How to build your wealth like the ultrawealthy

When you are searching for the best way to do things, you look for someone with experience. If you need information on gardening, you go to a nursery. If you want to build a house, you find a professional homebuilder with a good reputation and a long track record. Many people would say the same applies to investing: if you want to find the best strategy for building wealth, you look to those that have accumulated the biggest portfolios over the years. Enter the “Ultra-High Net Worth Individual” (UHNWI).

According to Investopedia, UHNWIs are those with investable assets of at least $30 million, an amount that many people balk at. UHNWIs are people too. As my mom would say, “They put their pants on one leg at a time like the rest of us.” They can have biases and make mistakes. However, here are three techniques in which they excel that everyone can use to invest like the ultrawealthy.

Lesson 1: Use a Team Approach

UHNWIs often have complicated financial pictures, and it is important that all the moving pieces fit together. Many UHNWIs will establish their own family office to manage their affairs with a team consisting of accountants, financial planners, portfolio managers, lawyers, and other professionals. The main pillars of planning include complex topics such as investments, insurance, tax planning, estate planning, and generational wealth transfers.

While it is unrealistic for most people to personally retain such an assembly of individuals, these are all professionals that everyone can and should gain some access to. Think of your financial life as a company. If you have multiple departments doing the same thing, you can reduce redundancies. If there are departments missing entirely, the best time to complete your team is now. If you are wanting to build a strategy to maximize your wealth and meet your objectives, you will be better off with input from a team of experts with diverse backgrounds.

After all, if these different professionals are not working towards the same goal there could be issues. For example, your portfolio manager could earn you an excellent return, but if they are not aware of a plan you made with your accountant to provide a large cash gift to one of your children, then it may be in an illiquid asset that is difficult to gift.

By having a level of coordination between these professionals, you can have a unified plan that covers all your bases and minimizes confusion. The most important part of using a team of professionals is not to make your life as complex as a UHNWI, but to streamline your resources so you can spend less time worrying about your life’s journey and more time enjoying it.

What can a team of professionals do for you?

If you think of the group of professionals in your team as the company supporting your financial and life goals, each should bring value to you and provide an Return on Investment toward achieving your goals. In the organizational structure each also brings a unique skill set.

Lesson 2: Invest in Alternative Asset Classes

Picking any one asset class to invest all your money is quite literally putting all your “nest eggs” in one basket. There is a chance it may work out, but it is a highly risky move that is unnecessary to building your net worth over time.

Increased diversification leads to better risk-adjusted returns. An important tool in the UHNWI toolkit for diversification is alternative asset classes. This includes access to private markets like private mortgages, private real estate and private debt.

What are the benefits of having access to private markets? For your portfolio, it means having investments that are less correlated to public markets (so you will see less volatility during market crises). In addition, many of these asset classes have higher expected returns because they earn an illiquidity premium.

Private markets are not without risk. The key one is that you cannot sell these investments quickly, so it should not be where you invest your “in case of emergency” money. Another risk is that high minimum investments (which are common to alternative asset classes) may lead you into concentration risk, meaning that you cannot buy enough variety in your investments to properly diversify your portfolio. For UHNWIs that have portfolios in the tens of millions of dollars to invest, this is hardly an issue.

At Alitis, we use pooled investment vehicles so that all our clients can gain an appropriate allocation to alternative asset classes allowing them to meet their return objectives with their given comfort level of risk.

Lesson 3: Take A Long-Term View

If you are completely focused on the short-term, you will find this slows your progress.

Last week I went mountain biking for the first time in a while with some friends. Given I was a little rusty and was riding a borrowed bike, I was a little slow to get going. I could not help focusing on every single root and obstacle in my way and found myself off-balance and falling behind.

Soon enough, one of my friends noticed what was going on and gave me some advice. She told me to stop looking down and start looking ahead. When you are moving faster and keeping your vision forward, the bike will absorb those bumps along the way, and you will have greater control. Sure enough, with this bit of advice I was able to hit the trails with greater speed, keep up with the group and have a lot more fun!

With investing, there are also times when the short-term bumps are taking up too much of our attention. UHNWIs are very good at keeping their attention on long-term goals. One reason for this is they often have a portion of their wealth in low-risk investments that is enough to meet not only emergencies, but also to sustain their lifestyle over the long-term.

This is important because it gives them the comfort and control needed in case of a market downturn, which is the exact point in time where they SHOULD NOT be making changes to their portfolios. After all, if a portfolio is truly built to fit your needs, it should be a good fit across all parts of the market cycle.

It is important for everyone to have money accessible for emergencies, as there is no telling what the future will hold. While few people can allocate enough to sustain their lifestyles for decades like a UHNWI can, a good guideline many financial planners would say, is to have enough to cover typical expenses for six months.

This does not necessarily mean that your emergency money needs to be sitting in a bank account earning nothing, but it is something to think about. If your current income were interrupted for the next six months, where would you access cash in a way that does not incur excess taxes or fees? If you can answer this question, you will find yourself well on your way to thinking long-term.

Summary

There is no “one size fits all” financial plan or secret investing plan for the ultrawealthy. Everyone will have different opportunities, goals and constraints along their financial journey.

By thinking like an Ultra-High Net Worth Individual, you can:

  • Build Your Team to make a unified plan to maximize your wealth
  • Gain access to Alternative Asset Classes to diversify your portfolio
  • Take A Long-Term View to prepare for and minimize obstacles along the way

Growing your wealth is similar to managing your personal health. Different techniques and routines will work for different people. There are many aspects to consider and you must continue to monitor and work on it regularly if you expect it to improve.

If you would like to discuss and discover ways to grow your wealth like an Ultra-High Net Worth Individual, please reach out to us to schedule an appointment with one of our Advisers or Wealth Service Coordinators.

Sincerely,
Thomas Nowak, BComm.
Associate Portfolio Manager

Disclaimer 

This report is provided, for informational purposes only, to customers of Alitis Investment Counsel Inc. (“Alitis”) and does not constitute an offer or solicitation to buy or sell any securities discussed herein to anyone in any jurisdiction where such offer or solicitation would be prohibited. Opinions expressed in this report should not be relied upon as investment advice. This report does not take into account the investment objectives, risk tolerance, financial situation or specific needs of any particular customer of Alitis. Each individual’s investment objectives, risk tolerance, financial situation and specific needs should be evaluated before making any investment decision.

