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.

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.

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.

In today’s environment, asset managers are navigating seismic shifts in public market dynamics that tend to emerge every five years or so. The recent downturn in equities has led some professionals to reassess their public market exposure and explore alternative strategies to mitigate portfolio volatility. While there’s no universal solution to this challenge, there are straightforward and effective ways to enhance portfolio composition by incorporating private assets.

Unstable politics and overpriced stocks: A risky combination

With Donald Trump’s ascent to the Oval Office, public markets were destined for heightened volatility. The threat of tariffs against key trading partners was guaranteed to disrupt markets, marking a historical shift away from a global free-trade model. Additionally, profound planned cuts in U.S. government spending serve to increase risks to the broader economy and employment. Some analysts estimate that layoffs associated with the Department of Government Efficiency (DOGE) could reach 1 million[1], or nearly 20 percent of the U.S. public workforce. The historic realignment of the public workforce, coupled with significant government spending cuts by itself could push the economy into recession.

In combination with frothy equity markets[2]  fueled by persistently high expectations, normalcy bias, and a relentless passive bid via the ETF-ization of financial markets, a fierce downdraft was inevitable.

According to the well-observed Buffett Indicator[3]—a metric that compares the total market capitalization of a country’s publicly traded stocks to its gross domestic product (GDP)—the market cap to GDP ratio is 187.6% (as of March 31, 2025). At these levels, the indicator implies that U.S. equities remain significantly overvalued despite the recent correction.

Historically, the S&P 500 and S&P/TSX Composite indices have exhibited a correlation of approximately 80%.[4] Although managing to buck the trend for the quarter, Canadian equity markets have largely mirrored U.S. market volatility amid ongoing trade tensions and general economic uncertainty.

As of March 31, 2025, the SP/TSX Composite index rose 0.76% year-to-day versus a decline of 4.59% and 10.41% for the S&P 500 and NASDAQ 100, respectively.

Mitigating portfolio risk through private asset allocation

While equities attract most investor attention due to dominant news coverage and their easily measurable price movements, private assets, when used strategically, can help mitigate public market risk. With mark-to-model valuation methods, volatility can be largely eliminated, as unit value changes are not impacted by weekly market fluctuations. Private Real Estate Investment Trust (REIT) and alternative asset portfolios are typically valued solely through data-driven calculations backed by certified appraisals.

Given these advantages and more, private assets are capturing a record share of investor portfolio allocations.

According to Barclays annual report[5], family offices and wealthy individuals are showing increasing interest in private markets. Among the eight distinct benefits cited by its Industry insight segment authors, access to opportunities, diversification and return potential stand out to us as the most prominent.

Regarding the latter, the authors state that “over the long term, private markets have demonstrated an ability to outperform public market equivalents.” The authors further opine that “the average family office portfolio allocation to private market investments is around 45%,” which they see “increasing over time.”

Private REITs and renewable infrastructure funds, such as those offered by Skyline, may be suitable options for asset allocators seeking exposure to private market investments.

Private Assets: Outperformance and stability are possible

Skyline’s REITs and Clean Energy Fund have a strong performance track record, and 2024 was no exception. Skyline Apartment REIT, our largest trust by portfolio fair value, significantly outperformed its public market peers in 2024—a comparison that underscores the trust’s resilience and ability to excel in volatile conditions.

For the year, Skyline Apartment REIT Class ‘F’ units produced a net 10.61% annualized return (6.31% net value increase, 3.86% distribution yield + DRIP; Class ‘A’ since inception: 13.81%), while the five largest publicly traded Apartment REITs by market capitalization produced an average (non-market cap weighted) return on -9.21%. That’s a difference of almost 20 percentage points. If we factor out one-time special distributions from two of the five companies, our performance would exceed all Class units by over 21 percentage points. This is especially notable given this outperformance occurred in a year when the Toronto Stock Exchange gained 17.98%.

With another double-digit return in 2024 and an historically stable long-term performance profile, we continue to demonstrate that private assets can generate consistent results while remaining largely insulated from public market volatility. In fact, Skyline Apartment REIT has not had a unit value decline in almost two decades since inception in 2006. Our investment products have become a valuable addition to many diversified portfolios, offering asset allocators an effective way to mitigate risk without sacrificing performance.

