Uncertainty seems to be the word of the year. It’s ubiquitous, popping up whenever the topic of investment markets arises, and it has been disconcerting for both investors and their financial advisors. However, there’s opportunity in uncertainty if you know where to look, says John Bai, Chief Investment Officer and a Senior Vice-president with NEI Investments.

“The first half of 2025 has been anything but predictable for Canadian financial advisors. From political upheaval to shifting economic tides, advisors have had to recalibrate strategies, reassure clients, and stay nimble in the face of volatility,” Bai says. “Yet, amid the noise, many have found opportunity — not just in markets, but in the strength of their client relationships and the clarity of their long-term visions.”

Still, he says, it has been a stressful environment, as lofty expectations at the start of the year collided with a far more challenging reality.

A tale of two quarters: from tariff turbulence to market recovery

The first half of 2025 has presented investors with a rapidly shifting landscape shaped by macroeconomic uncertainty and geopolitical developments. Equity markets began the year under pressure as concerns over renewed tariffs dampened investor sentiment, triggering broad-based declines in the first quarter.

However, sentiment turned sharply in the second quarter after the U.S. administration announced a 90-day tariff pause on April 9. That day, the S&P 500 surged 9.5% — its best single-day performance since 2008.

The dramatic turnaround in equities between the first and second quarters, says Bai, is a vivid reminder markets can rebound swiftly, often motivated by a single headline. The April 9 rally can serve as a lesson to investors, since those who moved to the sidelines during the Q1 downturn missed a substantial portion of the year’s gains.

Diverging market signals call for caution

While equity markets have recovered much of their early-year losses, the bond market has continued to face headwinds. This disconnect is primarily driven by differing investor expectations and reactions to economic indicators.

The stock market appears optimistic, almost pricing in a soft landing, with strong earnings, moderate inflation, and low recession risk. In contrast, the bond market is signaling something very different. Yields on U.S. treasuries have risen substantially since the start of the year, reflecting investor concerns about persistent inflation and the growing cost of servicing U.S. national debt. Bai sees several implications.

First, higher treasury yields increase the government’s borrowing costs, which raises long-term concerns about the sustainability of U.S. fiscal policy. This adds a structural layer of risk to the economic outlook.

Second, high yields often reflect pessimism in the bond market regarding growth and inflation. They also tend to draw capital away from risk assets such as equities, which can tighten financial conditions.

Finally, higher yields may attract foreign capital and strengthen the U.S. dollar. While this may sound positive, it can also make U.S. exports less competitive and widen the trade deficit.

The long-term yield increases are not uniquely a U.S. phenomenon. Bai points out we’re seeing this globally, with other major economies experiencing similar yield pressures for different reasons, such as higher import costs from tariffs.

Keeping a close watch on regions

In the near term, the U.S. looks solid, Bai adds. GDP growth has been stronger than expected, corporate earnings are robust (with S&P 500 data suggesting about 9% earnings growth over the next 12 months), and the job market continues to perform well. However, longer-term risks remain. Tariffs and elevated interest rates could begin to weigh on investment and productivity. And, with forward price-to-earnings ratios sitting near all-time highs, much of the good news may already be priced into the market.

Canada stands out positively. The Bank of Canada has taken an easing stance, which is helping to stimulate growth and inflation. Canadian equity valuations are more reasonable than U.S. equity valuations, and earnings growth is expected to be strong — around 6.2% for 2025 and 11.5% for 2026.

Across Europe, the U.K., and Japan, valuations are generally lower than in the U.S., making those markets relatively more attractive. While earnings growth expectations are more modest outside North America, these regions present a cushion against downside risk due to their lower entry prices. Recent economic data has also shown positive momentum in the European Union, with upside surprises in growth indicators. Meanwhile, the U.S. and Canadian economies are showing more subdued activity, reinforcing the value of geographic diversification.

Strategies for advisors to consider

The biggest takeaway from the first six months of the year, and the message that should inform investors through the rest of 2025, is that it continues to be critical to diversify. In an environment of still-strong fundamentals and earnings power, Bai also believes it’s vital to remain invested.

“We expect volatility to continue for the rest of the year,” says Bai. “Within equities, we favour areas with less downside risk.”

He notes that up-and-down markets provide opportunities for active managers who can go long and go short to produce certain outperformance.

As advisors position portfolios to navigate an investment climate characterized by uncertainty, Bai recommends they inform clients about the strategies they’ve put in place to help protect assets.

“Client communication should emphasize resilience strategies, such as focusing on quality assets, dividend payers, and global diversification,” he says.

When clients understand the efforts advisors are making to give them the steadiest ride possible, they’ll be better equipped to handle whatever surprises the rest of 2025 throws our way. Knowing their portfolios are well positioned for uncertainty can give clients the confidence and discipline in the face of negative and positive news — both essential so they don’t react emotionally and derail their long-term plans.

Bai will share more detailed information at NEI Investments’ Mid-year outlook webcast on July 24, 2025, at 1 p.m. EST. Advisors will get important context for client conversations by exploring key developments affecting the investment markets. They’ll also be able to ask questions and have them answered live.

This material is for informational and educational purposes, and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. The views expressed herein are subject to change without notice as markets change over time. Information herein is believed to be reliable, but NEI does not warrant its completeness or accuracy. Views expressed regarding a particular security, industry or market sector should not be considered an indication of trading intent of any funds managed by NEI Investments. Forward-looking statements are not guaranteed of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Do not place undue reliance on forward-looking information.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus and/or Fund Facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. (“NEI LP”). Northwest & Ethical Investments Inc. is the general partner of NEI LP and a wholly-owned subsidiary of Aviso Wealth Inc. (“Aviso”).