Unless otherwise noted, the indicated rates of return are the historical annual compounded returns for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into account income taxes payable by any securityholder that would have reduced returns. The investments are not guaranteed; their values change frequently and past performance may not be repeated. Unless otherwise noted, risk refers to the annualized standard deviation of monthly returns for the period indicated.

The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. Alitis assumes no duty to update any information or opinion contained in this report. Neither Alitis nor any director, officer or employee of Alitis accepts any liability whatsoever for any errors or omissions in the information, analysis or opinions contained in this report, nor for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

Client Update – COVID-19 & the New Normal

To our valued clients,

At Alitis, we are frequently assessing the COVID-19 landscape in our province.

As of October 5th, new modelling presented by Dr. Bonnie Henry indicates that BC has begun bending its epidemiological curve back down, which is credited on stricter regulations and public compliance.

We are still pro-actively managing the Alitis pools with vigilance and care during this time of continued market turbulence. We continue to offer phone and Microsoft Teams video meetings, as well as limited in-person meetings with the following procedures in place:

  • Only one group of clients will be allowed in the Alitis offices at one time.
  • Client meetings will be scheduled with adequate time for proper cleaning and sanitizing in between meetings.
  • Clients are requested to phone 250-287-4933 when they arrive at the office and remain in their car. The office door will open when we are ready for you.
  • Clients will be required to apply hand sanitizer upon entering the Alitis office.
  • Clients will be required to wear a non-medical face covering/mask. We will provide a disposable non-medical face mask if needed.

While we are excited to see our clients in person, if you, or anyone in your household are exhibiting COVID symptoms, have been requested to self-isolate, have arrived from outside Canada within the last 14 days, or have had contact with anyone who has COVID-19, we kindly request that we hold your meeting virtually over the phone or video conference, or postpone until a later date.

We would like to sincerely thank all our clients for their patience and understanding during this unprecedented time.

Sincerely,

The Alitis Team

 

Top 3 Fears For Most Investors

Signs of the emergence of second wave COVID-19 cases and the risk of further deterioration of U.S.-China relations are causing a slump in the stock markets. There is also no denying the fact that as the US & Canada relief packages run out in the near future and the levels of unemployment remain significantly high, the fundamentals remain grim and the future is hard to predict.

In such times, it is natural to have apprehensions and fears regarding investing, but we are here today to debunk some of the more common myths about investing and provide our perspective.

#1: I will lose all my money by investing 

Some individuals believe that the financial markets are risky and that nobody ever beats the market. The truth is that investments will have positive and negative periods of return, but having a long-term investment strategy and sticking to it, is the best method for growing your wealth over time.

Investing is not a gamble, rather it is the mechanism used for generating returns by purchasing investable assets. Investments are priced using future expected returns, and thus entail some degree of risk, but this is calculated risk. The investments you make should be based on thorough research and due diligence, looking at investable assets both from a macro-economic and micro-economic stance (considering both qualitative and quantitative aspects, as well as how they combine into your total portfolio).

Granted one might just consider investing in Guaranteed Investment Certificates (GICs) instead of trying to get higher long-term consistent returns. But then, in today’s low-interest-rate environment, can we honestly say that we are satisfied with our investments generating 0.7% annual return (current one-year GIC return is 0.7%) which does not even keep up with inflation (2019 inflation rate in Canada was 1.95%)?

Investing is all about making informed decisions, finding the risk vs return trade-off which best fits our own investment preferences, and focusing on long-term performance instead of short-term volatility.

#2: Fear of missing out 

Fear of missing out, made popular as a millennial meme, often stoked by social media, that somewhere someone was having more fun than you. It has since morphed into every investor’s concern that there is a sector, asset class, or investment that they are underexposed to that is going to be this year’s big winner. A classic example of this is when Warren Buffet, one of the most successful investors of all time and who is also known as the Oracle of Omaha, openly admitted to being too late to the game and missing out on the opportunity to invest in Amazon early on.[1]

Another kind of fear of missing out is market timing – is this the right time to invest or should I be exiting the markets now? History has proved time and again that market timing has never really worked in anyone’s favor.[2] So, if you are looking for the perfect day to invest – well there is none!! It is all about knowing and understanding the asset class and the fundamentals that drive their performance – bonds, stocks, commodities, real estate, and other alternative investments are each unique and serve a different purpose.

 

#3: What will happen if the markets drop the year after I retire? 

Let us assume that an investor retired in January 2020 at the age of 60, after having worked and saved for 30 years. Following that, the investor’s portfolio dropped in March 2020 by 20%. Does that mean he or she needs to get back to work to make up for all the money lost?

The market volatility or investment drop over a 3-month, 6-month, or even a 1-year duration should not impact how you live your life or your ability to retire. The duration of your retirement is 25-35 years (you are not spending all your hard-earned savings the year you retire but gradually over the next two or three decades). This means your investments have more or less the same time-frame to recoup the losses. Some measures such as reducing the rate of withdrawal from the investment portfolio can assist in faster recovery during periods of an extreme market correction, but your life plans can remain intact.

And that new retiree, who was pulling their hair out at the end of March 2020 with their portfolio having dropped 20%? They stuck to their plan, stayed invested, and now their portfolio at the end of August 2020 is likely back to the same level they started the year with.

The chart below shows how $10,000 invested in the S&P 500 index, for the 20-year period of 1999 through 2018, would have performed under various scenarios.

During times of uncertainty, investors need to look beyond traditional asset classes for other sources of returns to meet their financial objectives with greater confidence. Alternative investments can provide an interesting opportunity for investors to diversify their portfolios, dampen the impact of market volatility and help them achieve their long-term investment objectives, even during times of market uncertainty. By adding alternatives like real estate, private debt, alternative fixed income, mortgages and private equity to the mix; investors could enhance portfolio performance, boost diversification and reduce their overall risk.

One of the leading commentators on personal finance, Financial Journalist Jane Bryant Quinn once said, “The market timer’s Hall of Fame is an empty room.”