About Skyline Wealth Management

Skyline Wealth Management Inc. (“Skyline Wealth Management”) connects portfolio managers and institutional investors to several private alternative investments operating in the Canadian real estate and clean energy sectors and totaling over $9 billion in assets under management (as at December 31, 2024). These private alternative investments are:

• Skyline Apartment REIT (Fundserv code: SKY2006)
• Skyline Industrial REIT (Fundserv code: SKY2012)
• Skyline Retail REIT (Fundserv code: SKY2013)
• Skyline Clean Energy Fund (Fundserv code: SKY2018)

Each investment comprises a portfolio of geographically diverse assets, offering clients strong historical performance and stable distribution, low MERs, and potential diversification solutions with lower relative volatility to the public markets.

Visit SkylineWealthManagement.ca for more information.

Wayne Byrd, CPA, CMA
Chief Financial Officer, Skyline

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[1] DOGE Layoffs Pose ‘Growing’ Risk To U.S. Economy And Markets, Says Apollo Economist, DOGE Layoffs Bring ‘Growing’ Risk To Economy And Markets, Economist Says, February 24, 2025

[2] Why This Frothy Market Has Me Scared, Why This Frothy Market Has Me Scared – WSJ, December 17, 2025

[3] Buffett Indicator, Buffett Indicator

[4] Private REITs Offer Stability in Uncertain Political Environments, Private REITs Offer Stability in Uncertain Political Environments | Investment Executive, December 2, 2024

[5] Private Markets Annual Report 2024, https://privatebank.barclays.com/insights/2024/september/private-markets-annual-report-2024/#download

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Disclaimer for Skyline Wealth Management:
Skyline Wealth Management Inc. (“Skyline Wealth Management”) is an Exempt Market Dealer registered in all provinces of Canada.  The information provided herein is for general information purposes only and does not constitute an offer of securities.  Sales of interests in any investments offered by Skyline Wealth Management are only made to certain eligible investors pursuant to regulatory requirements and available exemptions. Any information provided herein is current as at the date of publication and Skyline Wealth Management does not undertake to advise the reader of any changes.

Commissions, trailing commissions, management fees and expenses all may be associated with investments in exempt market products. Please read the confidential offering documents before investing. The indicated rate of return is the annualized return including changes in unit value and reinvestment of all distributions and does not consider sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. There is no active market through which the securities may be sold, and redemption requests may be subject to monthly redemption limits. The payment of distributions is not guaranteed and may fluctuate. The payment of distributions should not be confused with an exempt market product’s performance. Distributions paid as a result of capital gains realized by an exempt market product, and income and dividends earned are taxable in your hands in the year they are paid. Exempt market products are not guaranteed, their values change frequently, and past performance may not be repeated. Nothing in this email should be construed as investment, legal, tax, regulatory or accounting advice. Prospective investors must make an independent assessment of such matters in consultation with their own professional advisors.

It’s always critical for investors and their advisors to understand the material risks that may affect the companies they hold in their portfolios. But in times of uncertainty and greater volatility, it’s absolutely critical. Material risks include financial risks, but they also encompass the environmental, social, and governance (ESG) risks that fall under the umbrella of responsible investing.

Investors are increasingly aware of this, with responsible investing funds reaching a new high of more than $56 billion according to Morningstar’s Canada Sustainable Funds Landscape 2024 in Review. Additionally, the Responsible Investment Association’s 2024 Canadian Responsible Investment Trends Report lists that asset managers’ top reasons for considering responsible investing factors are the two that are likely most important to retail investors: to minimize risk over time (77 percent) and to improve returns over time (63 percent).

At NEI Investments, where responsible investing has been an integral part of the investment process for decades, Adelaide Chiu, Vice-president and Head of Responsible Investing, says that although 2024 global flows into sustainable funds were down by about 50 percent compared to 2023 figures, the last quarter of the year saw a recovery, and full-year asset levels were positive.

“That, to me, indicates the interest in responsible investing in the fund landscape itself, and from an NEI perspective — with most of our funds following a responsible approach to investing — we’re still growing year after year,” she says. “What we differentiate with is the responsible investing lens, and we’re continuing to grow — especially in this turbulent market — so it’s positive.”

Chiu points out that the exponential growth in responsible and sustainable investment funds experienced five years ago has moderated — something that’s typical whenever there’s a proliferation of products in a specific area — but that doesn’t mean it’s fading away. A similar exuberance followed by moderation happened with exchange-traded funds in the past, and they remain important building blocks within retail and institutional portfolios.

Responsible investing, she says, has proven its worth, and asset levels are settling into a baseline. As that happens, investors will likely become more discriminating about what they want from responsible investments. They’ll seek out experienced investment teams with the ability to parse qualitative, non-financial data, to see through volatility and market noise, and to reliably assess the risks that may affect a holding.