Aviso is the sole limited partner of the NEI LP. Aviso Correspondent Partners operates as a separate business unit of Aviso Financial Inc., which is a wholly owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five provincial Credit Union Centrals and The CUMIS Group Limited. Aviso is a registered mark owned by Aviso Wealth Inc.

“How’s my portfolio doing?” That was once a client’s first and most important question. Now, many are just as likely to ask about the impact of changing careers, how to finance a wedding, or whether they should lease a car or dip into their savings for it.

As clients’ expectations evolve, is your value proposition as an advisor keeping up?

Increasingly, clients want more than portfolio updates and market commentary. They’re seeking guidance that ties financial plans to personal goals, continuity of advice for their families and businesses, and experiences that show a deep understanding of their lives.

The new value equation

Clients want to know that you get their lives and dreams, and will be there to help steer them through decisions big and small. This requires advisors to rethink how they deliver and demonstrate value.

Whether clients can afford to take time off, relocate to care for an aging parent, or invest in a passion project are questions that go beyond asset allocation. And when it comes to maximizing those assets, clients are also seeking more clarity.

We’re living in an era of information overload, market uncertainties, and, for many, generational wealth transfers. People are challenged to cut through the noise and complexity. They yearn for unbiased, trusted counsel.

Leading advisors grasp that they must redefine their relevance — to become part investment manager, part holistic planner, part coach, and part confidant.

Peace of mind is the real return

Call it a shift from beating the market to meeting the moment. The critical aspect isn’t running the numbers; that’s not hard. It’s unearthing and helping clients express what matters to them. As long as clients have the right road map and flexibility to reroute, and avoid a white-knuckle ride along the way, that’s peace of mind.

What does it take to achieve that? It transcends investment returns. Clients are exposed to an endless stream of financial headlines and hot takes. Everything has one volume: loud. Advisors need to be the voice of reason and the experts who can provide context.

Technology can help, from tools that monitor portfolios or suggest rebalancing opportunities, to AI that surfaces client behaviour patterns. At Sterling, we use such technology to give advisors the data they require to act, and the insights to anticipate concerns. Other technology relieves administrative burdens, freeing hours.

Whether using technology to gain a better view or handle more paperwork, advisors have to spend more time in front of clients having meaningful conversations.

But proactive engagement doesn’t have to centre on performance reports. It can involve education sessions, a quick call, a handwritten note, and routine check-ins. Regular contact reminds clients they have someone they can count on.

At the right stage, these conversations will also involve other family members. Part of estate planning is preparing the inheritors, and ensuring legacy goals are met. Here, the advisor’s value crosses generations.

As advisors help clients plan for their future and that of the next generation, they can’t neglect their own succession plans. If you don’t have one, you’re risking not just your business but your clients’ peace of mind.

We encourage advisors to bring along associates and introduce these next-gen advisor partners early. That supports a smooth handoff and continuity. It’s also part of the value story, conveying to clients that you’ll continue to have their back with a successor.

Future-proofing for your clients and practice

As clients’ needs and demographics transform, the advisors who succeed will be the ones who stay human and stay ahead. Personalization, in other words, stands out.

Anyone can look up the hottest funds of the day. What makes an advisor valuable is knowing how that does or doesn’t fit the client’s pathway, and showing a deep understanding — not just about the market but about what really matters to clients.

Truly knowing them, and demonstrating that you’re with them on their journey, will help to future-proof your practice and help clients secure the future they envision. In a world of noise and DIY options, advisors who show up, listen closely, and guide with purpose won’t just be valued — they’ll be indispensable.

This three-part series offers insights into what advisors can do to position themselves for success. Learn more about how Sterling Mutuals Inc. can help you meet your clients’ needs and help you plan for the future.

Bonds have traditionally played the diversifier role within portfolios, offsetting the historically greater volatility of stocks. That worked well as long as bond and stock performance was poorly correlated. But recently, there have been periods of time in which bonds and stocks moved in sync, which raises questions about how bonds can best serve investors in today’s market environment.

Reine Bitar, a Senior Portfolio Manager with Amundi in London, England, continues to believe in the diversification benefits of holding bonds. She watched closely as fiscal outlook came back into focus for fixed income markets, following an unexpected German fiscal package earlier this year and ongoing U.S. tax-cut discussions.

“This sort of shock raises risk premium in the long end of the curve, resulting in steeper curves. It also weakens the safe haven [role] of bonds…as a hedge against stocks,” she says. “However, we think this is nothing new. The market focus on fiscal does go through waves, and we believe bonds still offer value, particularly in a risk-off environment.”

Bonds are currently characterized by very attractive yields, she adds, and she sees an opportunity to add value through diversification by geography and sector. In April, for example, German bonds played the safe haven role as investors moved money away from U.S. bonds and Treasury bills. This suggests that carefully chosen bonds can still fulfill their traditional role in a portfolio.

Finding opportunities in volatility

Bitar is a lead manager of the NEI Global Total Return Bond Fund , which follows a “discretionary global macro investment approach” that starts with an assessment of global growth, inflation, and financial conditions. The portfolio is then filled with liquid, diversified government and corporate bonds based on medium-term views around duration, credit, and currencies. Most of the corporate bonds are investment grade, but there is also a small allocation to high-yield and emerging market bonds.