Sincerely,
Apurva Parashar, MBA, CAIA, CIM
Associate Portfolio Manager

Resources

  1. https://fortune.com/2018/05/06/why-warren-buffet-was-wrong-about-google-amazon/ & https://www.cnbc.com/2017/05/06/warren-buffett-admits-he-made-a-mistake-on-google.html
  2. https://www.rbcgam.com/documents/en/advisor-support/time-in-the-market-vs-timing-the-market.pdf

Disclaimer 

This report is provided, for informational purposes only, to customers of Alitis Investment Counsel Inc. (“Alitis”) and does not constitute an offer or solicitation to buy or sell any securities discussed herein to anyone in any jurisdiction where such offer or solicitation would be prohibited. Opinions expressed in this report should not be relied upon as investment advice. This report does not take into account the investment objectives, risk tolerance, financial situation or specific needs of any particular customer of Alitis. Each individual’s investment objectives, risk tolerance, financial situation and specific needs should be evaluated before making any investment decision.

Unless otherwise noted, the indicated rates of return are the historical annual compounded returns for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into account income taxes payable by any securityholder that would have reduced returns. The investments are not guaranteed; their values change frequently and past performance may not be repeated. Unless otherwise noted, risk refers to the annualized standard deviation of monthly returns for the period indicated.

The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. Alitis assumes no duty to update any information or opinion contained in this report. Neither Alitis nor any director, officer or employee of Alitis accepts any liability whatsoever for any errors or omissions in the information, analysis or opinions contained in this report, nor for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

Alitis’ Values

Back in 2007, driven by my personal values of learning, community, adventure and growth, I moved across the world to Tanzania to volunteer at a rural hospital. During the 18 months I was there, I had the good fortune to play a few different roles within both the hospital and the community. One of the most memorable and rewarding experiences was coaching the local men’s football (soccer) team. We traveled to other villages to play, allowing me to explore the surrounding area, as well as, meeting a wide assortment of interesting characters. Had I not been guided by my values; I may not have taken the opportunity to move to Africa nor go outside my comfort zone to coach the team.

At Alitis, our corporate values are at the center of all that we do. Given how the world and our community has changed due to COVID-19 over the past few months, these values are more important now than ever.

Alitis’ values are centered around 3 key themes; Community, Integrity, and Innovation.

At Alitis, our values guide our decisions and are the foundation that has enabled us to be where we are today.

Community

People – “Our team works together to support each other to thrive by fostering teamwork, respect and growth.”

Relationships – “Our clients and collaborative partners are treated as friends and family; they are our biggest advocates.”

Community – “We are a leader in our community and industry through our volunteer work, sponsorships and participation on Boards and Committees.”

Fun – “We come to work through choice. We celebrate our successes. We act in a way that is appropriate to the business. Our clients and co-workers see us as genuinely friendly and up-beat.”

Integrity

Trust – “We earn the trust of our clients through acting in their best interest. We earn the trust of our team members through having faith in one another to do our jobs well.”

Ethics – “We strive to do what is right for our clients, our profession, our firm and each other.”

Communication – “The voices of our clients and our team are welcomed and encouraged. We appreciate that many of our best ideas come from them.”

Innovation

Quality – “We aim to deliver premium value to our clients by providing outstanding products and service.”

Change – “Our entrepreneurial team embraces change to create opportunities for our firm and clients.”

Creativity – “We encourage and invest in creativity to invent and reimagine solutions, leverage technology and promote innovation that best serves our clients.”

 

As we found ourselves in the midst of a global pandemic, with core values and focus on people and relationships, Alitis provided a flexible and safe environment, allowing the team to continue working, stay connected and maintain relationships with our clients and each other. Guided by our value of communication, we deliver regular updates to our clients on various important topics including what we were doing as a firm and what we were seeing in the markets as a result of COVID-19.

As a bit of a tech nerd, I am very drawn to Alitis’ values around innovation. Alitis has continually embraced innovation throughout the years and have implemented various structures and technologies throughout our processes and procedures. The use of cloud-based technologies for many systems allows for remote offices with a virtual work force and the ability to maintain physical distance from each other. If Alitis had not incorporated a mindset of innovation, COVID-19 would have been a major interruption to the service that we provide.

In a similar way that my personal values set me up for an amazing adventure in the middle of Tanzania, Alitis’ values are the guiding principles that allow us to support our clients, our team, and manage our funds through the unpredictability of 2020.

Sincerely,
Chad Grimm, BComm.
Manager, Business Development and Marketing

Alitis Investment Update – August 2020

August 12, 2020:  It has been two months since our last investment update so we thought it would be a good time to provide another one.  Calm and orderliness has returned to the markets after the massive sell-off that occurred in March due to COVID-19.  This has resulted in decent returns for the Alitis Pools over the last few months:

Class E Units* 1 Mo 3 Mo 4 Mo 2020 YTD 1 Yr 3 Yr 5 Yr 10 Yr
Alitis Strategic Income Pool 1.3% 3.9% 6.4% 2.3% 3.3% 4.0% 4.6% 3.8%
Alitis Income & Growth Pool 1.9% 6.1% 8.9% -0.8% 2.5% 4.6% 4.7% 4.7%
Alitis Growth Pool 1.9% 6.7% 10.3% -4.5% -0.9% 4.6% 4.9% 5.4%
Alitis Private Mortgage Fund 0.7% 3.1% 3.8% 1.3% 4.4% 6.2% 7.8%
Alitis Private REIT 1.1% 1.7% 1.7% 1.8% 6.1% 9.7%
Alitis Private Real Estate LP 1.7% 2.2% 2.2% 3.6% 7.2% 8.3%

* All returns to July 31, 2020.  3 year, 5 year, and 10 year returns have been annualized.

The following provides further information on the strategies that we employed, as well as, what we see as we look ahead:

Fixed Income

One of our fixed income strategies is to diversify into different types of alternative fixed income investments and private debt to enhance returns. The liquidity stress in the fixed income markets that we saw in March showed us that these increased returns, specifically in alternative fixed income, come with a cost and that cost is volatility. Since then, our alternative fixed income investments have performed very well and on average gained over 18%.