Standing out with a proven, differentiated process

At NEI, responsible investing includes exclusionary screens, ESG evaluation, proxy voting and corporate engagement. These approaches are included in the firm’s investment decisions and contribute to a track record of repeatable, consistent results.

NEI’s 2024 Responsible Investment Report highlights the hundreds of company evaluations conducted annually, with almost 12,000 proxy items voted, 210 companies engaged, 100 hours of due diligence meetings with 20 subadvisors, and four impact mandates launched within one year.

Meanwhile, the firm prides itself on transparency. For example, NEI was one of the first Canadian asset managers to make its proxy voting guideline public. Chiu says that influenced peers to become more transparent as well. Regulators have joined the push for transparency, requiring firms to provide their proxy voting guidelines to any investors who request them.

As part of its commitment to getting to know holdings at a deeper level, the NEI team makes a point of establishing long-term relationships with executive management teams.

“We have engagements with them on a one-on-one basis to talk about sensitive topics, such as how companies can improve their strategies, what opportunities lie out there that maybe their competitors aren’t aware of, and the best practices for companies that want to…aim to be a leader within that space because they know incorporating these positive attributes can benefit their business,” she says.

Chiu offers, as an example, NEI’s engagement with Amazon Web Services. Recognizing the tremendous resources required to power AI, alongside its promise, NEI has been speaking with senior management about water usage in particular.

“If they don’t have the adequate resources, if they don’t have access to water, or if they’re not thinking about the future costs of having access to water, it will impact their future growth,” Chiu says. “They may not be thinking about the longer term viability of future cashflows, but we do.”

Telling different stories can give advisors an edge

A “differentiated view” with “differentiated products,” as Chiu puts it, allows advisors to tell clients different stories that they can relate to and that therefore strengthen relationships. Many more of these stories are contained in NEI’s annual Focus List, recently released for 2025.

“A lot of those companies will resonate with advisors. They’ll probably hold them in their portfolios. And with the Focus List, they’ll be able to understand other issues that perhaps investors are not focused on. It gives them an advantage,” she says.

“Even in the face of market volatility, advisors can offer their clients comfort that they continue to move forward on their responsible investment objectives.”

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”).

As retirement approaches for many financial professionals, succession planning becomes critical—not just for the advisor, but for their clients as well.

Canadian studies show that more than half of financial advisors are over age 55. The need for a clear exit strategy is pressing. While selling a practice to an outside buyer is an option, transitioning the business to a younger, internal successor often offers a range of clear benefits.

Bringing associates into the fold isn’t only a smart succession strategy for the long term, it can also bring immediate advantages and long-term gains for all parties.

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Give your clients peace of mind

Integrating a younger advisor into your practice provides clients with a sense of continuity and security. This is particularly important for sole proprietorships where the advisor is the only point of contact.

With a successor in place, clients can rest assured that their financial advisory relationship will continue, even after the original advisor retires.

Expand your client base

Advisors and their clients are typically close in age. In serving them, advisors often don’t focus enough on attracting a younger client base. Some advisors wait too long to address this, only to find that older clients begin depleting their assets in retirement. That can decrease the value of the practice.

A younger advisor can help attract a new generation of clients, ensuring the practice continues to grow and increase in value – and ultimately delivering higher returns for the exiting advisor.

Build long-term relationships

Attracting younger clients can include connecting with the next generation of a current client’s family. As wealth passes down through generations, the advisor-client relationship can continue seamlessly, maintaining value and deepening trust. This ensures that relationships and assets stay within the practice, safeguarding its long-term viability.

Gain fresh perspectives

Collaboration between seasoned and younger advisors can introduce new ideas. This can inject fresh energy into the practice, reinvigorate the veteran advisor, and open up innovative ways to work and serve clients.

While these four advantages are compelling, what steps should advisors take to ensure an effective and profitable transition?

That takes time. In setting the foundation for success, think about compatibility and the ability to build meaningful relationships with clients—qualities that go beyond just financials. Consider too the factors that entice advisors. Here are three things to keep in mind.

Advisors want the chance to grow

Grooming a successor requires careful attention. You need someone who aligns with your practice’s culture and can form strong client relationships. Providing mentorship is crucial.

Our industry often focuses on sales management, but true development involves coaching and guidance. Investing in mentorship programs can greatly benefit both the younger advisor and the practice as a whole.

To draw in the next generation of advisors, compensation structures must be appealing too. Sterling Mutuals offers a flat-fee model that allows advisors to control their expenses while exponentially benefiting from growth. Sterling’s advisors receive 100% of their commission, thereby receiving the maximum upside from the business they build.