Importantly, this is an actively managed fund — something that has proven its merit in recent turbulent months. As volatility shakes up markets and reveals opportunities, the team have flexibility to deviate from the benchmark and capture value wherever it appears. Active management has also been critically important to manage risk through the ups and downs.

“Our strategic investment approach has not changed this year,” says Bitar. “What has changed is our shorter-term management approach, which has been much more focused on diversification, risk management, and options overlays.”

Following U.S. President Donald Trump’s election, the Amundi team decided it wouldn’t help to try to time or predict what he might do or say. Rather, they remained focused on their conviction views, and managed risk around them.

“Back in January, we started buying U.S. duration and selling the U.S. dollar in an options format, as we thought that the U.S. exceptionalism theme…was looking vulnerable to reversal,” she says. “We hedged our positions, and we ended up being right on the hedges and benefited a lot from the options positions.”

At the same time, the fund leaned into diversification, buying duration across developed and emerging markets, including Brazil, Mexico, and Poland.

Volatility in response to on-again, off-again tariffs has opened up value in corporate bonds, and the fund responded by increasing its exposure to corporates. It also selectively took profits on U.S. dollar shorts in response to the U.S. dollar sell-off in the spring, while tactically buying the U.S. dollar at a lower price. One of the fund’s biggest overweight positions is in UK government bonds, where premium has built up on the back of fiscal scares and sticky wage inflation. Bitar says UK government bond yields look particularly attractive at their current levels.

“We continue to be overweight duration on the fund overall, and we favour international diversification into both developed and high-quality emerging market bonds,” she continues. “The beauty of the flexibility of the NEI Global Total Return Bond Fund is that we remain very nimble and very quick to take profit.”

She says that, despite shadows on the horizon looking ahead to the summer and the rest of the year, “volatility creates opportunity, [and] we look forward to hopefully being able to benefit from opportunities that will come…because we still have a lot of room to manoeuvre in the fund.”

Want to learn more about the Global Return Bond Fund? Dive into the full article on the NEI website to see more of the Fund’s advantages including its flexible and active approach, and to learn how it’s achieved over a decade of positive total returns.

This material is for informational and educational purposes, and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. The views expressed herein are subject to change without notice as markets change over time. Information herein is believed to be reliable, but NEI does not warrant its completeness or accuracy. Views expressed regarding a particular security, industry or market sector should not be considered an indication of trading intent of any funds managed by NEI Investments. Forward-looking statements are not guaranteed of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Do not place undue reliance on forward-looking information.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus and/or Fund Facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. (“NEI LP”). Northwest & Ethical Investments Inc. is the general partner of NEI LP and a wholly-owned subsidiary of Aviso Wealth Inc. (“Aviso”).

Aviso is the sole limited partner of the NEI LP. Aviso Correspondent Partners operates as a separate business unit of Aviso Financial Inc., which is a wholly owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five provincial Credit Union Centrals and The CUMIS Group Limited. Aviso is a registered mark owned by Aviso Wealth Inc.

Q: Why expand this partnership now?

Paul Savage: We’ve had a long-standing relationship with WFG in other areas of our business. This next phase is about reach and access. Too many Canadians don’t have the insurance coverage they need. In fact, recent data from the Life Insurance Marketing and Research Association (LIMRA) indicates that 31 per cent of Canadians are either uninsured or underinsured. By bringing life insurance and Manulife Vitality into this partnership with WFG, our goal is to connect more Canadians with trusted agents who can help them understand what their insurance needs are, find solutions that meet their unique needs, and help them live longer, healthier, better lives.      

Todd Buchanan: At World Financial Group, our motto is ‘No family left behind.’ We recognize that middle-income Canadians have often been overlooked by the insurance industry, leaving many families underserved. Our expanded partnership with Manulife is working to change that. We are dedicated to sitting down with families one-on-one, providing education on insurance and financial solutions to secure a brighter future. This initiative goes beyond offering products; it’s about empowering our agents to forge long-term relationships built on trust. Many WFG agents live and work in the very communities they serve, often seeing themselves in the clients they support. This personal connection enables us to make a meaningful impact.

Q: What does this look like in practice for agents?

TB: It starts with comprehensive onboarding. Following the completion of required training, WFG agents have access to a full suite of Manulife offerings, including Term, Universal, and Participating life insurance, plus guaranteed wealth solutions like segregated funds and annuities. More importantly, they’re focused on ways to connect these solutions with customer needs and goals, whether that’s protecting a young family or supporting retirement readiness.

PS: Manulife Vitality is also a big part of our offering and WFG agents, upon completion of their onboarding, will receive their Vitality certification. Manulife Vitality is backed by behavioural science and is the only program of its kind in Canada that offers clients helpful tools, as well as access to the latest technology, resources, and rewards, to help them take steps towards better health. The features of Manulife Vitality can provide value to anyone, regardless of their age, health status or protection needs – empowering agents to tap into new customer markets. 

Q: Why is WFG the right partner for this?

PS: We’ve been working with WFG since 2017, including successful collaborations on travel, health, and dental insurance benefits for Canadians. Expanding to life insurance products and segregated funds felt like a natural progression. WFG’s growing network also brings deep community insight and expertise, serving local communities across Canada who haven’t traditionally had access to personalized financial advice. This aligns with our mission to make insurance more accessible and tailored to Canadian families.

TB: Exactly! We share a common goal of closing the coverage gap for middle-income families in North America. Recognizing their needs, we’ve joined forces to better serve this community. This partnership highlights our dedication to Canada and ongoing investments in our back office. We are enhancing our digital capabilities and compliance oversight to provide the best support for our agents. By equipping our agents with robust tools and resources, we ensure they can effectively meet the needs of their clients and build lasting relationships rooted in trust and reliability.