Looking ahead: Central banks’ support of bond liquidity has been positive and we expect this support will continue for the near and mid-term. As we look further out, we believe that yields are near a lower bound and the stabilization of the corporate/high yield market will likely continue but at a much slower pace. Our thought is that the upside for traditional fixed income investments is lower than it was in March/April and given this belief, we are actively shifting away from fixed income towards stocks within our Income and Growth Pool. We believe there will likely be more upside available in stocks in the months and years ahead.

Mortgages

Mortgage investments have continued to do well during the COVID-19 crisis.  Most of the mortgage investments are in the residential sector which held up very well.  From the information we have received, very few borrowers are defaulting on their payments, so it seems to be business-as-usual at this time.  Commercial mortgages, which make up less than 20% of the holdings, are experiencing some issues but nothing that is concerning.  As mentioned in our last update, we were shifting some money from private mortgages to publicly traded mortgage investments as the expected returns were higher; public mortgages in the Alitis Private Mortgage Fund were increased from approximately 11% of the portfolio in February to 16% in July with some gains achieved.

Looking ahead: We continue to expect higher returns on public mortgages as prices increase and yields decline to be more in line with what we are seeing with the private mortgages. For the most part, however, we are expecting a return to normal circumstances.

Stocks

We have stayed cautious over the last few months as the COVID-19 situation has created conditions that are difficult to assess – high unemployment, massive government deficits, and significant intervention by central banks.  The conditions do not paint a rosy economic picture, yet the markets slowly marched upwards over the last couple of months and have provided some good gains.

Looking ahead: The strategy has not changed since our last update and we continue to be cautious as we expect to see volatility reappear.  We do expect to see more upside to stocks relative to bonds/cash and will slowly allocate more to stocks as the year progresses and opportunities arise.  As well, we are conducting due diligence on a few private equity investments and may add one or two over the next few months.

Real Estate

Alitis has predominantly invested in residential multi-family housing which is regarded as the safest category of real estate, and so far this year that has proven to be the case.  To gauge potential impacts, we looked back to the Financial Crisis of 2008-2009 to see how real estate reacted.  We found that the capitalization rates (“cap rates”) increased marginally which had the effect of slightly lowering the value of real estate.  We used this approach in valuing the properties held by the Alitis Pools in order to be conservative with our valuations.   The net effect is that real estate experienced a period whereby valuations remained flat for a few months. With respect to the outside managers we use, they have generally experienced limited ill effects due to COVID-19 so their valuations were fairly stable on average.

Looking ahead: As mentioned, there appears to be limited issues with respect to the vast majority of the real estate held, which is good news.  In fact, mortgage borrowing rates have dropped significantly with 10-year mortgage rates below 1.75%.  Some projects are getting financed at these rates which will result in excellent cash flow to the Alitis Pools.  This also means that we have cash to reinvest in new real estate projects. Alitis has committed to two new deals in Winnipeg and one in Victoria.  Overall, we are optimistic about the real estate portfolio and future returns.

* * * * *

Thank you for taking the time to read this update and if you have further questions, please feel free to contact your adviser.

Sincerely,

Alitis Investment Committee

Mitchell Prothman, Todd Blaseckie, Thomas Nowak, Kevin Kirkwood

 

Disclaimer 

This report is provided, for informational purposes only, to customers of Alitis Investment Counsel Inc. (“Alitis”) and does not constitute an offer or solicitation to buy or sell any securities discussed herein to anyone in any jurisdiction where such offer or solicitation would be prohibited. Opinions expressed in this report should not be relied upon as investment advice. This report does not take into account the investment objectives, risk tolerance, financial situation or specific needs of any particular customer of Alitis. Each individual’s investment objectives, risk tolerance, financial situation and specific needs should be evaluated before making any investment decision.

Unless otherwise noted, the indicated rates of return are the historical annual compounded returns for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into account income taxes payable by any securityholder that would have reduced returns. The investments are not guaranteed; their values change frequently and past performance may not be repeated. Unless otherwise noted, risk refers to the annualized standard deviation of monthly returns for the period indicated.

The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. Alitis assumes no duty to update any information or opinion contained in this report. Neither Alitis nor any director, officer or employee of Alitis accepts any liability whatsoever for any errors or omissions in the information, analysis or opinions contained in this report, nor for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

The Right Adviser for You

Imagine for a moment that it is a beautiful day on the west coast and your friend invites you onto their new boat to head out on the ocean. The sun is shining, the ocean is calm and you are having a great time. After a few hours boating, you start to feel the cool wind on your skin and notice that the ocean is becoming choppy. You scan the horizon and can see dark clouds approaching quickly. The waves are getting bigger. You turn to your friend to ask what to do and if you will be okay. They explain that they don’t know because they’ve never been in a squall before. In fact, they’ve only had the boat on the lake, never the ocean; you both panic!

Coincidentally, finding the right financial adviser can be a similar situation. The value of the experience and education that your adviser and their team will not only add value in your planning and wealth, it can provide peace of mind when you are on the ocean during a storm. The world as we know it has changed significantly in the past few months.  Finding the right adviser for you is important and can be very valuable, especially in these turbulent times. Here are our top 3 tips:

1. Education: The financial industry is rife with an alphabet soup of designations. A few designations to look for are;

      • CFP (Certified Financial Planner) is likely the most recognized of all the designations in the financial industry. Financial Advisers who have this designation have invested in their education to become a well-rounded professional that is competent in most areas of finance; they are essentially general practitioners of finance.
      • CFA (Chartered Financial Analyst) and CIM (Chartered Investment Manager) are the most common designations when it comes to wealth management. Financial Advisers who have earned these trademarks illustrate a high level of proficiency, dedication, and skill to understand various investments and strategies and how to navigate their client’s portfolios to achieve long term success.
      • CLU (Certified Life Underwriter) is a common designation for financial advisers who are skilled in the areas of estate and insurance planning for individuals and businesses.

2. Experience: The experience of an individual financial adviser is important, however the experience and composition of the team around them is just as important and in some cases even more so. In the traditional model of wealth management, an adviser was expected to know a little about everything and/or their breadth of knowledge was minimal. Today, some firms are evolving to a team model; a group of like-minded professionals who form a comprehensive unit in wealth management. Within the group there can be a variety of specialists enabling comprehensive planning. The varying degrees of experience and expertise within the team can create a strong culture of mentorship providing the client with benefit they may not find with an individual adviser.

