All Posts By


Canadian Real Estate Market Update 2020 Q2

By | News | No Comments

Vancouver home buyers and sellers have gradually become more active in each month of the COVID-19 pandemic.   In June, home sale and listing activity in Metro Vancouver returned to more historically typical levels.

“Realtors continue to optimize new technology tools and practices to help their clients meet their housing needs in a safe and responsible way,”  said Colette Gerber, REBGV Chair.

She added, “Over the last three months, home buyers and sellers have become more comfortable operating within the physical distancing and other safety protocols in place.

Many more real estate transactions are happening virtually today.   Before considering an in-person showing, realtors are helping potential buyers pre-screen homes more thoroughly by taking video tours, reviewing floor plans and an increased number of high-resolution images, as well as often driving through the neighbourhood.”

Lisa Patel, Toronto Real Estate Board President said, “Following the broader movement to reopen the economy in June, we experienced a very positive result in terms of home sales and selling prices.  Before the onset of COVID-19, there was a great deal of pent-up demand in the market.  This pent-up demand arguably increased further over the past three months.   We are still in the early days of recovery, but barring any setbacks, we should continue to see stronger market conditions in the second half of 2020 as households look to satisfy their ownership housing needs.”

The pause in Montreal’s resale market due to the pandemic caused sales and new listings to fall by approximately equal amounts in the second quarter of the year.  The market is in a situation where there is less than 4 months of inventory for single-family homes and condominiums.  There is less than 5 months of inventory for plexes.  Overall, market conditions give sellers a very strong advantage for all three property categories and many areas are experiencing overheating, which leads to sales above the asking price.

Victoria Real Estate Board President Sandi-Jo Ayers says, “If all we do is look at numbers, we see a fairly normal June, in the midst of a very not normal world.  The impact of COVID-19 on our entire economy continues.  And while some buyers and sellers are slow to emerge from isolation, others have been highly active since the start of Phase 2 of BC’s Restart Plan.   Due to the pandemic alone, we have multiple factors influencing the inventory and sales in our market.”

“Recent price declines, easing mortgage rates and early easing of social restrictions are likely contributing to the better-than-expected sales this month,” said Calgary Real Estate Board chief economist Ann-Marie Lurie. “However, the market remains far from normal.   Challenges, such as double-digit unemployment rates, will continue to weigh on the market for months to come.”

Despite some recent monthly gains in supply, sales activity was high enough to cause the months of supply to dip below four months for the first time since May 2019.   If this trend continues, it should help to ease the downward pressure on prices.   Residential benchmark prices are comparable to last month, but remain nearly three per cent lower than last year’s levels


Please click here for detailed PDF report


Vintage Wine Market Update June, 2020

By | News | No Comments

COVID-19 and Trade Wars

So far the fine wine market has shown some resilience compared to global equity and commodity markets.  Looking back at the GFC in 07/08 when the Liv-ex 100 fell more than 30%, the impact of COVID-19 and associated negative effects do not seem to have been fully experienced yet in the fine wine market.   Although various Liv-ex indices have been down 1-4% year-to-date, a weaker pound sterling has helped stabilize the market but has not led to a boost in volume.

The current pandemic and global economic slowdown might have more important negative consequences on both demand and supply in the longer term.  Disruption of traditional distribution channels such as top-end restaurants could lead collectors and restaurant owners to sell parts of their collections or stocks to compensate for lack of income.  This would put downward pressure on prices, with varying extent of the effect felt by different wine regions, appellations, vintages and also depending on the rarity of the wines.

Another important factor affecting the fine wine market is the repercussions of the trade wars between China, the US and Europe.  Higher tariffs applied to French wines by the US, for example, has had a negative impact on French wine exports across the board and has contributed to increased sales of top Italian wines in the US market.  The political situation in China, and Hong Kong in particular, has led to a decrease in demand for high-end wines.   Bordeaux wines have been especially affected.

Focus on Italy

Interest in Italian wines continues to be on the rise.   In 2019, the Liv-ex Italy 100 index was the best performing amongst all Liv-ex indices with a +3% gain, whereas the Liv-ex Bordeaux 500 was -3.6%.   It is also important to note that Italy is the third most actively traded wine region on Liv-ex, behind Bordeaux and  Burgundy and before Champagne, Rhone and Rest of World.   Super Tuscans such as Sassicaia, Ornellaia and Tignanello are not new on the wine scene and over the past few years have acquired investment grade status.   Meanwhile, wines from another important region, Piedmont, are catching up and are among the best performing on Liv-ex.   Top Barolo and Barbaresco wines from producers like Giacomo Conterno and Bruno Gisacosa are fetching prices doubles those of the Super Tuscans.   Reds wines from Piedmont are made uniquely from Nebbiolo, a demanding varietal and indigenous to Piedmont.   It is a late ripening grape with high levels of tannins and acidity giving them long aging potential.  Undoubtedly, the increased interest and demand for quality Italian wines is not a fad.