Q: What’s next?

PS: Our expanded partnership with WFG aligns with our goal of ensuring Canadians who need insurance have access to Manulife solutions. This collaboration is a testament to our dedication in reaching diverse markets and ensuring inclusivity in insurance coverage.  

TB: WFG agents can play a crucial role in helping everyday Canadians safeguard their families’ future. Their advice and ongoing support are essential in ensuring that families are protected and prepared for whatever life may bring. Together with Manulife, our collective goal is to reach the under and uninsured in Canada and set a new standard in how financial advice and protection are delivered.

To learn more about the Manulife and WFG partnership, visit 
https://advisor.manulife.ca/advisors/insurance/newsroom/manulife-and-world-financial-group-news-release.html

While familiar to institutional investors, collateralized loan obligations (CLOs) are relatively new territory for many Canadian financial advisors. But the door is opening to CLO access for retail investors.

It’s an opportune time to consider CLOs. In today’s uncertain interest rate environment, advisors are under pressure to uncover new income opportunities without sacrificing quality or stability. “We think high-quality CLOs fill that gap,” says Aaron Young, Executive Director and Head of Client Portfolio Management with CIBC Asset Management.

A CLO is a credit product that pools corporate senior loans into a single package. The loans generate cash flows that form the CLO structure. CLOs are divided into tranches with different risk and return levels.

As the fixed income landscape evolves, advisors are rethinking traditional strategies. High-quality CLOs — when actively managed and carefully structured — offer a rare combination of yield, quality, and resilience.

The launch of the CIBC Income Advantage Funds can help meet the need for a prudent and institutional-calibre income solution.

Built on strict underwriting standards

Some advisors and investors associate the acronym CLO with the structured products that helped trigger the 2008 financial crisis. But there are crucial differences between CLOs and that period’s CDOs (collateralized debt obligations).

CLOs aren’t built on subprime mortgages, or any mortgages, notes Young. They comprise loans that are typically made to large and midsize U.S. companies, including household names like American Airlines and Burger King. “They’re blue-chip companies we know well,” he says.

CLOs follow strict underwriting standards. Moreover, CLOs weathered the financial crisis thanks to their conservative structuring. The latest iterations, sometimes called CLO 2.0, feature even more robust safeguards and high-quality inputs.

CLOs represent a USD $1.2-trillion market globally. That’s bigger than Canadian government, provincial, and corporate bonds. The majority of CLOs are AAA-rated securities, representing about 60 percent of the market. In the case of the CIBC Income Advantage Funds, the exposure is at least 80 percent AAA, and will probably be closer to 85 to 90 percent. The remainder are AA- and A-rated securities.

High-quality CLOs like these have a solid track record, even during periods of market stress. “That speaks to the quality of these instruments,” says Young.

Increased potential for yield

CLOs are particularly compelling given today’s backdrop of rate volatility and tightening spreads. One of the best reasons to consider CLOs is their yield potential.

Compared to traditional fixed income, AAA-rated CLOs have consistently offered higher income without meaningfully increasing risk. An investor with a core bond portfolio made up of government and corporate bonds can possibly achieve higher overall portfolio income by adding an allocation to a CLO fund.

Balanced and growth investors can benefit, too.

For balanced investors, CLO funds offer access to a broader range of fixed income assets — compared to the traditional stock and bond mix — to help manage risks and reduce overall portfolio volatility.

Growth investors might also be looking for ways to earn higher income without taking on excessive equity risk. These funds introduce an income-generating asset class that complements their long-term growth strategies.

CLOs are floating-rate instruments, so they also offer built-in protection against interest rate volatility while still offering predictable cash flows.

Complementing a core allocation

This isn’t about replacing traditional holdings but augmenting them, says Young. Government, corporate, and high-yield bonds remain the foundation of fixed income portfolios. “A CLO fund is a great complement to sit alongside that core allocation.”

Young notes that, historically, CLO sleeves have shown low-to-zero correlation with core bond portfolios. This is valuable to advisors who want to build portfolios designed to “zig when one zags,” he says.

AAA-rated CLOs are primarily held by major banks, insurance companies, and pension funds. CIBC Income Advantage Funds invest in CLOs by taking a similar approach.

“We’re following the playbook of institutional investors,” says Young.

In this case, to capture income advantages often unavailable to individual investors. To do so, the CIBC Asset Management team focuses on three layers of risk management. They take a deep dive on: 1) the underlying loans in the CLO instruments; 2) the CLO managers (“We’ve covered them for decades and have seen them through cycles,” Young says); and 3) the structuring of a CLO to ensure it aligns with risk-return goals.

The CIBC Income Advantage Funds leverage over 50 years of CIBC Asset Management’s experience as an active fixed income investor, with specialist research teams and a dedicated credit analysis team. As a distinct asset class, CLOs offer investment opportunities that may not be available through traditional fixed income options. Through rigorous due diligence and a disciplined approach, CIBC Asset Management aims to deliver high-quality income and diversification that advisors can confidently recommend — in uncertain times and beyond.

With U.S. tariffs reshaping the global trade and economic landscape, many portfolio managers, financial advisors, and investors are focused on finding the least damaging way to react to the barrage of policy changes. John Bai, Chief Investment Officer and Senior Vice-President with NEI Investments, has taken a different approach, moving beyond reacting to anticipating long-term opportunities for Canada and Canadian investors.