As the sports world has illustrated time and time again, individuals don’t win championships, deep teams do. Similarly, the advisory team approach seeks to remove competition between advisers, helping to build collaboration between experienced and newer advisers. In this approach, it is common that in specific circumstances for a more experienced or educated adviser to be brought in to lend their experience and expertise to a given situation. The model encourages this and advisers have no fear of their clients being stolen or losing out on compensation.

3. Fit: Ultimately, when you choose to work with an adviser you are entering into a relationship that will likely span decades and for some families, generations. Ask yourself this question; do you like and trust the individual giving you advice? If a good connection does not exist, then at some point this relationship is going to have friction which can be amplified in stressful situations like the market and economic volatility we are seeing right now. Interview a few advisers and decide if they are the right fit. If you already have an adviser and there is friction or a misalignment, take the time to determine if there is a better fit.

A recent study from Russell Investments quantified that comprehensive wealth management can result in a value of 2.88%, up from 2.79% in 2019.[i] When you find an adviser, who is a student of their craft, has an experienced team that they can leverage, and you enjoy working with them; then you can say that is money in your pocket! Ultimately, we are in a service profession where trust is paramount. At Alitis Investment Counsel, we are confident that our team has the experience, education and relationships to help you achieve your financial goals.

Sincerely,
Shawn Fetter, CFP, CLU
Senior Financial Planner
Wealth Service Coordinator

 


[i] Russell Investments Canada Ltd. “Advisor Value Is Nearly Triple the Typical Advisory Fee: Study.” Investment Executive, 7 May 2020.

Disclaimer 

This report is provided, for informational purposes only, to customers of Alitis Investment Counsel Inc. (“Alitis”) and does not constitute an offer or solicitation to buy or sell any securities discussed herein to anyone in any jurisdiction where such offer or solicitation would be prohibited. Opinions expressed in this report should not be relied upon as investment advice. This report does not take into account the investment objectives, risk tolerance, financial situation or specific needs of any particular customer of Alitis. Each individual’s investment objectives, risk tolerance, financial situation and specific needs should be evaluated before making any investment decision.

Unless otherwise noted, the indicated rates of return are the historical annual compounded returns for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into account income taxes payable by any securityholder that would have reduced returns. The investments are not guaranteed; their values change frequently and past performance may not be repeated. Unless otherwise noted, risk refers to the annualized standard deviation of monthly returns for the period indicated.

The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. Alitis assumes no duty to update any information or opinion contained in this report. Neither Alitis nor any director, officer or employee of Alitis accepts any liability whatsoever for any errors or omissions in the information, analysis or opinions contained in this report, nor for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

COVID-19: Client Update – Reopening Our Offices

To our valued clients,

On March 13th, 2020 we made the difficult decision to close our offices in order to do our part in limiting the spread of the COVID-19 virus.

While our offices may have been closed to clients and guests, our entire team has continued to support our clients-through phone and video conferencing-and pro-actively manage our Alitis pools with vigilance and care during a time of significant market turbulence.

The good news is that our Province’s collective efforts have slowed the spread of the virus and at the time of posting this blog, Vancouver Island has only one active case of COVID-19.

As a result of our Province’s success, we are excited to announce that we will slowly start to reopen our offices.

Effective Monday July 6th, 2020, Alitis will be booking a limited number of in-person client meetings. We will continue to offer telephone or video conference for most client meetings and encourage clients to choose the meeting format that they are most comfortable with. To maintain physical distancing during in-person client meetings and to protect our clients and team members,things will look a bit different.

The following procedures will be in place:

  • Only one group of clients will be allowed in the Alitis offices.
  • Client meetings will be scheduled with adequate time for proper cleaning and sanitizing in between meetings.
  • Clients are requested to phone 250-287-4933 when they arrive at the office and remain in their car. We will phone or text you when we have adequately sanitized and prepared the boardroom and let you know it is safe to enter.
  • Clients will be required to apply hand sanitizer upon entering the Alitis office.
  • Clients will be required to wear a non-medical face covering/mask. We will provide a disposable non-medical face mask if needed.

While we are excited to see our clients in person, if you, or anyone in your household are exhibiting COVID symptoms, have been requested to self-isolate, have arrived from outside Canada within the last 14 days, or have had contact with anyone who has COVID-19, we kindly request that we hold your meeting virtually over the phone or video conference, or postpone until a later date.

We would like to sincerely thank all our clients for their patience and understanding during the pandemic. The relationships with our clients are the main reason we do what we do, and we look forward to starting our gradual return to in-person client meetings. If you have any other questions or concerns, please contact your Alitis adviser by email or the office at 250-287-4933.

Sincerely,

The Alitis Team

The Alitis Story: One to Share

Every once in a while, we are provided with a great opportunity to remember what is most important in our lives. For many people, including the Alitis Team, the COVID-19 pandemic has provided this opportunity. If asked, we tend to acknowledge that our family, friends and health are the things we cherish most. But in our day-to-day busy lives, without being prompted, we tend to forget this. In the last two months we have had to change how we live. We have had to change how we connect with our friends, family and our professional relationships.

Coinciding with the pandemic has been a major impact on the world economy and world markets. We have seen unprecedented volatility in public stock markets. When we hear about big drops in the markets and the doom and gloom reported in the media, it can be very easy to forget past conversations with your Alitis Adviser. It can be easy to forget the story of Alitis and the foundation it is built upon.

In the conversations we have had with our clients since early March, all were expecting a drop in their portfolios, but most have been pleasantly surprised they have experienced such small declines when compared to market indices. These reference points and the troubling experience of our friends and family during periods of prolonged market volatility are the cornerstones upon which Alitis carved out its strategy for shielding assets and providing consistent long-term returns. Alitis clients holding a diversified portfolio of Alitis investment pools have simply not experienced the full weight of declines in public fixed income and equity markets.