Bordeaux 2019 – A Very Unusual En Primeur Campaign

The verdict is out: the 2019 Bordeaux vintage is very good to excellent.  Red wines from both left and right banks look fairly classic in style and the dry whites are judged to be excellent as well.   The “en primeur” campaign usually starts in April with hordes of wine journalists and the trade flocking to Bordeaux for the new vintage tastings.  Of course this year, due to travel restrictions, this did not happen and the tasting were done in isolation with samples sent directly to the press or merchants.   Zoom interviews and tastings, as odd as it may seem, became the norm, for this year anyway. Releases just began in the past week with Chateau Pontet Canet 2019 opening the grand ball of the Grands Cru releases.  So far, it seems that Bordeaux is finally getting wiser and listening to the market.  2019 prices are down 15-30% compared to 2018 despite the high quality vintage as we pointed out earlier.  Cos d’Estournel 2019 is 24% lower than last year although it received scores of 98/99 points.   Palmer 2019 is 33% cheaper and even Chateau Lafite is showing reason with first release priced at  €394, a 16% discount from last year.   However, it is too early to tell whether these price-sensitive release prices will assure success for this year’s campaign.

The Auction World

Spring is usually a busy time for the major auction houses.   Things are different this year with bidding done online.  This new approach seems to have worked well with results showing a high numbers of lots sold and prices in the middle to high estimates for the most sought after wines.  Eyes are now on Sotheby’s and Christie’s first live auctions since COVID-19.  Sotheby’s have scheduled June 18 for New York and July 5-7 for Hong Kong, whereas Christie’s is slated to hold theirs on July 12  and July 28 in Hong Kong and London respectively.


Click here for download version


Canadian Real Estate Market Update 2020 Q1

By | News | No Comments


It was announced the Greater Toronto Area reported 8,012 home sales in March 2020, up by 12.3 per cent compared to 7,132 sales reported in March 2019. However, despite a strong increase in sales for March 2020 as a whole, there was a clear break in market activity between the pre-COVID-19 and post-COVID-19 periods. The overall March sales result was clearly driven by the first two weeks of the month. There were 4,643 sales reported in the pre-COVID-19 period, accounting for 58 per cent of total transactions and representing a 49 per cent increase compared to the first 14 days of March 2019. There were 3,369 sales reported during the post-COVID-period – down by 15.9 per cent compared to the same period in March 2019.


Metro Vancouver’s housing market saw steady home-buyer demand to begin March and a levelling off of activity as the month went on and concerns about the COVID-19 outbreak intensified.

“The first two weeks of the month were the busiest days of the year for our region with heightened demand and multiple offers becoming more common.  Like other aspects of our lives, this changed as concerns over the COVID-19 situation in our province grew.” – Ashley Smith, REBGV president.

Last month’s sales were 19.9 per cent below the 10-year March sales average.

“Many of the sales recorded in March were in process before the provincial government declared a state of emergency. We’ll need more time to pass to fully understand the impact that the pandemic is having on the housing market,” Smith said. However, it is important to note real estate business is still carrying on in BC as the provincial government deemed it an essential service.


With a total of 14,662 transactions concluded, the residential real estate market in the Montreal CMA continued its momentum and posted its 23rd consecutive quarterly increase in sales.

“Montreal’s real estate market experienced record sales at the start of the year, building on the momentum of an equally strong year-end in 2019.  At the same time, the number of active listings continued to decline in all areas,” said Julie Saucier, president and chief executive officer of the QPAREB.

“The resale market is becoming even tighter across the metropolitan area, putting additional and widespread pressure on prices,” added Charles Brant, director of the QPAREB’s Market Analysis Department.  “The full impact of the health crisis will only be felt on sales in the next two quarters.  That said, the extremely tight market conditions and very favorable financing conditions will help limit the negative impact on prices”, he added.


In Victoria, it isn’t business as usual either. “Last month, we stated that we saw the spring market kicking off,” says Victoria Real Estate Board President Sandi-Jo Ayers. “The start of March continued that trend and we saw higher year-over-year sales for the first weeks of the month – spring had officially sprung with multiple offers, new listings and sales.  And then the world changed.  Since the COVID-19 pandemic was declared, we have tracked a predictable downturn of sales in our market.  Moving forward it is hard to predict what our spring market will look like, but it will likely be very different than recent years as our entire community slows down to stay healthy.”