This structure, combined with solid mentorship, ensures that your practice remains attractive to younger advisors looking for a path to partnership and succession.

Technology plays a role

Technology is an essential enabler for the success of any practice. At Sterling, we offer a suite of proprietary technology solutions—from workflow management to client service platforms—that help streamline operations.

These tools not only save time but allow advisors to focus more on what matters most: their clients. The right technology can make your practice more efficient and appealing to potential successors.

Succession planning is a journey, not an event

Succession planning doesn’t happen overnight. It’s a process that requires foresight, careful planning, and a commitment to the future. Just as advisors expertly guide their clients through retirement planning, they must do the same for their own transitions and proactively prepare for what’s next.

Advocating for younger advisors and helping them succeed isn’t just good for them; it’s good for your clients, your practice, and the health of our entire industry. By aligning yourself with the next generation, you’ll help ensure a smooth transition and set up your practice for continued success long after you’ve retired.

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.

U.S. equities drove stock market returns in 2024, with the effect amplified for Canadian investors as the loonie weakened against the U.S. dollar. But lift the hood and it quickly becomes apparent that a handful of stocks — the Magnificent Seven — had an outsized effect on U.S. equity performance. That overconcentration poses risks for investors in 2025, as do stocks priced to perfection and geopolitical risks that could negatively affect investor sentiment.

In a potentially volatile environment, advisors know that optimizing diversification is more important than ever to minimize concentration risk and maximize returns. But what’s the best way to go about achieving that when even broad market indexes are disproportionately affected by the rise or fall of just a few companies? To achieve consistently good performance, it’s critical to go beyond regular rebalancing and look for different, deeper ways to achieve diversification.

At NEI Investments, Judith Chan and her team have developed a multi-step, multi-layered approach to diversification that regularly refreshes market assumptions and return expectations to assess which areas of the market are most attractive in future risk-adjusted returns. Chan, NEI Investments’ Vice-president and Head of Asset Allocation describes what she does, on a regular basis, as “re-optimization.”

Unlike regular rebalancing, re-optimization is a process to re-constitute the portfolio using the most updated market assumptions, aiming to identify and include the most attractive opportunities in the portfolios, while paying close attention to risks that can undermine the team’s efforts.

“Even the stock-bond correlation can change quickly, and that would give us a different mindset or a different opportunity in a multi-asset setup,” says Chan. “For us, it’s the relationship and the relative attractiveness between asset classes that impact us most.”

Finding the right balance for uncertain times

Investors need to be prepared for the possibility that markets will experience volatility in the coming months, Chan says. With U.S. equities in particular trading at high prices, and starting valuation being a very strong indicator of future total returns, it’s critical to be mindful of risk.

“We want to be a little bit more conservative and more defensive. We’re looking for opportunities to be able to capitalize on the downside. If we get market volatility, we want instruments or building blocks where we can build in that offset, to provide downside protection more than ever.”

In this context, Chan suggests that portfolios may benefit from holding alternatives, derivatives, real assets, and instruments with built-in downside hedging. At the same time, she emphasizes, it’s important not to be “too fearful” and pay too high an opportunity cost.

Finding the right balance in any market environment is what optimized diversification is all about — and, again, Chan believes it’s essential to continuously monitor and fine-tune that balance as conditions, and market environment changes quickly. There’s a need to cultivate agility — an ability to anticipate changes and promptly make appropriate adjustments.

“Even though we assess our long-term assumptions on an annual basis, we also have tactical shorter-term signals that give us a more agile look at the market. If the assumptions are changing, or if market dislocation gets extreme, we can make changes in our portfolios with more conviction,” she says.

In the face of current pressures on markets, Chan emphasizes it’s vital for advisors to look for ways to neutralize unintended tilts to ensure the portfolios their clients hold can continue to perform whatever surprises markets throw our way. One way NEI manages this challenge is to make use of a wide range of building blocks within portfolios. Recently, the team has broadened the building blocks at its disposal – for example, by adding more exchange-traded funds and a long-short equity fund to the menu.

The NEI team has also invested in human expertise and added technological tools, including leveraging predictive market modelling using AI technology such as machine learning to enhance the portfolio construction process, in order to position portfolios for the next 10 years. People and technology working together enables a new level of precision – what Chan calls having “fingertips on the pulse of the markets and our funds” – and generate fresh insights into the makeup of each portfolio.

Accessing predictive models that respond to real-time analytics can help advisors steer clients through inevitable ups and downs over the next decade and more. To learn more about how NEI’s investment team identifies, capitalizes on and monitors underestimated investment opportunities using a rigorous investment process, reach out to the NEI Sales team today or visit their website for more information.

