Mr David Kaufman
Money & business show
Radio Shalom
CJRS 1650AM
SAMUEL EZERZER
What does Alternative Investments mean? And how can you benefit from these investments ?
LISTEN TO THE SHOW
OCTOBER 6TH 2010
INTRODUCTION
MONEY MONEY & BUSINESS
An alternative investment is an investment product other than traditional investments such as stocks, bonds cash or property. The term is most commonly used to describe investments in tangible assets such as Art, Wine, Antiques, Coins or Stamps
but may include some financial assets such as precious metals , managed futures , private equities , Real estate Reits and hedge funds are also sometimes called alternative investments!!!
Alternative investments are favored mainly because their returns have a low correlation with those of standard asset classes. Because of this, many large institutional funds such as pensions and private endowments have begun to allocate a small portion (typically less than 10%) of their portfolios to alternative investments such as hedge funds. While the small investors may be shut out of some alternative investment opportunities, real estate and commodities such as precious metals are widely available. A Consultant company in California are telling the state investment council in new jersey pension funds that they should be putting more money in alternative investments such as private equity and real estate to boost returns and protect against stock losses, The panel voted to draft regulations that would allow the new jersey pension fund as much as 38 percent of the $68.3 billion fund to be invested in alternatives investment , compared with a maximum of 28 percent currently.The reason you might want to consider alternative investments as part of a investment strategy is because alternative investments tend to react to market conditions differently than our traditional investment stocks and bonds. Many alternative investments have a high expectation of return, like you would have with a stock. If you can have two investments with high expected returns, but they are going to earn those returns over different periods of time, it provides diversification to the portfolio and that's how you can manage your investments risk..To find out more about alternative investments , we have with us today, directly from Toronto , is Mr David Kaufman president of Westcourt Capital Corporation.. Biography David Kaufman, is the president of Westcourt Capital Corporation (www.westcourtcapital.com), an Exempt Market Dealer operating in Toronto. Westcourt specializes in the distribution of conservative, income-producing alternative investments including private mortgage funds, REITs and asset-backed lending syndicates.
A non-practicing lawyer and former Executive Director of Magna Golf Club in Aurora, Ontario, David has more than 10 years experience in the real estate industry, having specialized in the creation and execution of residential development strategies for major Canadian developers.
David appears regularly on CBC's Lang & O'Leary exchange to discuss alternative investing and published a series on alternative investments with the Financial Post in 2010.
David you will be launching a new weekly show on BNN Business News Network this Friday on October 8th on alternative investing, congratulations !!!! can you tell us more about your weekly show on BNN?
http://www.westcourtcapital.com/
Questions
but may include some financial assets such as precious metals , managed futures , private equities , Real estate Reits and hedge funds are also sometimes called alternative investments!!!
Alternative investments are favored mainly because their returns have a low correlation with those of standard asset classes. Because of this, many large institutional funds such as pensions and private endowments have begun to allocate a small portion (typically less than 10%) of their portfolios to alternative investments such as hedge funds. While the small investors may be shut out of some alternative investment opportunities, real estate and commodities such as precious metals are widely available. A Consultant company in California are telling the state investment council in new jersey pension funds that they should be putting more money in alternative investments such as private equity and real estate to boost returns and protect against stock losses, The panel voted to draft regulations that would allow the new jersey pension fund as much as 38 percent of the $68.3 billion fund to be invested in alternatives investment , compared with a maximum of 28 percent currently.The reason you might want to consider alternative investments as part of a investment strategy is because alternative investments tend to react to market conditions differently than our traditional investment stocks and bonds. Many alternative investments have a high expectation of return, like you would have with a stock. If you can have two investments with high expected returns, but they are going to earn those returns over different periods of time, it provides diversification to the portfolio and that's how you can manage your investments risk..To find out more about alternative investments , we have with us today, directly from Toronto , is Mr David Kaufman president of Westcourt Capital Corporation.. Biography David Kaufman, is the president of Westcourt Capital Corporation (www.westcourtcapital.com), an Exempt Market Dealer operating in Toronto. Westcourt specializes in the distribution of conservative, income-producing alternative investments including private mortgage funds, REITs and asset-backed lending syndicates.
A non-practicing lawyer and former Executive Director of Magna Golf Club in Aurora, Ontario, David has more than 10 years experience in the real estate industry, having specialized in the creation and execution of residential development strategies for major Canadian developers.