In Calgary, March sales activity started the month strong, but quickly changed, as concerns regarding the spread of COVID-19 brought about social distancing measures.  This had a heavy impact on businesses and employment.

“This is an unprecedented time with a significant amount of uncertainty coming from both the wide impact of the pandemic and dramatic shift in the energy sector.  It is not a surprise to see these concerns also weigh on the housing market,” said CREB® chief economist Ann-Marie Lurie.

The reduction in both sales and new listings should help prevent significant price declines in our market.  However, price declines will likely be higher than originally expected due to the combined impact of the pandemic and energy sector crisis.

Please click here for detailed PDF report


Impact of Dividends

By | News | No Comments




The equity components of our client’s portfolios are currently enjoying dividend yields (gross) above 3%.   There are large variations in yield within the portfolios, with some companies paying dividends that yield over 6% and some not paying a dividend at all.

Dividends have provided a significant component of total returns over the long-term. Some studies show that over the very long term, dividends have contributed more than half of the total returns for broad equity portfolios.

Given the importance of dividends to the total return of a balanced portfolio, we thought it useful to provide a brief overview of dividends and how dividends can function as an important signaling device.


Dividends are payments made by companies to their shareholders from their current or retained earnings and usually on a regular basis. A company’s ability to pay steadily increasing dividends is seen as a sign of financial and operational strength and stability.  Large, mature, profitable companies with solid cash flows typically pay dividends as part of their capital policy.  However, high-growth companies often do not pay dividends because they believe cash generated from their operations is better used to invest in their business, driving continued growth.

Companies capable of generating an attractive return on equity are more likely to generate more value for shareholders over time by investing in organic growth, rather than returning that cash to shareholders who then need to find other attractive investment opportunities.

Most managements are careful to increase dividends only when they are confident those new levels can be maintained. If a company with a history of steady dividend payments suddenly cuts its dividend, even if to pursue growth initiatives, the market will likely interpret this as suggesting the company’s financial health is deteriorating.

There are three metrics which are commonly used to describe, or assess, the sustainability of a company’s dividend policy:

Dividend yield is calculated as the annual dividends paid per share divided by the current share price. It measures the amount of income received in proportion to the share price over a one-year period – either the last twelve months, or the current fiscal year typically.

Dividend coverage ratio is calculated by dividing a relevant earnings metric by the dividends paid to shareholders.  It measures the sufficiency of earnings (or a related measure such as distributable cash from operations) to cover expected dividend payments.  A higher ratio suggests that the Company can maintain dividends even if earnings were to suffer, while if the ratio is under 1x, the dividends are being paid out of earnings earned from prior years (or increased borrowing), and may be not sustainable.  This ratio is more often considered when dealing with structures that are required to or historically pay out most of their earnings in dividends, such as REITs, MLPs or lower-rated companies with modest earnings growth.

Payout Ratio is essentially the reciprocal of the above, and reflects that percentage of earnings that are being paid out to shareholders as dividends.  Mature companies are often paying out more than 50% of their earnings as dividends.

Dividends are a key metric in some valuation methodologies, although that is a bit complicated for this discussion.

Investing in stocks with an attractive dividend yield provides both income and supports the possibility of future capital gains. Dividend-paying stocks often offer more stable returns and demonstrate a lower than average market risk (or lower Beta), in part because large, mature companies with attractive dividends typically have solid balance sheets and steady cash flows.

But there are limits to this. Managements are not likely to deliberately set a dividend that results in a yield higher than 5 – 6%. When you see dividend yields higher than that, it is more likely that the share price has declined since the dividend payments were set and management wants to maintain dividends so as not to signal weakness.  Therefore, very high yields are often seen as flagging deteriorating underlying financial conditions with the likelihood of a dividend cut in the offing.

During the current economic recovery, companies (particularly those in North America) have materially increased the amount of capital returned to shareholders by purchasing their own shares in the market. While capital is actually returned only to those shareholders selling to the company, the total number of shares outstanding are reduced, providing the remaining shareholders with a slightly higher participation in future earnings and cash distributions.

Companies and commentators sometimes combine the amount spent on share buybacks with that paid out as dividends, to describe a total shareholder return yield. While this clearly overstates their equivalence, and we caution clients not to make that comparison, share purchases send many of the same positive signals as do sequentially higher dividend payments and will be discussed in a separate posting.

Click here to download a PDF version of this article.



Canadian Real Estate Market Update 2019 Q4

By | News | No Comments

The Metro Vancouver housing market experienced below average sales activity and moderate price declines in 2019. The Real Estate Board of Greater Vancouver (REBGV) reported sales of detached, attached and apartment homes reached 25,351 in 2019, which is a 3% increase from sales recorded in 2018, and a 30% decrease from 2017.  Last year’s sales total was 20% below the region’s 10-year sales average.  Benchmark price for all residential properties in Metro Vancouver finished the year at $1,001,000, a 3% decrease compared to December 2018.

