The Trump administration on Monday strengthened an executive order barring U.S. investors from buying securities of alleged Chinese military-controlled companies, following disagreement among U.S. agencies about how tough to make the directive.
The Treasury Department published guidance clarifying the executive order, released in November, would apply to exchange-traded funds and index funds as well as subsidiaries of Chinese companies designated as owned or controlled by the Chinese military.
The “frequently asked questions” release, posted on the Treasury website on Monday, came after Reuters and other news outlets reported that a debate was raging within the Trump administration over the guidance. The State Department and the Department of Defense had pushed back against a bid by Treasury Department to water down the executive order, a source said.
Specifically, some media outlets reported that Treasury was seeking to exclude Chinese companies’ subsidiaries from the scope of the White House directive, which bars new purchases of securities of 35 Chinese companies that Washington alleges are backed by the Chinese military, starting in November 2021.
The guidance released on Monday specifies that the prohibitions apply to “any subsidiary of a Communist Chinese military company, after such subsidiary is publicly listed by Treasury.” It added that the agency “intends to list” publicly traded entities that are 50% or more owned by a Chinese military company or controlled by one.
The list of designated companies, which was mandated by a 1999 law, currently contains 35 companies, including oil company CNOOC Ltd and China’s top chipmaker, Semiconductor Manufacturing International.
Source: – CNBC
Alternative investments proved their worth through a rocky 2020 – The Globe and Mail
Harking back through all the fog that the Covid-19 pandemic has wrought on our lives, February and March 2020 surely tops the list of most vivid moments for investors. Witnessing global capital markets and portfolios in free fall is not easily wiped from one’s eyes or memory.
Some investors prepared for risks of volatility and declining capital markets by including an allocation in portfolios to alternative investments: those strategies which are not linked directly to the movements of stock and bond markets. These investors understood the power of diversity and had effectively modernized their investment portfolios.
The burgeoning alternative investment sector provided both portfolio protection and generated meaningful growth through to year-end.
Included in modernized portfolios are strategies involved in private debt and mortgages, private real estate and equity, defensively managed credit and equity strategies, arbitrage funds and other opportunistic, agile growth seeking strategies. They can provide value with much less, and in certain cases, no dependence on broader market direction.
Formerly only available to large institutions and wealthy investors, Canadian securities regulators provided broad access to certain non-traditional strategies starting in 2019 to all Canadian investors. This followed many years of study and consultation, concluding that access to more complex investment strategies for private individual investors would be of benefit to their savings and retirement goals.
By allocating at least some capital to an increasingly wide selection of available strategies, styles and objectives, a portfolio can be more insulated from risks of interest rates rising, equity market volatility and macro issues. The Canada Pension Plan Investment Board (CPPIB) expanded their portfolio beyond stocks and bonds starting 20 years ago. The CPPIB now holds over 60% in alternative assets, earning income and growth in this allocation from a variety of investment styles complementing their traditional holdings.
As an indication for how some of these strategies panned out in the spring of 2020, we can look at the Scotiabank Hedge Fund Index – Asset Weighted, a composite of various non-traditional strategies. It was down 7.50% through February and March, compared with global markets falling 20% or more, with the TSX Composite losing 37% at its lowest point. When federal governments opened the fiscal stimulus taps, broad market indices staged a sharp and sustained rally into the year end. By the end of November, the SHFI-AW had increased by 8.20% year to date, posting a return in line with an average year on the stock markets without the pain and volatility, and which compares very favourably to the TSX Composite return last year of 2.2%. Investors thinking differently about how to position their portfolios were far less impacted by sudden declines and earned strong returns through the year. The enhanced diversity worked well.
The key to including other types of investments is to determine what purpose you want served from each; in other words, to assess what you are trying to achieve. You may be seeking higher income potential, increased stability in capital, outsized returns or opportunities unavailable in traditional stock and bond holdings. Conversely, you need to be comfortable with what you may be giving up in return whether immediate liquidity, upside potential or insulation from other risks, and whether alternative investments are right for you at all.
