended to provide legal, accounting, tax or specific investment advice. Please speak to your Nicola Wealth Advisor regarding your unique situation.
Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation
of any particular security, strategy or investment product. The Nicola Core Composite returns represent the total returns of Cdn. dollar denominated accounts of all fee-paying
portfolios with a Nicola Core mandate. The composite includes clients who are both fully discretionary and nondiscretionary. Historical net of fee composite performance
returns are calculated using individual realized time-weighted client returns net of fees and is presented before tax. The Nicola Wealth inclusion policy is based on clients’
weights at calendar month end. The composite returns are asset-weighted based upon ending monthly market value. The Nicola Core mandate may change throughout time.
Additional information regarding policies for calculating and reporting returns is available upon request. The composite returns presented represent past performance and is
not a reliable indicator of future results, which may vary. Comparisons of the historical performance of Nicola Wealth funds or models to the historical performance of
indexes, mutual funds or other investment vehicles should only be undertaken with consideration of the differences that exist between the underlying investments that comprise
the compared investment vehicles. Indexes may be primarily composed of a single asset type/asset class (i.e. 100% equities or 100% bonds) whereas Nicola Wealth funds may
or may not contain a combination of exchange-traded equities, marketable bonds, private investments, other alternative investment classes and exempt products. When making
any comparison of historical performance, these differences and their impact on the performance of each comparable should be taken into account. Past performance is not
indicative of future results. All investments contain risk and may gain or lose value. Returns are net of fund expenses charged to date. This is not a sales solicitation. This
investment is generally intended for tax residents of Canada who are accredited investors. Some residency restrictions may apply. Please read the relevant documentation for
additional details and important disclosure information, including terms of redemption and limited liquidity. Please speak to your Nicola Wealth advisor for advice based on
your unique circumstances. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities’
commissions. Hypothetical performance results have many inherent limitations, only some of which are described below. No representation is being made that any account will
or is likely to produce profits or losses similar to those shown. In fact, there are frequent sharp differences between hypothetical performance results and the actual results
subsequently produced by any particular trading approach. 1) Hypothetical performance results are limited in that they are generally prepared with the benefit of hindsight. 2)
Hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading. The ability to
withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results. 3) Numerous other
limiting factors related to the behavior and performance of markets in general and/or to the implementation of any specific trading approach cannot be fully accounted for in
the preparation of hypothetical performance results all of which can adversely affect actual trading results when compared to the hypothetical model.
*Morningstar Canadian Neutral Balanced is a proprietary index developed by Morningstar Canada based on the CIFSC Fund categories (www.cifsc.org). This index includes
funds which meet the following criteria: Funds in the Canadian Neutral Balanced category must invest at least 70% of total assets in a combination of equity securities
domiciled in Canada and Canadian dollar-denominated fixed income securities and between 40% and 60% of their total assets in equity securities.
^ This is a blended benchmark of 4 indices minus 1% management fee: Citi World Government Bond, FTSE TMX DEX Universe Bond, MSCI World, S&P TSX Composite