The Nicola Wealth Strategic Outlook, hosted by President David Sung, featured presentations by John Nicola, Chairman & CEO, and Rob Edel, Chief Investment Officer, Bijal Patel, CFO and Head of Private Capital, and Mark Hannah, Managing Director, Nicola Wealth Real Estate. Our speakers each weighed in on the issues influencing today’s investing environment and how they impact their respective asset classes.

1. 2022 Strategic Outlook
A Tale of Two Perspectives
Hosted by David Sung, President

3. This
or That?

6. 0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
$1M invested @ 4% $1m invested @ 6%
The 2% and $1 Million Dollar Difference
Value in Year 1 Value in Year 20
$2,191,123
$1,000,000 $1,000,000
$3,207,135
The Dalbar Effect
46%, $1M More

7. Going Beyond the 60/40 Approach – Institutional Investing
29%
33%
60%
Based on the most recently available data
Public Equities
Fixed Income
Real Estate
Private Equity
Alternatives
Retail Fear & FOMO 60/40 Approach
Institutional Pension Approach
Institutional Pension Approach
Nicola Wealth Core Asset Allocation
As at March 31, 2021
As at March 31, 2021
As at Dec 31, 2021

8. Average Client Returns Net of Fees Since JAN/2000
And take 2% off of
these for bad
investor behavior!
100% Equities 3X Volatility
2.68%/yr. lower return + Higher Volatility
*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.
**

9. Our differentiator lies in our ability to integrate advanced tax and financial planning
with institutional grade investment management
Integrated Wealth
Management

10. & 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?

11. At Nicola Wealth, our purpose is to share
our expertise and best skills to help you achieve
the goals and legacies that matter

12. Strategic Outlook 2022

14. • Public markets and residential real estate at all
time highs in several markets.
• Covid Vaccines developed in record time; Fourth
Wave of Omicron has lower levels of serious
illness or death.
• The move to ESG investment options in light of
major environment issues such as climate change
is accelerating rapidly. The cost and evolution of
renewable energy is improving exponentially.
• Significant drops in levels of global poverty,
hunger and illiteracy (Marshall Tuwy)
• Global population increases are slowing rapidly
and likely to peak within 30 years at about
8.9 billion
• Any rises in interest rates are likely to be
measured and spread out over time. Impact on
asset prices will be modest.
• Huge increases in corporate and government debt
to finance the pandemic and acquisition of assets
(Evergrande as an example). The end result, a
combination of higher inflation and corporate
defaults.
• Geo-political tensions such as China / U.S. and
Russia / Ukraine.
• Functional politics and the rise of populism
(U.S. in particular).
• Equity prices (especially the U.S.) at near record
valuation levels.
• Faster infectious rates for Omicron lead to new
lockdowns globally.
• Higher interest rates and inflation (major impact on
residential housing).
Glass Half-Full Glass Half-Empty

15. Are Happy Days here again?
Who Prevails
Bulls or Bears?

16. Bubble Bubble Toil and Trouble
(1-yr returns as at Dec 31, 2021)
NYSE 19.2% Hang Seng -15%
London FTSE 16.5%
TSX 19.3%
Euro Stoxx 11%

17. Bubble Bubble
Toil and Trouble
(peak to market
returns as at
Feb 25, 2022)
S&P 500 -9.2%
Hang Seng -25%
Nasdaq -16.3%
TSX -3.5% Euro Stoxx -10%
Russell 2000 -17.9%

18. Nasdaq -16.3%
Is this Dotcom 2.0?
-8%
-15%
-18%
-30%
-61%
-46%
as at Feb 25, 2022

19. The Deadly Duo
Russia
• War in the Ukraine
• Are sanctions strong enough without SWIFT and
blocking all trade including energy?
• Strong military – weak economy (smaller than
Canada with almost 4x population)
• Declining population
China
• Severe decline in property market and developers
• Will Taiwan be invaded if Russia takes the Ukraine?
• Command and Control over tech companies
(Tencent, Alibaba, Didi-down -40% to -75% in one
year)
• Declining population

20. Palki Sharma Video
Source: https://www.youtube.com/watch?v=nK-yJD_fAtk

24. S&P 500 PE Ratio
Are stocks getting cheaper?
30% lower than Jan 2021

25. Other markets cheaper valuations separating
S&P Yield +130% higher than 10-year bonds

26. Interest Rates & Real Estate
Cap rates linked to interest rates

27. Country 10-year bond yield
(February /27/2022
(Bloomberg)
US 1.96%
Canada 1.94%
Italy 1.83%
UK 1.46%
Japan .21%
Switzerland .30%
Negative
in January