David appears regularly on CBC's Lang & O'Leary exchange to discuss alternative investing and published a series on alternative investments with the Financial Post in 2010.
David you will be launching a new weekly show on BNN Business News Network this Friday on October 8th on alternative investing, congratulations !!!! can you tell us more about your weekly show on BNN?
http://www.westcourtcapital.com/
Questions
1.David can you tell us how you started in the business of Alternative investment ?, and what prompted you to start westcourt capital corporation?
2.David most investors invest in Gics in Canada , cds (certified deposits rate in the US) , stocks , bonds & mutual funds , Can you explain to our listnership on Money and business ccWhy should we consider alternative investments?
DAVID ;An alternative investment is an investment other than traditional investment products such as stocks, bonds or cash.
This broad definition makes it impossible to list all alternative strategies, but the most common alternative investments are in real estate, private equity, venture capital, commodities, and hedged or absolute return strategies. Exotic investments in wine, art and antiques are also alternative investments.
A common theme to alternative investments is that they generally have modest correlation with traditional investments and provide diversification to investors’ portfolios.
Clearly, some alternative investments are riskier than others. While the entire field of alternative investing is sometimes incorrectly painted as “very risky” by professionals in more traditional investment circles, it is in fact the nature of specific alternative investments that make them risky, not the fact that they are alternative investments.
At Westcourt Capital Corporation, as our credo indicates, it is our mandate to focus only on conservative alternative investments, leaving the more exotic forms of alternative investing to others. Without exception, when we recommend alternative investments, our clients will understand the nature of the investments, how they create distributable cash, and how they can increase in value over time. When investors understand their investments, they have more confidence in the process and are always more satisfied over the long term
3.
What services do you provide at westcourt capital corporation? and can you tell us the
typical type of clientele that would invest in alternative investments..?
Westcourt's function is to research and identify investment opportunities with the characteristics sought by our clients, rather than to invest their money on their behalf. When we make an investment recommendation and our clients choose to invest, they invest directly with the entity managing the investment.
In addition to investing in Westcourt-recommended funds on equal or better terms than would be available directly (see question above), Westcourt's clients benefit from our end-to-end due diligence on the investment funds we recommend. This research is ongoing: once a fund is approved, we conduct quarterly updates to ensure that the material aspects of the approved fund remain strong. We make these updates available to all of our clients upon request. The alternative investment universe is large: Westcourt's role is to help you navigate your way through it and support you while you make important investment decisions.
4.Can you explain Private vs. Public securities: measuring the relative value of liquidity versus low volatility and returns?
5.One day after the federal reserve got investors thinking about uncomfortably low inflation last week , Starbucks announced it was raising prices on some of its coffee drinks. Anheuser-Busch is planning price hikes on some of its Budweiser beers later this year. Americas high rate of unemployment and the low rates of capacity utilization imply that there is little upward pressure on wages and prices in the US and Canada . The CRB index which tracks commodity prices, hit an 8-month high last week. Gold prices hit a record level and other commodities, including soybeans and cotton, notched multi-year peaks.
It is less clear what these rising commodity prices will mean for the U.S. & Canadian economic recovery and the Fed's next policy move. High unemployment and sluggish consumer spending mean many companies cannot follow Starbucks' lead and pass higher raw material costs along to consumers.
So David is inflation dangerously low or is it creeping higher? and what kind of strategies have you been implementing for your client?
6Alternative investments are sometimes used as a tool to reduce overall investment risk through diversification ,,so david can you expand on
6.whats the difference between staying rich and getting rich? David how do you conduct due diligence on a private investment fund?
Whether investing for growth or income, all investors should seek multiple layers of diversification in their investment portfolio. The first level of diversification is asset class allocation, where investors diversify their investments among separate asset classes such as stocks, bonds, alternative investments and cash. This is inter-asset class diversification.
The next level of diversification is among the assets within a specific asset class. For example, most investors’ stock portfolios hold stock in numerous companies and sectors, such as owning multiple stocks in the banking sector, the technology sector and the resources sector. This is intra-asset class diversification.