It is all by design that Alitis has performed well against these reference points and here are a few key reasons why:

  • Philosophy: The core belief around Alitis is to reduce the volatility of investments and deliver consistent returns over the long term. To accomplish this, Alitis maintains a more naturally conservative approach to investments, with the portfolios being built with the objective of being resilient during market events such as this one. Alitis was created to limit the losses in times of recessions and downturns. Never do we want our clients to experience what many of them went through in the 2008 Financial Crisis.
  • Active Management: All the Alitis Investment Pools are actively managed, daily. At all times during the day, we have our Portfolio Managers and Analysts monitoring market activity to take advantage of opportunities or reduce risk where necessary. This is quite different from many Investment Advisers or Portfolio Managers who utilize a passive management strategy, which is when the fund’s portfolio mirrors a market index.
  • Diversification: All Investment firms claim to diversify, but many are only diversified through the public stock and bond markets. This type of diversification can include geographic, sector and various grades of Bonds, among others. Alitis also utilizes these strategies, but what sets us apart is additional diversification through other asset classes such as Private Real Estate, Private Mortgages, Private Debt, Alternative Fixed Income and Alternative Equities. Further to the investment diversification of each Alitis Pool, with the expertise of Alitis Advisers, each clients’ investment structure is uniquely built to meet their specific needs. This includes retirement and income planning to meet various financial goals, as well as tax and estate planning within an appropriate risk and return framework.

Once the investment discussion is over, the conversation quickly turns to the important things of life; family, friends and health. This is where we as advisers remember why we got into this business. It wasn’t for the charts, the graphs, the formulas and the constant feed of market updates. It was because we enjoy helping people. It’s because of the relationships that we get to be part of. It’s because of the personal interaction with our clients. It’s because helping clients achieve success for themselves and their family is what motivates us.

The majority of our clients have been referred to Alitis by other Alitis clients; great people tend to know great people. We truly want to thank each and every one of our wonderful clients for choosing Alitis to be your wealth management firm. We also want to thank all our clients for referring family and friends to us over the years. It is these referrals that reinforce the trust and confidence that our clients have in Alitis and our approach to helping them achieve financial success. For those who mentioned that your friends and family have experienced a rough ride with their investments as of late, please share your experience with them or introduce them to us so we can provide the same great Alitis experience to the people you cherish most. We enjoy working with and helping our clients and would like to do the same for your friends and family. We would be happy to get to know them, answer their questions and concerns, and provide insight on their financial situation. Alitis will provide a free financial and investment review for any referrals.

While COVID-19 has created a new “normal”, Alitis stays committed to providing the best service we can for our clients. We are here to answer any questions or inquiries by phone or video conference that you, your family or your friends may have and to help navigate through these uncertain times.

Sincerely,

Aaron Robertson, CIM, CFP
Associate Portfolio Manager
arobertson@alitis.ca

Harrison Brown, BSc.
Wealth Service Coordinator
hbrown@alitis.ca

Disclaimer 

This report is provided, for informational purposes only, to customers of Alitis Investment Counsel Inc. (“Alitis”) and does not constitute an offer or solicitation to buy or sell any securities discussed herein to anyone in any jurisdiction where such offer or solicitation would be prohibited. Opinions expressed in this report should not be relied upon as investment advice. This report does not take into account the investment objectives, risk tolerance, financial situation or specific needs of any particular customer of Alitis. Each individual’s investment objectives, risk tolerance, financial situation and specific needs should be evaluated before making any investment decision.

Unless otherwise noted, the indicated rates of return are the historical annual compounded returns for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into account income taxes payable by any securityholder that would have reduced returns. The investments are not guaranteed; their values change frequently and past performance may not be repeated. Unless otherwise noted, risk refers to the annualized standard deviation of monthly returns for the period indicated.

The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. Alitis assumes no duty to update any information or opinion contained in this report. Neither Alitis nor any director, officer or employee of Alitis accepts any liability whatsoever for any errors or omissions in the information, analysis or opinions contained in this report, nor for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

Alitis Investment Update

June 9, 2020: No doubt about it… it’s been a tough year for investments! Nevertheless, Alitis’ conservative stance and allocation to private investments has resulted in our various investment solutions holding up well during these adverse conditions. It has been a couple months since COVID-19 had its significant impact on the markets, so an update on Alitis’ investments is due. Generally speaking, the public stock and bond markets have bounced back quite nicely since their lows in late March, which has resulted in very solid returns for Alitis’ Investment pools:

 

Time Period

Weekly Funds (Class E Units)

March

April to June 5

Year-to-June 5

Alitis Strategic Income Pool

-5.41%

+4.18%

+0.14%

Alitis Income & Growth Pool

-9.00%

+6.93%

-2.61%

Alitis Growth Pool

-9.79%

+10.40%

-4.47%

 

Time Period

Monthly Funds (Class E Units)

March

April & May

Year-to-End of May

Alitis Private Mortgage Fund

-2.68%

+2.27%

-0.22%

Alitis Private REIT

+0.17%

-0.47%

-0.43%

Alitis Private Real Estate LP

+0.14%

+0.16%

+1.56%

The following provides further information on the strategies that we employed, as well as, what we see as we look ahead:

Fixed Income

Our fixed income strategy has been to add different types of alternative fixed income investments as a means to increase returns, enhancing the relatively low yields available on traditional fixed income. The events in March did not work out well for the leveraged long/short investments and hurt our fixed income strategy but since then, these strategies have recovered significantly as central banks around the world stepped in to calm the bond markets. Now as of June 5th, the Alitis Strategic Income Pool was positive for the year.

Looking ahead:  We expect that central banks will continue to support bond liquidity which should be positive for most types of fixed income for the short to mid-term. As we look further ahead, we believe that continued low yields and the stabilization of the corporate/high yield side of the fixed income market will lessen the upside for fixed income. In this case, the Alitis Income & Growth Pool will likely shift from fixed income to stocks as the year progresses, as there will likely be more upside available in stocks.

Mortgages

A major aspect of our mortgage strategy is to shift between the private and public markets as the relative valuations change. Private mortgage investments generally have a stable net asset value price whereas public mortgage investment corporations (MICs) can trade at a premium or discount to net asset value. Through the end of 2019 and the beginning of 2020, we were reducing our public MIC exposure as values increased. After the market collapse, we once again become buyers as the expected public MIC return is greater than that of the comparable private mortgage investments.