“Why waste this global crisis?” he asks. “Let’s focus not on what the U.S. can do for Canada, but what we can do for ourselves.”

Bai points out that Canada was not thriving in the pre-tariff environment. In fact, Canada consistently lags its G7 peers in productivity and GDP per capita, with a stock market that has historically underperformed the U.S. by a wide margin. That, despite the fact Canada has the most educated workforce in the G7, with abundant resources, energy, and critical minerals — and a stable political environment.

Now, in the context of a post-tariff shake-up, there may be more willingness to listen to fresh ideas, and Bai sees the potential for policies that play to Canada’s strengths and provide long-term benefits to the country and Canadian investors.

“Productivity growth leads to wage growth. Wage growth leads to better earnings. Better earnings lead to more prosperity,” says Bai. “And that happens on the stock market as well: the higher the productivity of Canadian companies, the higher the earnings growth of Canadian companies, and the higher the stock price appreciation of Canadian companies.”

Bai believes policies aimed at enhancing productivity can significantly impact Canada’s economic trajectory. Canada is aiming to remove interprovincial trade barriers by July 1, and Canadian government research suggests this would add $200 billion to our economy — a number that exceeds the projected impact of the U.S. tariff drags.

Three pressures may be motivating U.S. policy

At the same time, the U.S. is facing at least three enormous challenges that may be playing into its policy decisions, Bai explains.

First, U.S. public debt has reached a critical level, exceeding 100 percent of GDP, at about US$36 trillion. Comparable debt levels in Portugal, Greece, and Italy during the global financial crisis resulted in painful austerity measures. While the U.S. has the protection of serving as the global currency reserve — which gives the country access to capital markets — its public debt is, without question, high.

Second, U.S. budget deficits exceed those of any other G7 country, at about 7 percent of GDP. Between October 2024 and March 2025, the deficit reached US$1.3 trillion. All that red ink means the U.S. is growing its public debt at a rate of US$1 trillion approximately every 100 days — an unsustainable pace.

Third, interest payments on U.S. public debt are over US$1 trillion a year. That exceeds military spending — and, over the past few centuries, interest payments higher than military spending signalled the downfall of several nations, including Spain, France, and the U.K.

“The U.S. faces huge challenges,” says Bai. “But we shouldn’t focus on what they’re doing. Instead, we should focus on what we can do.”

Finding new paths to performance while managing risk

Bai is optimistic about the opportunities available to investors as interprovincial trade barriers ease and Canadian companies pursue their ambitions nationally and globally. He envisions strategic investments to position Canada as a leader in areas such as STEM research, AI, and engineering.

“A lot of these trends are going to take a while before they start to hit investors, but we’re focused on helping advisors capitalize on the shifting markets and a changing world.”

For instance, at beginning of the year, the NEI team anticipated a more volatile market environment in 2025. So, in their annual strategic asset allocation re-optimization, they increased allocations to lower-volatility equity strategies, alternative investments such as a long-short strategy, and higher-income securities. This is just one example of what the team focuses on as they look beyond current market conditions for unseen opportunities and trends.

Looking ahead, Bai recommends that investors avoid over-allocating to the U.S. and seek better valuations with similar growth rates elsewhere. Increasingly, that opportunity can come from Canadian companies.

Learn more by visiting the NEI website  or speak to your NEI wholesaler today.

This material is for informational and educational purposes, and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. The views expressed herein are subject to change without notice as markets change over time. Information herein is believed to be reliable, but NEI does not warrant its completeness or accuracy. Views expressed regarding a particular security, industry or market sector should not be considered an indication of trading intent of any funds managed by NEI Investments. Forward-looking statements are not guaranteed of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Do not place undue reliance on forward-looking information.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus and/or Fund Facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. (“NEI LP”). Northwest & Ethical Investments Inc. is the general partner of NEI LP and a wholly-owned subsidiary of Aviso Wealth Inc. (“Aviso”).

Aviso is the sole limited partner of the NEI LP. Aviso Correspondent Partners operates as a separate business unit of Aviso Financial Inc., which is a wholly owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five provincial Credit Union Centrals and The CUMIS Group Limited. Aviso is a registered mark owned by Aviso Wealth Inc.

Canada’s fixed income landscape is foggy. A mix of slowing growth, trade uncertainty, and pending rate cuts has left investors — and their advisors — looking for clarity.

While fixed income portfolios may not be sprinting, they’re not standing still either. Opportunities exist for those taking a methodical yet active approach, says Darcy Briggs, a Senior Vice-president and Portfolio Manager at Franklin Templeton Fixed Income.

Several macro trends are shaping investor behaviour. In past years, government spending, an influx of immigration, and a housing boom “created an illusion of growth,” says Briggs. But deeper productivity and investment gaps remain. “Looking at Canada, we expect softer growth. GDP per capita is somewhat flat.”

Meanwhile, the on-again, off-again effects of U.S. tariffs, and whether the United States–Mexico–Canada Agreement will be renegotiated, are adding fresh economic headwinds. Until that gets settled, Briggs says consumers and businesses are going to “sit on their hands.”

“We may end up being one of the lowest-tariffed countries in the world when all is said and done, but we don’t have any visibility on that.”

If Canada has a quick resolution to tariffs, Briggs feels that mediocre growth might follow. If tariffs remain substantial, he says the country will face a full-blown recession over the next year. There are several paths, but Briggs feels that none are highly bullish for growth.

He expects the Bank of Canada will cut rates to about 2 percent by year-end, citing mortgage resets and indebted households as key drivers. Inflation remains a wildcard, too.