28. YOY inflation 7.5%
YOY inflation 5.1%
Inflation Rising?
• Low levels in 2020 – U.S.
1.2%, Canada 0.7%
• Supply chain issues
• Increased demand from
government support
• Is this permanent or
transitory?
• Has the trend turned

29. 2yr vs.10yr U.S. Bond rates increase by 1.2%
When short-term rates are higher than longer durations,
the yield curve becomes inverted. Typically leads into a recession.
1.6%

30. Already in decline

33. No change since 1993
20 Million
less by 2050
500,000 less
than last year
What has the impact of demographics been on Japan’s GDP
and inflation over the last 30 years?

34. Less than 1995
Japan GDP

35. 1.94%/yr
1.88%/yr
1.53%/yr
1.29%/yr
As of end 2021, population growth
rate has dropped to 1.03%

36. Five Tectonic Forces
• Aging populations and
demographics
• Technology revolution
• Income inequality
• Levels of debt
• Climate change
This is overwhelming governments.
Companies need to fill the void with
stakeholder capitalism and ESG.
To this I would add philanthropy and
equality of opportunity but not outcomes.

37. Half full or
Half empty
Good asset allocation drives returns and reduces volatility

39. Public Assets
Macro Overview & Strategy

40. Hedgeye Cartoon of the Day – April 20, 2021
S&P 500 +108% from Pandemic Bottom
December 31, 2021
S&P 500 +119% from Pandemic Bottom
+119%

41. Strategas – Feb 9, 2022 Strategas – Feb 9, 2022
Record Monetary Policy Record Fiscal Policy

42. Bloomberg – Feb 16, 2022

43. It’s Still About Mostly About Covid & Supply Chains
Morgan Stanley – Feb 22, 2022

44. Goldman Sachs – Feb 23, 2022
Almost 20% above 10%!

45. Economist – Nov 29, 2021
Washington Post – Jan 9, 2022
Strategas – Feb 15, 2022

46. Goldman Sachs – Feb 11, 2022
High Wages
Lead to High
Inflationary
Expectations

47. Bloomberg – Feb 14, 2022
Hedgeye Cartoon of the Day – Feb 17, 2022
Markets expect the Fed
to control inflation

48. Hedgeye Cartoon of the Day – Jan 6, 2022 Bloomberg – Feb 11, 2022
7 Rates
Hikes in
2022!

49. BMO – Feb 17, 2022
Bloomberg – Feb 17, 2022
2 Year +125 BPS = 5 Hikes
10 Year +50 BPS

50. BMO – Feb 17, 2022
Hedgeye Cartoon of the Day – Feb 22, 2022

51. Hedgeye Cartoon of the Day – Feb 16, 2022 Goldman Sachs – Jan 23, 2022

52. US 10 Year Treasury Yield
Last 12 months
US 10 Year Treasury Yield
Last 5 Years
Bloomberg Barclays US Corporate High Yield OAS
Last 5 Years
5-Year average 3.87%
Current credit spreads
below 5-year average
Bloomberg Barclays US Corporate High Yield OAS
Last 12 Months
12 Month average 3.00%
12 Month average 1.53%
5-Year average 1.92%
Current credit spreads
Above 12 month average
Current 10 Year Yields
Above 12 month average
Current 10 Year Yields
At 5-year average

53. Morgan Stanley – Feb 22, 2022
Goldman Sachs – Dec 29, 2021

54. WSJ – Feb 21, 2022

55. Barron’s – Jan 28, 2022
Strategas – Dec 8, 2021

56. Bernstein – Jan 15, 2022
Morgan Stanley – Feb 22, 2022

57. Bernstein – Jan 11, 2022
CIBC – Jan 17, 2022

58. Strategas – Feb 18, 2022
Financial Times – Feb 14, 2022

59. Scotiabank – Feb 18, 2022
Strategas – Feb 22, 2022

60. Goldman Sachs – Feb 10, 2022 Goldman Sachs – Feb 10, 2022

61. Goldman Sachs – Feb 10, 2022
Barron’s – Jan 28, 2022

62. Bloomberg – Jan 26, 2022
Economist – Feb 4, 2022

63. Nicola Wealth Private Capital
Market Outlook 2022

64. 64
What are Private Markets?
Investments not traded on a public exchange or market
Return
Potential
Risk (standard deviation)
Infrastructure
Venture Capital
Private Equity
Private Debt
Mortgages
Risk Return Profiles Private Capital Funds
Venture Capital
Private Equity
Private Debt
Mortgages
Infrastructure
Private Assets Include