Looking ahead:  We still expect to see some higher returns on public mortgages as prices increase. This will help to counter the slightly lower returns we expect on private mortgages – as these investments have generally increased their reserves for loan losses, which effectively lower their yields. We anticipate seeing a positive return for the year.

Stocks

Going into the market decline, Alitis’ equity strategy was quite conservative. The Alitis Income & Growth Pool held the minimum amount to stocks and the Alitis Growth Pool was only about 50% exposed to stocks. As such, the downside due to stocks was much less than the overall markets. Subsequently, stocks have recovered nicely with Alitis’ strategy doing rather well since the beginning of May.

Looking ahead:  Although the stock markets have been great for the last few weeks, we expect to see volatility, likely for the remainder of the year. That being said, we expect to see more upside to stocks relative to bonds/cash and will slowly allocate more to stocks as the year progresses.

Real Estate

Most of the real estate holdings in our investment pools are private. With the private market essentially frozen (no transactions), there is uncertainty on the impact of COVID-19 to valuations. To be conservative, we had been adjusting our valuation metrics (increased vacancy expectations and capitalization rates) which has generally resulted in lower expected completed project valuations; however, these adjustments have been offset by construction progress which have increased the current fair market value of the properties. Thus, we have built in a valuation buffer for when the multi-residential apartment real estate market thaws. After the market declines, we added our first public real estate investments in many years as the valuations were rather compelling. So far, these additions have paid off nicely.

Looking ahead:  Alitis almost exclusively invests in residential multi-family housing which is regarded as the safest category of real estate. initial reports indicate that the vast majority of tenants are paying their rent with collections >96% – a very good sign. As well, mortgage borrowing rates have dropped significantly which makes owning an apartment building more profitable. This means that the value of multi-family apartments could increase as they would be more profitable to operate. We continue to be active in our search for new investment opportunities.

* * * * *

Thank you for taking the time to read this update and if you have further questions, please feel free to contact your adviser.

Sincerely,

Alitis Investment Committee

Mitchell Prothman, Todd Blaseckie, Thomas Nowak, Kevin Kirkwood

 

Disclaimer 

This report is provided, for informational purposes only, to customers of Alitis Investment Counsel Inc. (“Alitis”) and does not constitute an offer or solicitation to buy or sell any securities discussed herein to anyone in any jurisdiction where such offer or solicitation would be prohibited. Opinions expressed in this report should not be relied upon as investment advice. This report does not take into account the investment objectives, risk tolerance, financial situation or specific needs of any particular customer of Alitis. Each individual’s investment objectives, risk tolerance, financial situation and specific needs should be evaluated before making any investment decision.

Unless otherwise noted, the indicated rates of return are the historical annual compounded returns for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into account income taxes payable by any securityholder that would have reduced returns. The investments are not guaranteed; their values change frequently and past performance may not be repeated. Unless otherwise noted, risk refers to the annualized standard deviation of monthly returns for the period indicated.

The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. Alitis assumes no duty to update any information or opinion contained in this report. Neither Alitis nor any director, officer or employee of Alitis accepts any liability whatsoever for any errors or omissions in the information, analysis or opinions contained in this report, nor for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.

Everything is Changing…Evolving Amidst COVID-19

May 27, 2020: The coronavirus pandemic has crossed 5,700,000+ confirmed cases and claimed 355,000+ lives worldwide1, and a significant amount go uncounted as well.2  The loss of lives is devastating. The ripple effects of this virus have started to impact most, if not all, sectors of the economy.

At Alitis, one tool we consider often is the use of scenario analysis. How would an investment have done in a historical market crisis? Understanding how different investments react in each event is a key part in building a portfolio that is resilient across the entire market cycle.

There are a few key historical events that are typical for investors to consider and they all have earned monikers over the years: The Global Financial Crisis of 2007-2008, the Tech Bubble of 1999-2000, the Asian Crisis of 1997, and the list goes on. We believe that the COVID-19 pandemic is already earning its place in this list of scenarios that have made a mark on the investment markets for years to come, and it is still in the early stages of developing.

In this time of flux, it is important to consider the impact and outlook on some key sectors. How these sectors adapt over the next couple of years will have a significant impact on national economies, international relations, and each of our lives. We at Alitis use our outlooks to actively manage our clients’ asset allocations and cash positions. This is part of our prudent approach to realize target returns with a risk level that is lower than our market benchmarks.

A is for Airlines

Carriers worldwide are facing a dire collapse in demand for flights as governments restrict travel and consumers heed warnings to stay home. Air Canada was one of the best-performing companies in the Canadian stock markets with strong fundamentals for the decade that ended on Dec 31st, 2019. The airline expects the impact of the virus to last for at least three years and predict large job cuts as it hunkers down to survive “the darkest period ever” for the industry. Air Canada is down 68% this year (as of May 12, 2020).

Airline carriers south of the border have used terms like “apocalyptic” and “unprecedented” to describe their outlook. There are rising concerns that one or more airline companies in the United States will fail as the COVID-19 pandemic all but erases demand for flights.

Graph 1: YTD drop in stock prices of Air Canada, United Airlines, Delta Airlines and American Airlines as of May 20, 2020

Source: Bloomberg

E is for Energy

It’s hard to talk about Canadian investment markets in general without discussing oil. Energy makes up almost 14% of the S&P/TSX Composite Index, and oil is a major employer and contributor to the economy. Oil prices have plummeted in recent months, as COVID-19 caused a huge drop-off in demand for energy, and the pandemic has hit North America just as Saudi Arabia and Russia started a price war to gain world market share. Last month, for the first time in history, global crude contracts slipped into negative territory as demand collapsed due to the COVID-19 pandemic, while supply stayed steady which led to an unprecedented storage shortfall.

To add to this, the Canadian energy sector was dealt a major blow when the world’s largest sovereign wealth fund decided to divest from four Canadian oil companies, citing “unacceptable greenhouse gas emissions”.3

Canadian energy companies are in capital preservation mode announcing capital spending cuts, employee layoffs, and lowering executive pay. The federal financing relief package for large Canadian companies was applauded and welcomed with open arms. There has been some price recovery in the last month, but the truth remains that the prices we are seeing today are by no means close to profitable for the industry. The reopening of any number of battered economies across Asia, Europe, and the Americas will be difficult and could be set back at any moment by the second wave of COVID-19 infections. The enthusiasm for cutting production shown by U.S. shale companies or OPEC+ could weaken.