To paraphrase Warren Buffett, investing is simple in theory but difficult in practice. The goal of the CPPIB is uncomplicated and one which we can all relate to: to maximize returns over the long term without undue risks. No gain is had without accepting risk – being comfortable with the risks you are embracing is as critical as is reducing these risks as much as possible while still positioned to meet your goals. Investing is a long and evolving journey which must be experienced in real time – in tangible terms, this implies more comfort and peace of mind with less mistakes made along the way.
As investors, we can be assured that at some stage interest rates will rise thereby decreasing bond principal, equity markets will experience bouts of volatility that are extreme at times and that macro events beyond anticipation or control will all impact our hard-earned savings. Investors with more tools in their bag are better positioned regardless of market forecasts.
Modern Portfolio Theory established in 1952, defining optimal diversity by way of the appropriate mix of cash, bonds and stocks for a chosen risk profile earned Harry Markowitz a Nobel Prize. This ground- breaking theory has worked well for many years. However, in practice MPT has been challenged by issues of practicality including historically low cash and bond yields, as well as increased equity market volatility and and intermarket correlations. In addition, his theory does not account for investors who desire a degree of protection on their savings during times of market turmoil, seeking short-term protection to ensure comfort through the long term. To be fair, at the time Mr. Markowitz did not have access to various alternative strategies in order to properly diversify an investment portfolio. If he had, I suspect he would have included some private real estate and maybe a hedged equity strategy or perhaps an arbitrage fund. In the more-modern portfolio, it is now possible for you to reap such benefits.
Craig Machel, FMA, CIM, is director of Wealth Management, Investment Advisor and Portfolio Manager with The Machel Group of Richardson Wealth Ltd.
Cominar Real Estate Investment Trust Announces January 2021 Monthly Distribution – Canada NewsWire
QUÉBEC CITY, Jan. 15, 2021 /CNW Telbec/ – Cominar Real Estate Investment Trust (“Cominar”) (TSX: CUF.UN) announced today a distribution of 3.00 cents per unit to unitholders of record as at January 29, 2021, payable on February 15, 2021.
PROFILE AS AT JANUARY 15, 2021
Cominar is one of the largest diversified real estate investment trusts in Canada and is the largest commercial property owner in the Province of Québec. Our portfolio consists of 313 high-quality office, retail and industrial properties, totalling 35.7 million square feet located in the Montreal, Québec City and Ottawa areas. Cominar’s primary objective is to maximize total return to unitholders by way of tax-efficient distributions and maximizing the unit value through the proactive management of our portfolio.
SOURCE COMINAR REAL ESTATE INVESTMENT TRUST
For further information: Analysts and Investors: Sylvain Cossette, President and Chief Executive Officer, [email protected]; Antoine Tronquoy, Executive Vice President and Chief Financial Officer, [email protected], Tel: (418) 681-8151; Media: Sandra Lécuyer, Vice President, Talent and organisation, [email protected]
Gold investment demand remains well supported in 2021 – report – MINING.com
In its 2021 outlook report, the World Gold Council (WGC) predicts that investment demand for gold will remain well supported, while gold consumption should benefit from the nascent economic recovery, especially in emerging markets.
Record year for gold
Gold was one of the best performing major assets of 2020, driven by a combination of high risk, low interest rates and positive price momentum – especially during late spring and summer.
By early August, the LBMA gold price reached a historical high of $2,067.15/oz as well as record highs in all other major currencies. While gold subsequently consolidated below its intra-year high, it remained comfortably above $1,850/oz for most of Q3 and Q4 2020, finishing the year at $1,887.60/oz.
Interestingly, gold’s price performance in the second half of the year seemed to be linked more to physical investment demand – whether in the form of gold ETFs or bar and coins – rather than through the more speculative futures market, the WGC points out.