With these conditions providing the backdrop, what are the prospects for fixed income investors? In times like these, fixed income isn’t just about yield; it’s about discipline.

“Markets are remarkably comfortable with the current level of risk. We have been generally very cautious about chasing spread. We’re trying to be as disciplined as we can about credit, duration, and currency. We prefer to take a lot of little bets rather than a few big bets,” says Adrienne Young, a Senior Vice-president and Director of Corporate Credit Research, Canada, with Franklin Templeton Fixed Income.

Global diversification is key

That translates into an approach grounded in global diversification (access sectors unavailable in Canada), liquidity (act when opportunities arise), and defensive positioning (hedge selectively with derivatives).

In Canada, the bond market is smaller and less liquid, Young adds. “If other people are selling and we’re one of the few buyers, we can lock in great pricing on good-quality bonds that we might not otherwise get.”

What’s worth considering now? The short list of sectors that Franklin Templeton is overweighting includes energy (pipelines and distribution). Young touts the “contracted cash flows with high-quality counterparties.”

She’s bullish, too, on some of the resources that are important to farming and utilities (they’ll be needed regardless of the economic cycle), U.S. healthcare and industrials, and defence. Young also mentions U.S. money-centred banks, which are trading at a discount compared to Canadian banks.

This sizable investment in U.S. sectors acts as “a bit of a ballast against any correction that may affect Canadian consumer-related credit,” she adds.

In contrast, areas of concern include Canadian consumer credit, the retail and auto sectors, and credit unions (whose housing-loan books are skewed to the Toronto and Vancouver markets).

In the current environment, fixed income is generating income again. “The FTSE Canada Bond Universe yields just under 3.5%. Our preference for holding more credit than the index allows us to deliver additional yield to clients in our strategies”, says Young. That means less variance compared to some equity funds without the associated risk, offering real value.

Made-in-Canada expertise

There was a time when fixed income didn’t pay. Now, it’s a viable contributor for income and diversification, and cushioning client portfolios. “If we do have a downturn in economic activity, fixed income should still provide that buffer,” says Briggs.

While global exposure is vital, there’s no substitute for being on the ground. The Franklin Templeton team is based in Calgary, and Briggs says Canadian investors benefit from managers who understand the local nuances, whether around investors’ objectives or constraints. “You have a better knowledge of the intricacies of the marketplace. It becomes a lot more difficult if you’re removed from that.”

Rather than make major directional bets, Franklin Templeton is emphasizing a nimble posture. This measured stance enables the firm to be opportunistic.

“To benefit their clients around fixed income, advisors should think active, not passive, and diversify thoughtfully”, Young says. “Volatility demands vigilance to help smooth the ride.”

“Active management allows for better control over credit risk, interest rate risk, and liquidity risk, which can be crucial during periods of market turbulence,” says Briggs, adding that this isn’t a time to underestimate fixed income’s contribution. “Uncertainty will be with us for a period of time.”

The Franklin Templeton team believes that’s not necessarily bad for fixed income investors.

“Volatility is risk, of course. But if you’re an active manager that has been collecting liquidity — and we have — it’s an opportunity,” says Young.

She explains that sometimes certain areas of the market will go completely no bid. “That’s when Franklin Templeton can go in and say, ‘You have to sell. Well, we can buy. And here’s the price.’

“That’s an opportunity to really outperform for the investor,” she continues. “Active managers can offer you more diversification than the passive benchmark, capitalize on market opportunities, and respond to changing market conditions in uncertain times.”

Important Legal Information
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell, or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.
The views expressed are those of the investment manager, and the comments, opinions, and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, or market.
Commissions, trailing commissions, management fees, brokerage fees, and expenses may be associated with investments in mutual funds and ETFs. Please read the prospectus and fund fact/ETF facts document before investing. Mutual funds and ETFs are not guaranteed. Their values change frequently. Past performance may not be repeated.
Franklin Templeton Canada is a business name used by Franklin Templeton Investments Corp.

In a period defined by an evolving trade war, heightened political risk, and subdued economic growth, investors are looking for sources of stable income. Private real estate investment trusts (REITs) focused on rental apartments are one solution, offering an “all-weather strategy” ideal for navigating a range of market conditions, says Geoff Lang, SVP, Business Development at Equiton. 

For instance, the rising interest rates and inflation of recent years were a cause for concern among many investors, he says. But as inflation carved into their traditional investment returns, rental income continued to grow — underscoring private REITs’ utility as a hedge against market forces and a smart tool for diversification. 

“We’re tailored for those long-term investors who can ride on multiple market cycles and want that monthly tax-efficient income over time.“

“With interest rates continuing to decline, your average GIC rate is around 3.5%.* That just isn’t enough income for many investors,” says Lang. “At the same time, volatility and inflation can take a chunk out of publicly traded dividend-paying stocks and fixed-income assets that usually pay a little more. That’s when investors start looking at private REITs, which offer both stability and generally higher income.”

Lang notes the three key benefits of private apartment REITs: reliable, tax-efficient monthly income, climbing rental demand, and the opportunity to invest in a tangible asset. Here’s what they can mean for investors.

1. Stable tax-efficient income

While there are as many types of private REITs as there are property types, those focused on Canadian rental apartments  are often seen as the “gold standard” for stability, particularly among institutional investors like pension funds, says Lang. Private REITs offer investors shares of a portfolio of apartment properties, which can be diversified by location, age, and so forth, and typically pay monthly distributions via rental income.