Bottom line: It will take a long time for demand to recover fully and most likely won’t be until we have a vaccine.

Graph 2: WTI Crude Futures drop in mid-April 2020 and recovery over the last month 

Source: Nymex

F is for Financials

Canada’s largest banks hold more capital entering the COVID-19 pandemic than they did entering the global financial crisis in 2008. Banks in Canada have stepped up to help our country work through these difficult times and have launched comprehensive programs to make a positive difference for those who need their help and support. They are working directly with individual and small business customers to create tailored support plans to manage financial uncertainty and build a bridge to a strong future.

But as the recovery is expected to be a long and slow process, even the big banks will experience one or more of these challenges:

  • Non-performing loans will surge as consumers and businesses are unable to make loan payments
  • Rate cuts, as well as a collapse in demand, will have a top-line impact causing revenues to decrease
  • Restrictions on personal interactions will push customers toward digital channels for service and sales
  • Misaligned revenues and cost will require banks to improve operational flexibility and rethink short-term priorities

To add to this is the geographic exposure that each bank has outside Canada – including the United States, Brazil, Asia, or Europe.

Graph 3: YTD drop in stock prices of the top 5 Canadian Banks as of May 20, 2020

Source: Bloomberg

T is for Technology

The COVID-19 pandemic has revealed the extent to which we rely on technology and how it has become integrated with almost every facet of the economy and our lives. We have seen technology applied to keep “business as usual”, to replace normal social interactions and to be mobilized for good to fight the COVID-19 pandemic.

The effects of COVID-19 are having a significant impact on the technology sector, affecting raw materials supply, disrupting the electronics value chain, and causing an inflationary risk on products. More positively, the disruption has caused an acceleration of remote working, a rapid focus on evaluating and de-risking the end-to-end value chain.

Hardware, Software, IT Services, Semi-Conductors, and Network Equipment – all these technology sub-sectors have been forced to evolve to this new paradigm shift.

The delayed launch of new smartphones, increased demand for remote-working technologies, a surge in security software demand, delay in supply of raw materials, and need for ever-faster access to date and automation are just a few of the many impacts on the technology sector.

Technology will continue to play a major role in the COVID-19 pandemic. Each organization will be impacted differently based on several factors. This situation could play out for technology broadly in two waves: the current, more significant wave, that has direct consequences due to the pandemic and self-isolation measures, and a future change in the way consumers and companies interact with technology.

Graph 4: YTD drop in stock prices of Apple, IBM, Intel Corp, Alphabet and Microsoft as of May 20, 2020

Source: Bloomberg

At Alitis, we do not tend to trade sectors, or the individual stocks mentioned in this article directly4. However, we do make a point to stay informed and follow the markets, as ripple effects will impact all asset classes. If you are interested in a more thorough report of our broad economic outlook and Alitis Pools’ current investment strategy, check out this post from the end of April written by Kevin Kirkwood, our President & Chief Investment Officer.

The number of moving pieces during this pandemic is akin to a forest fire. There is no model that can predict exactly how every individual flame will burn. Even if such a model were built, the wind could change a moment later and throw it askew. In our case, the collective actions of governments, businesses, and citizens provide gusts of policy and action that can be as unpredictable as the wind.

However, we are not lost in the blaze. We can start by carefully studying the results we have from experience and history. We can adapt to the knowledge we gain at each turn. We can examine options and make predictions with the information we have available. We can respectfully balance empiric information with theoretical approaches, keeping our long-term goals, targets, and values in mind.

We will get through this period. There may be a “new normal” that we must adjust to, and some regions/sectors/asset classes may be in better shape than others. What will not change is our dedication to our process and our continued determination to strive for excellence in everything we do for our clients.  In the words of Michael Jordan, “Obstacles don’t have to stop you. If you run into a wall, don’t turn around and give up. Figure out how to climb it, go through it, or work around it.”

Thank you for your trust in Alitis.

Sincerely,

Apurva Parashar, MBA, CAIA, CIM

Chartered Investment Manager

Thomas Nowak, BComm.
Research Associate

References

  1. https://www.worldometers.info/coronavirus/
  2. https://www.reuters.com/article/us-health-coronavirus-global-cases/global-coronavirus-cases-surpass-3-5-million-amid-underreporting-fears-idUSKBN22G00Z
  3. https://business.financialpost.com/commodities/energy/why-the-worlds-largest-sovereign-wealth-funds-divestment-from-the-oilsands-could-trigger-a-bigger-fund-exodus
  4. Alitis Investment Counsel is a registered Investment Fund Manager and Portfolio Manager in British Columbia, Ontario & Quebec, and is a registered Portfolio Manager in Alberta, Saskatchewan & Manitoba. Alitis manages money through the use of mutual fund trust structures (the “Alitis Pools”) that may hold direct or indirect positions (including both long and short positions) in the individual sectors or stocks mentioned in this article. At the time of writing, the Alitis Pools did not hold any direct positions in the sectors or securities mentioned in this article. This article is not to be considered as specific investment advice or as a specific investment recommendation.

Disclaimer 

This report is provided, for informational purposes only, to customers of Alitis Investment Counsel Inc. (“Alitis”) and does not constitute an offer or solicitation to buy or sell any securities discussed herein to anyone in any jurisdiction where such offer or solicitation would be prohibited. Opinions expressed in this report should not be relied upon as investment advice. This report does not take into account the investment objectives, risk tolerance, financial situation or specific needs of any particular customer of Alitis. Each individual’s investment objectives, risk tolerance, financial situation and specific needs should be evaluated before making any investment decision.

Unless otherwise noted, the indicated rates of return are the historical annual compounded returns for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into account income taxes payable by any securityholder that would have reduced returns. The investments are not guaranteed; their values change frequently and past performance may not be repeated. Unless otherwise noted, risk refers to the annualized standard deviation of monthly returns for the period indicated.

The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. Alitis assumes no duty to update any information or opinion contained in this report. Neither Alitis nor any director, officer or employee of Alitis accepts any liability whatsoever for any errors or omissions in the information, analysis or opinions contained in this report, nor for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.