For example, COMEX net long positioning reached an all-time high of 1,209 tonnes in Q1 but ended the year almost 30% below this level. The Council believes this was due to the dislocation that COMEX futures experienced in March relative to the spot gold price, making it more expensive to hold futures compared to other choices.
Investors’ preference for physical and physical-linked gold products last year further supports anecdotal evidence that, this time around, gold was used by many as a strategic asset rather than purely as a tactical play.
Low interest rates and inflation
Global stocks performed particularly well during November and December, with the MSCI All World Index increasing by almost 20% over the period. However, rising covid-19 cases and a reportedly more infectious new variant of the virus created a renewed sense of caution.
Yet, neither this nor the highly volatile US political events during the first week of 2021 deterred investors from maintaining or expanding their exposure to risk assets.
The S&P 500 price-to-sales ratio is at unprecedented levels, and analysis by Crescat Capital suggests that the 15 factors that make up their S&P 500 valuation model are at – or very near – record highs.
Going forward, the Council believes that the very low level of interest rates worldwide will likely keep stock prices and valuations high. As such, investors may experience strong market swings and significant pullbacks. These could occur, for example, if vaccination programs take longer to distribute – or are less effective – than expected, given logistical complexities or the high number of mutations reported in some strains.
In addition, many investors are concerned about the potential risks resulting from expanding budget deficits, which, combined with the low interest rate environment and growing money supply, may result in inflationary pressures. This concern is underscored by the fact that central banks, including the US Federal Reserve and European Central Bank, have signalled greater tolerance for inflation to be temporarily above their traditional target bands.
Gold has historically performed well amid equity market pullbacks as well as high inflation. In years when inflation was higher than 3%, gold’s price increased 15% on average.
Notably too, research by Oxford Economics shows that gold should do well in periods of deflation. Such periods are typically characterized by low interest rates and high financial stress, all of which tend to foster demand for gold.
Further, gold has been more effective in keeping up with global money supply over the past decade than US T-bills, thus better helping investors preserve capital.
Market surveys indicate that most economists expect growth to recover in 2021 from its dismal performance during 2020. And although global economic growth is likely to remain anaemic relative to its full potential for some time, gold’s more stable price performance since mid-August may foster buying opportunities for consumers.
The economic recovery may particularly realize in countries like China, which suffered heavy losses in early 2020 before the spread of the pandemic was controlled more effectively than in many western countries.
“Given the positive link between economic growth and Chinese demand, we believe that gold consumption in the region may continue to improve,” the WGC says.
Similarly, the Indian gold market appears to be on a stronger footing. Initial data from the Dhanteras festival in November suggest that while jewelry demand was still below average, it had substantially recovered from the lows seen in Q2 of last year.
However, with the global economy operating well below potential and with gold prices at historical high levels, consumer demand may remain subdued in other regions.
Central bank demand
After positive gold demand in H1, central bank demand became more variable in the second half of 2020, oscillating between monthly net purchases and net sales, the WGC says. This was a marked change from the consistent buying seen for many years, driven in part by the decision of the Central Bank of Russia to halt its buying program in April.
Nonetheless, central banks are on course to finish 2020 as net purchasers (although well below the record levels of buying seen in both 2018 and 2019), and 2021 may not be much different.
There are good reasons why central banks continue to favour gold as part of their foreign reserves, which, combined with the low interest rate environment, continue to make gold attractive.
Recovery in mine production is likely this year after the fall seen so far in 2020. Production interruptions peaked during the second quarter of last year and have since waned.
While there is still uncertainty about how 2021 may evolve, it seems very likely that mines will experience fewer stoppages as the world recovers from the pandemic.
According to the WGC, this would remove a headwind that companies experienced in 2020 but that is not commonly part of production drivers. Even if potential second waves impact producing countries, major companies have introduced protocols and procedures that should reduce the impact of stoppages compared to those seen in the early stages of the pandemic.
The Council expects that the need for effective hedges and the low-rate environment will keep investment demand well supported in 2021, though it may be heavily influenced by the perceptions of risk linked to the speed and robustness of the economic recovery.
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