When it comes to tax efficiency, private REITs may classify distributions as return of capital (ROC), which effectively allows investors to defer taxes on those returns until they sell the investment. “As we know, this is better than dividend income, as well as interest income, like a GIC. So, it’s very strategic for clients looking for tax-efficient cash flow,” says Lang. “It also benefits those with a longer investment horizon, allowing them to reinvest the full amount of their distribution.”

2. Ongoing demand

Canadians will always need a place to live; that’s why there’s ongoing demand for rental units across Canada, says Lang. As well, Canada has experienced historically high levels of population growth, adding further pressure on housing.

In fact, “rental market conditions across Canada’s large urban centres remained tight,” according to the Canada Mortgage and Housing Corporation’s fall 2024 rental market report. Further, rents increased by 23.5% when units turned over. 

“When you have occupied properties,it signals a healthy rental portfolio,” says Lang, adding that Equiton’s Apartment Fund has an occupancy rate of nearly 98%. Compare that to Canada’s national occupancy rate, which has hovered around 96% in recent quarters, signaling intense pressure in the rental market.

3. A tangible asset

“Canadians just love talking about real estate, and it’s fairly easy to understand,” says Lang. Still, not everyone wants the headache of becoming a landlord, he adds, which comes with the responsibility of acquiring properties that have the potential to appreciate in value, collecting rent from tenants, doing renovations, and taking calls late into the night. 

“Canadians have realized that it’s very onerous,” he says. “We see many mom-and-pop style owners divesting their properties and making their lives easier with well-run private REITs.”

He emphasizes that when investors own shares of a private REIT, they become direct owners of tangible real estate investments. “Investors love being able to visit the properties, to drive by and see them. It’s just like owning a building yourself,” says Lang. “The difference is that someone else is managing the property and you can go home smiling at the end of the day.”

Private REITs play a bigger role as investor needs evolve

The traditional 60/40 portfolio split no longer offers the same mix of growth, stability and income it was once known for, says Lang.

“It’s now more of a 50/30/20, where that 20% is allocated to alternatives providing alpha or income stability, depending on their goals,” he says. “Private apartment REITs offer a kind of buffer between the two. You get a mix of appreciation of the properties — your alpha — as well as that income stability, which comes from collecting rent and distributing it to unitholders.”

That said, Lang notes that careful consideration must be given to choosing a private REIT that’s right for one’s clients.

“It can be difficult choosing which REIT is the best, which one is the safest for their clients,” says Lang. “Making sure the company is implementing a corporate governance strategy before allocating is a must.”

To start, suggests Lang, ensure the fund manager has audited financials available on its website, is being as transparent as possible, has an independent board, and operates like a public company — even if it’s private. Lang adds that private REITs are well suited toward long-term investors with a three- to five-year hold. 

Equiton’s Apartment Fund is one such investment solution that targets 8% to 12%, net of fees. This includes 6% in monthly income and 2% to 6% in capital appreciation, explains Lang. 

“We’re tailored for those long-term investors who can ride on multiple market cycles and want that monthly tax-efficient income over time,” Lang says. “Private Canadian apartments haven’t had a negative year in over three decades, making them a great choice for this kind of investor.”

Click here for more information on Equiton’s Apartment Fund. 

https://www.ratehub.ca/gics/best-gic-rates
Accessed 4/23/2025

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Text transcript

Geoff Lang:

My name is Geoff Lang, Senior Vice-president at Equiton.

What are the benefits of private REITs?

Geoff Lang:

The benefits of private REITs are threefold, right? So there’s stability amidst market volatility, which is what we’re seeing today in the marketplace. And, there’s always going to be demand. Everyone still needs a place to live, so that provides that stability within the asset class. So that’s number one.

Number two is that stable and reliable monthly income that’s tax efficient. We invest in apartment buildings; our residents are paying rent. So that’s that stable monthly income that our investors are looking for.

And thirdly, you own a tangible asset. There’s something to be said about owning a physical building that you can touch. We know we’re an alternative, but the stock market, you’re not actually holding anything physical. So that tangibility of the asset class is also a major benefit. So that stability, that monthly income, and that tangible asset that you’re investing in provides a lot of stability for our clients.

Discuss how private REITs can offer returns in various market conditions like volatility, a low-rate environment.

Geoff Lang:

We all know there’s various market conditions out there in the economy, both macro and micro as well. Rewind three, four years ago, interest rates are increasing. We’re in that inflationary environment, right? So, in that inflationary environment, private REITs offer stability because when rates are increasing, so, too, does the rental income. So we saw in that inflationary environment rents increasing year over year, which provides a nice return for our end investors. Now, rates have started to come down. So what happens in a lower-rate environment, we can borrow for cheaper. That helps us with acquisitions. So no matter the market economy, there’s always going to be a benefit for private real estate. And when you have occupied properties — you know, our portfolio has an occupancy rate of over 97 percent — prices tend not to fluctuate like the stock market. So that shelters that blow we have been seeing in Q1 of 2025 so far to start the year. And that’s why the asset class has become a benefit for a lot of our investors to, sort of, be that all-weather-type strategy, no matter the market conditions.

Are private REITs a good source of income for clients?