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”). 

In 2024, the Magnificent Seven contributed about 50 percent of the S&P 500 Index’s return and accounted for about 75 percent of earnings growth. However, this group of stocks — comprising Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — may not sustain that level of dominance through 2025 and beyond. That’s a risk to investors without broadened equity market exposure. “This whole Magnificent Seven theme — we’re all just waiting for it to fade,” says John Bai, Senior Vice-president and Chief Investment Officer with NEI Investments, who points out that the U.S. market hasn’t seen this degree of concentration since the 1960s.

“It’s more concentrated than the dot-com bubble in 2000. It’s more concentrated than the Nifty Fifty back in the early 1970s. And when markets get this concentrated and they have these bubbles, they only do one thing: pop. And that’s never good for investors.”

Importantly, however, Bai doesn’t expect the aftermath of this period of overconcentration to look like the ones investors have experienced in the past.

“We’re not saying, like other bubble periods, that the bubbly part of the market is going to collapse and the rest of the market is going to outperform. We think [the Magnificent Seven] will continue to be steady, buoyed by their earnings growth rates. But the rest of the market is just going to catch up — and, when you have the highest-weighted stocks going sideways and the rest of the S&P 500 going up, it’s actually a pretty positive environment,” he says.

After all, the Magnificent Seven’s returns are justified to some extent by their strong earnings growth. The difficulty is that they are also expensive, trading at a 50 percent premium compared to the other 493 stocks in the S&P 500. Plus, the rate of change between Magnificent Seven earnings growth rates and the rest of the market’s is starting to narrow.

For example, Bai points out, quarter-over-quarter earnings growth rates in the fourth quarter of 2023 were 60 percent for the Magnificent Seven and negative for the rest of the index. On the other hand, projections for the first quarter of 2025 are for quarter-over-quarter earnings growth rates of less than 20 percent for the Magnificent Seven and more than 10 percent for the rest of the index.

Opportunity to buy cheaper stocks with solid growth potential

Clearly, 20 percent is still a healthy earnings growth rate, but there is an opportunity for investors to capitalize on a broader range of stocks’ 10 percent earnings growth rate at far lower valuations. Sectors that are well positioned for positive earnings momentum at reasonable prices include financials, healthcare, and energy, says Bai. He adds that cuts to interest rates by the U.S. Federal Reserve — which happened three times in 2024 — tend to result in outperformance by the equal-weighted index compared to the market cap-weighted index.

Bai anticipates that broad U.S. market performance will be supported by the new Trump administration’s pro-business policy tilt. An already strong U.S. economy is likely to benefit from tax cuts and deregulation — though tariffs, if imposed to the extent initially promised, will put upward pressure on inflation. There is also the potential for Trump’s policies to worsen deficits, increasing U.S. federal debt and keeping interest rates high. And, a combination of high inflation and high interest rates may push the U.S. into recession.

Still, Bai has a positive outlook for the broad U.S. equity market. “It’s a great environment for earnings and for investor optimism, so we think that provides a good backdrop.”

Time for active management to shine

“With the markets broadening now, we think investors will be well served by active management,” Bai emphasizes, pointing to the NEI Select RS Portfolios as simple, all-in-one active management solutions. “When markets are very concentrated in a few high market-cap securities, it’s very hard to beat the index. But when the economy starts to broaden, when earnings start to broaden, when the stock market starts to broaden, that’s when you see active management really shining.”

Whatever the economic and market environment, Bai says NEI Investments makes sure its portfolios don’t drift toward accidental overconcentration by taking an “X-ray” view of every fund to identify “unintended tilts.” In any mix of funds, there may be an unintentional overweight or underweight toward or away from a geographic region, capitalization size, or management style, for example. The key word there is unintentional. Those tilts are corrected so they don’t distort the intentional positioning of a portfolio.

Bai describes his team’s asset allocation approach as “re-optimization” rather than rebalancing. The process involves revisiting capital market assumptions on a regular basis to ensure portfolio allocations are optimized for long-term returns, expected earnings growth, valuation rates, and a multitude of other metrics that feed into capital market assumptions and portfolio construction. The long-term focus is important because it aligns with many investors’ time horizons, with the goal of capitalizing on areas with the highest probability of delivering the returns those investors need to accomplish their goals.

“We’re never going to be at neutral. We’re always going to have an active view on which factors we want to overweight or underweight, but we want to make sure the bets we’re making are intentional and aren’t too extreme,” says Bai.

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.