65. 65
Why invest in Private Markets?
Attractive way to diversify a portfolio
Expansive
Marketplace
Transparency
of Information
Number of
private
companies is
growing, while
public companies
decrease
Access to more
company
information than
public companies
1 2
Exclusivity of
Deals
Expanded
Investment
Horizon
Ability to enter
exclusive
investment
arrangements
Long-term focus
–
Not driven by
quarterly
earnings
3 4
Greater
Control
Ability to
influence
value creation
5

66. 66
Our Private Capital investment pools break down the traditional barriers to investments in private markets for
individual investors:
Diversification
Minimum
Thresholds
Liquidity
Access to all
investments in pool
No minimum
commitment
Ongoing ability to
redeem
The Nicola Private Capital Value Proposition
1 2 3
Return
Upside
* some restrictions may apply

67. 67
What are the recent trends in Private Markets?
Strong Demand
Record Valuations
Lots of
Dry Powder
Smoother Ride
Return
Upside

68. 68
What are the emerging themes driving Private Markets demand?
Diversification
Innovation
The Pursuit of
Income
Retail
Participation

69. 69
Spotlight on Private Equity – activity is at record levels
0
500
1,000
1,500
2,000
2,500
3,000
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Deal value ($B) Estimated deal value ($B) Deal count Estimated Deal count
In 2021, US GPs closed 8,624 deals for a combined $1.2 trillion, over 50% above the previous annual
record for deal value
Source: Preqin

70. 70
Spotlight on Private Equity – and so are the number of privates and multiples
122.37
128.11
135.58
139.66
146.79
152.95
159.55
165.24
170.19
174.29
180.15
184.95
194.49
205.07
213.65
120
130
140
150
160
170
180
190
200
210
220
Estimated
number
of
companies
in
millions
Statista 2021
Estimated number of companies worldwide from 2000-2020
Source: Reuters

71. 71
Spotlight on Private Equity – trends to watch for
Will Tech still be King?
ESG Rising
Will sellers continue to have power?
How does PE growth drive demand for PD?
CAGR: 11.3%

72. 72
Spotlight on Private Debt
2.6% yield
premium
(per red bar above)
Risk Premiums
Widening
Floating Rate
Insulation
Source: Cliffwater 2021 Q3 Report on US Direct Lending

73. 73
Spotlight on Private Debt – AUM is at record levels
Private debt emerged as a core alternative asset class after the Global Financial Crisis and has again
proved its worth in a volatile year, with the COVID-19-driven slowdown pushing total assets to new highs
CAGR: 11.6%

74. 74
Trends we are monitoring
Economic cycles
High Valuations Rising Rates
Strong sponsor partners
Non-cyclical industries
Conservative
underwriting
1 2 3
Floating rate loans
Cash flowing businesses
Portfolio diversification
Cyclitic-focused analysis

75. 2022 Strategic Outlook
Nicola Wealth Real Estate

76. Summary of Returns
*See Disclaimer at the end of the presentation
2021 Returns Since Inception 2022 Projected
Nicola Canadian Real Estate LP 18.4% 9.6% 10.0% - 11.0%
Nicola U.S. Real Estate LP 11.5% 10.9% 10.0% - 11.0%
Nicola Value Add Real Estate LP 12.9% 13.9% 13.0% - 15.0%

77. Target Markets
Vancouver
Seattle
Denver
Toronto
Phoenix
Dallas Fort-Worth
Montreal
Las Vegas
Minneapolis

78. Asset Classes
Creative Office
Self Storage Build to Hold Development
Covered Land Play
Industrial Multi-Family Rental

79. Build-to-Own Developments
Nicola Canadian Real Estate LP (NCRE LP)
Cambie Street & West 7th Avenue
Vancouver, BC
Office
McKenzie & Shelbourne
Victoria, BC
Multi Family Rental
The Spencer Block
Victoria, BC
Multi Family Rental
Partner: Denciti
880 Avonhead Road
Mississauga, ON
Industrial
Partner: First Gulf
601 – 607 Milner Avenue
Toronto, ON
Industrial
2485 Speers Road
Oakville, ON
Industrial
Partner: First Gulf

80. Value-Add Fund Strategies
Strata/Condo Industrial Development
Creative Office Development Residential Condo Development
Industrial Re-Positioning
Multi-Family Rental Re-Positioning
Multi-Family Rental Development

81. Threats in 2022 and Beyond
Inflation Interest Rates Access to Labour
Supply Chain
Municipal Red
Tape
(Lack of Federal)
Leadership