Geoff Lang:

I think why a lot of investors invest in private REITs is that stability of the monthly income. We know there’s, you know, GICs out there — that’s your guaranteed income. But as rates have come down more recently — you know, your average GIC rate is around that 3 percent — a lot of investors are looking for more income in times of market volatility. So, as I mentioned earlier, we’re collecting rent from our residents. They pay us on a monthly basis, and we’re able to distribute at around a 6 percent yield. That’s tax efficient — we’re 100 percent return of capital, so very tax efficient. And this is why private REITs are so sought after. It’s not because of the alpha, the upside benefit. It’s that stable, reliable monthly income that’s tax efficient, that can get you higher than a GIC. And, in times where interest rates are coming down and those yields are dropping, it’s important to still achieve that monthly income that investors are looking for. And that’s why they look to private REITs in times of volatility and lower interest rates.

How can advisors discuss private REITs with their clients?

Geoff Lang:

So it’s important when discussing private REITs within your client base and just, sort of, the how-to. But one thing that’s a benefit is that Canadians just love talking about real estate, and it’s fairly easy to understand. And, you speak to clients and, you know, anyone out on the street, “How’s the real estate market doing? Is it good? Is it bad?” It all gets lumped into one bucket. We’re multifamily, but it’s very easy to understand because you’re collecting rent from residents or tenants, and then you’re looking for the properties to appreciate in value. So it’s very straightforward. Collect your rent, distribute it out to unit holders, and have the assets appreciate in value over time. And, I think Canadians have realized that it’s very onerous and there’s a lot of headaches to doing this yourself. Everyone loves the idea of having multiple rental properties collecting income, but it’s very difficult, very time-consuming. And if you have a full-time job, it proves very difficult. So that’s why you outsource it to the professionals where you can hold a portfolio, a basket of apartment buildings similar to our fund; you don’t have the headaches of, you know, doing renovations and taking calls late at night; and you have that upside potential with the monthly income. But, how advisors can discuss it is plain and simple. We’re an asset class. It’s an all-weather- type strategy, collecting monthly income and looking for the properties to appreciate in value because a lot of clients don’t want the stress of being a landlord. And, to look at it at a different perspective as well, that 60/40 asset class split of 60 percent equities, 40 percent fixed income — that’s no longer the case anymore. It’s now more of a 50/30/20, where that 20 percent is looking to alternatives to either how to generate alpha or add income stability to client portfolios. So we’re kind of a buffer between the two. We’re trying to get that alpha position for the appreciation of the apartments, but that income stability, collecting that rent, and distributing it out to unit holders. So I think we fit in that nice 20 percent bucket there.

Advisors are in a better position to succeed when they can spend as much time as possible servicing their clients. Technology can remove some of the administrative burden. But the right tools can also help advisors make the most of their client-facing time.

What if you could not only have greater insight than ever into your clients’ needs and wants, but also anticipate them? Artificial intelligence (AI) and data analytics are making it possible, and when used in tandem with your professional expertise, that’s a powerful combination.

Integrating AI into Canada’s financial advisory sector is transformative. Balancing technological innovation with data integrity, security, and regulatory compliance is essential — so is understanding how to leverage AI’s potential.

Sterling Mutuals has been an early adopter of many technology solutions because we know how these solutions enable advisors to do their jobs even better. Recently, that has included AI capabilities. Here are five considerations for making the most of such tools.

1. Focus on where AI can fill some knowledge gaps

You may know a great deal about the top 20 percent of your clients, but it’s hard to know all of your clients intimately. While every client is an individual, and you want to paint as detailed a picture of them as you can, each client also tends to fall into a category.

An AI-generated report can place clients within a demographic group and observe trends based on aggregated data points. That’s useful intelligence.

If you want to glean more about client X, you can discover that couples like them tend to be at a particular point in their financial trajectory. That might indicate an opportune time for certain discussions, whether about products or decisions, and prompt topics to raise.

2. Use AI to become even more personalized

AI analysis may seem impersonal, but its insights empower you to deliver a more personalized experience. For instance, AI gives you the data norm. If you see your client is an outlier, why? Are they not telling you something that’s relevant to their financial future? Do they have other income or investments you don’t know about it?

You won’t learn the answers from AI, but you’ll have a solid starting point to ask the right questions to get to know your client even better.

3. Limit the risk of your clients leaving

Part of our AI platform is retention and engagement scoring. You’ll have cues for when you might want to be reaching out more, to provide extra hand-holding or increased communications.

The AI platform can also alert you to warning signs. For instance, why would a client who’s at non-retirement age be asking for monthly income routinely? Perhaps because you’ve misread their situation, and they may be growing unhappy with you as a result. These cues can help advisors to take a closer look at their clients’ situations.

4. Improve your overall efficiency

Any technology should free your time. AI is part of our OneBoss back-office system, our advisors never have to leave the platform. Know Your Client, document management, suitability reviews, voice notes — everything is in one place.

Advisors juggle many tasks, but there’s only so much time in the day. AI and other tech tools help you to ease your burden and maximize that time. It’s not just about the individual tools, but about how they can operate more seamlessly.

When advisors are considering changing firms, they have many questions. Here’s a great one to ask: What supports are in place — from tech to personnel — that enable me to spend less time on paperwork and number crunching and more time with my clients?

5. Have an open mind

As with any great tool, AI should be used to support you in meeting your clients’ needs. New technology can feel daunting, often leading to hesitation or even resistance. In a financial advisory setting, it’s completely understandable to believe that no machine could understand your clients as well as you do.

You do know them best. But the point is to develop an even deeper understanding of your client, in any way, so you can enhance your service and have more productive conversations.​ That serves the well-being of clients and advisors alike.

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This three-part series offers insights into what advisors can do to position themselves for success. Learn more about how Sterling Mutuals can help you meet your clients’ needs and plan for the future.