The final (and most often overlooked) level of diversification allows investors to purchase specific investments that diversify internally among numerous holdings. For example, an investor who purchases units in a Real Estate Investment Trust (REIT) that spreads its risk over several apartment buildings, shopping plazas or other income-producing properties receives diversification that is unavailable when only a single property is purchased. This is asset-specific diversification, and this is the focus of all investments recommended by Westcourt.
8.Can Alternative investments be relatively illiquid?
DAVID ; One of the features of private investments is that they are generally less “liquid” than publicly traded securities. While most allow for you to redeem your investment either monthly or quarterly, they also generally apply “redemption fees” penalizing investors who invest for less than 1 or 2 years. This is a very important consideration when considering an investment, and you should ensure to be fully informed about the redemption rules for any investment.Low or high correlation with traditional financial investments such as stocks and shares?
9.Just like buying a mutual funds or a stock or a structure product there is a degree of investment analysis that may be required before buying these financial investments;
DAVID ;At Westcourt, we ensure that our review of the investments we recommend is thorough and personal. This entails a combination of both quantitative and qualitative analysis designed to provide a complete picture of a prospective investment.
Our methodology begins with a “macro” analysis of categories of investments, studying their benefits and drawbacks from the point of view of our investment strategy. For those investment models that pass the macro test of general suitability for our clients, we then apply an even more rigorous “micro” analysis of the investments in Canada that fit within this model. This level of analaysis is more detailed and more personal. Among a long list of questions that are dealt with at this stage are the following:
11.On you web site one of your philosophy is to Stay Rich vs. Get Rich
Our clients dont come to us to get rich. As qualified investors, most of them are already very comfortable. Their primary investment goal is to preserve their hard-earned capital in any market. In fact, their greatest fear is not under performance of their investments, but putting their capital base at risk. At Westcourt, capital preservation is the primary factor in determining which investments to recommend.
NOTES
7.Is there a Low or high correlation with traditional financial investments such as stocks and shares?
Whether investing for growth or income, all investors should seek multiple layers of diversification in their investment portfolio. The first level of diversification is asset class allocation, where investors diversify their investments among separate asset classes such as stocks, bonds, alternative investments and cash. This is inter-asset class diversification.
The next level of diversification is among the assets within a specific asset class. For example, most investors’ stock portfolios hold stock in numerous companies and sectors, such as owning multiple stocks in the banking sector, the technology sector and the resources sector. This is intra-asset class diversification.
The final (and most often overlooked) level of diversification allows investors to purchase specific investments that diversify internally among numerous holdings. For example, an investor who purchases units in a Real Estate Investment Trust (REIT) that spreads its risk over several apartment buildings, shopping plazas or other income-producing properties receives diversification that is unavailable when only a single property is purchased. This is asset-specific diversification, and this is the focus of all investments recommended by Westcourt.
8.Can Alternative investments be relatively illiquid?
DAVID ; One of the features of private investments is that they are generally less “liquid” than publicly traded securities. While most allow for you to redeem your investment either monthly or quarterly, they also generally apply “redemption fees” penalizing investors who invest for less than 1 or 2 years. This is a very important consideration when considering an investment, and you should ensure to be fully informed about the redemption rules for any investment.Low or high correlation with traditional financial investments such as stocks and shares?
9.Just like buying a mutual funds or a stock or a structure product there is a degree of investment analysis that may be required before buying these financial investments;
DAVID ;At Westcourt, we ensure that our review of the investments we recommend is thorough and personal. This entails a combination of both quantitative and qualitative analysis designed to provide a complete picture of a prospective investment.
Our methodology begins with a “macro” analysis of categories of investments, studying their benefits and drawbacks from the point of view of our investment strategy. For those investment models that pass the macro test of general suitability for our clients, we then apply an even more rigorous “micro” analysis of the investments in Canada that fit within this model. This level of analaysis is more detailed and more personal. Among a long list of questions that are dealt with at this stage are the following:
11.On you web site one of your philosophy is to Stay Rich vs. Get Rich
Our clients dont come to us to get rich. As qualified investors, most of them are already very comfortable. Their primary investment goal is to preserve their hard-earned capital in any market. In fact, their greatest fear is not under performance of their investments, but putting their capital base at risk. At Westcourt, capital preservation is the primary factor in determining which investments to recommend.
NOTES
7.Is there a Low or high correlation with traditional financial investments such as stocks and shares?
- How much of the management team’s own money is invested alongside your investors?
- What are the firm’s long-term objectives?
- How much experience does your team have in these and related investments?
- What are your management fees and exactly how are they calculated?
- What protections and controls have you designed in your investments to protect investors from illegal and unethical conduct?
- What are your redemption rules and how have they been applied in the past?
- Are your firm’s financial results audited and who are the auditors?
10.Can you explain what the specific alternative investment strategies are ;
a. Hedge Funds
b. Private Equity Funds
c. Mortgage Funds
d. Private REITs
e. Asset-backed lending funds.
low Volatility: As a dealer in conservative, alternative investments, it is important to us that the investments we recommend have very low volatility. Our clients are generally happy to forego the promise of huge gains in exchange for the promise of reasonable gains with low volatility.
High risk-adjusted returns:The concept of “high” returns is relative to the risk assumed by investors to achieve those returns. At Westcourt, we seek out conservative investments with attractive returns that are achievable without the assumption of undue risk.
High degree of diversification: Diversification within investors’ portfolios takes two forms. Both are designed to ensure that under-performance within an asset class has a lesser effect on the invested assets as a whole. The first is diversification among asset classes, meaning that investors split their investments between stocks, bonds, cash and alternative investments. The second is diversification within asset classes.
At Westcourt, we focus exclusively on the asset class of alternative investments. Still, our clients enjoy two distinct types of diversification. First, we recommend that clients diversify among the investments we recommend. Second, we generally recommend investments that are themselves diversified among a group of specific investments, adding to the layers of diversification that bring our clients confidence.
Low correlation to public equity markets: As a dealer of conservative, alternative investments, Westcourt does not deal in public equities (stocks of publicly traded companies). Since most clients already have exposure to the public markets, Westcourt provides diversification through the recommendation of alternative investments uncorrelated to those markets. In other words, we endorse investments that we believe will perform predictably regardless of stock market volatility.
Expected Consistent Distributions: With the exception of bonds, few investments guarantee distributions in specific amounts or on a specific schedule. However, many alternative investments are designed to return predictable periodic distributions that, while not guaranteed, are expected and paid out. At Westcourt we endorse a suite of investment products designed to provide steady, predictable returns to our clients.
Potential for Capital Appreciation: In addition to distributions, some conservative alternative investments provide investors with capital appreciation (the increase in value of their investments). Capital appreciation is welcome both because it increases the investors’ net worth and because it defers any taxes payable on the gains until the investments are sold in the future.
Reasonable Liquidity: Most publicly-traded securities, such as stocks and bonds, are fully liquid, meaning that investors are able to buy and sell them at will. Full liquidity has the advantage of being able to “cash out” on a moment’s notice, and the disadvantage of having the “value” of a security determined by whatever the last purchaser was willing to pay for it. As we have seen in recent times, during volatile market cycles, the minute-by-minute re-pricing of securities is not necessarily beneficial to anyone. That being said, illiquid securities are generally difficult purchases for all but the most trained and sophisticated investors. There is little or no way to cash out if an investor requires his money back at a time other than the one designed by the security’s issuer. At Westcourt, our clients are long-term investors who require flexibility, but not “real-time” liquidity. We seek investments for our clients with periodic liquidity, to provide some comfort that their investments are not tied up indefinitely.
Tax Efficiency: It is often said that investors, when evaluating the purchase or sale of an asset from a tax perspective, should not allow the “tail to wag the dog”. In other words, investors should not purchase a security simply because it is tax efficient. After all, if the investment doesn’t provide a distribution or increase in value, the fact that it was tax-efficient is totally irrelevant! Still, tax efficiency is a very important consideration to make when comparing offerings that are otherwise very similar in risks and returns. At Westcourt, we seek investments that fit squarely within our investment profile that may also provide tax-efficient distributions or growth.
No Startups/turnarounds: One of Westcourt’s fundamental principles is that we do not deal in investments or managers who do not have a significant track record. It is in this spirit that we do not promise outsized returns or magical capital appreciation. We have no interest in introducing our clients to startups, turnarounds, or other models and schemes that puts some or all of their hard-earned capital at risk. That is not to say that there is no room in an investor’s portfolio for “growth” plays – just not within an investor’s Westcourt allocation. http://www.westcourtcapital.com/investment-characteristics
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