“Home buyer confidence was a factor throughout the year.  In the first quarter, many prospective buyers were in a holding pattern, waiting to see how prices would react to the mortgage stress test, new taxes, and other policy changes,” said Ashley Smith, REBGV president. “Confidence started to return in the summer, and we saw above average sales in the final quarter of 2019.”

Conversely on the East coast, Toronto’s average selling price for 2019 was $819,319, up 4% compared to $787,856 experienced in 2018 and total sales amounted to 87,825, a 13% increase from last year.

Toronto Real Estate Board President Michael Collins reported 2019 sales figures were on par with the median annual sales results experienced over the past decade. “We certainly saw a recovery in sales activity in 2019, particularly in the second half of the year.  As anticipated, many home buyers who were initially on the sidelines moved back into the marketplace starting in the spring.  Buyer confidence was buoyed by a strong regional economy and declining contract mortgage rates over the course of the year.” said Mr. Collins.

In Montreal the year 2019 ended visibly as a seller’s market as the city’s hot property market continues, particularly on the Island of Montreal where the scarcity of supply of single-detached homes compared to demand is undeniable. Consequently, the amount of time needed to absorb the inventory of properties is approximately 4 months.

“The real estate market in the Montreal CMA continues to stand out from that of the rest of the province,” said Charles Brant, economist and director of the QPAREB’s Market Analysis Department.  “In addition to registering record sales in 2019, selling times were down sharply and price increases were sustained.   By property category, condominiums stood out most in terms of the number of transactions, but plexes registered the largest price growth,” he added.

Of all the property types, condominiums in Montreal stood out with particularly tight market conditions, falling from 10.5 months of inventory to 3.1 months between 2016 and 2019.  The speed of this decrease implies a significant imbalance has arose over a short period of time.

“Sales concluded above the asking price increased in certain areas and became more widespread in the Montreal CMA for all three property categories,” noted Mr. Brant.  “Condominiums are increasingly exposed to situations of multiple offers, with sales being concluded at a price higher than the asking price.  This phenomenon has become increasingly prevalent in the large areas on the periphery of the Island of Montreal and has even become endemic in many neighbourhoods on the Island of Montreal,” he added

This trend doesn’t appear to disappear as in 2019 the number of listings has decreased for the 4th consecutive year. As a result, market conditions now give sellers a distinct advantage in negotiations as Montreal’s property market activity and price continue to increase.


Toronto Real Estate Board 
Real Estate Board of Greater Vancouver
Quebec Professional Association of Real Estate Brokers 

Please click here for detailed PDF report


Securities Backed Lending

By | News | No Comments



We provide clients with access, via their custody bank, to credit facilities that are backed by their securities portfolio (referred to as securities-backed lending or “SBL”).   Amounts drawn down can be used for any purpose, including to purchase additional securities (which increases leverage within the portfolio).

The interest rate is attractive, and there are no set-up, funding or commitment fees, making this an attractive form of short-term liquidity. In our case, the interest income is earned by the custody bank.

Recent media coverage has described concerns raised about SBL programs, as previously flagged by the U.S. FINRA and industry commentators. SBL can be seen as attractive to asset managers because they are an additional source of income, the assets under management become collateral thus seen as stickier, and if SBL is used for portfolio leverage, then AUM (and management fees) increase.

We have found that this accommodation is particularly helpful for clients that have frequent short-term liquidity needs in connection with real estate or other property purchases. Draw-downs under an SBL are less disruptive to the portfolio strategy than are unplanned withdrawals, to be added back to the portfolio sometime later.

The total amounts drawn by our clients under SBL have declined over the past 18 months; we believe consistent with broad industry experience. Currently, they are under 10% of total AUM.  Their use has been, roughly, evenly split between short-term funding for personal expenses and increased investment portfolio leverage.

Most of the portfolios we manage represent retirement funds, as opposed to shorter-term performance-oriented funds. We very much discourage imprudent use of leverage and are able to monitor client leverage.  Given this careful use of SBL by our clients, as well as the flexible and low-cost nature of the facilities, we are confident that SBL is a valuable additional client service.

However, some wealth managers heavily market SBL, with the result that total amounts outstanding have increased relative to AUM in the past five years.

Conduct issues remain a challenge for our industry and its reputation. Accordingly, we believe that given the commercial incentives to some managers and financial advisors to potentially abuse this product, regulatory enquiries as to how they are marketed and whether “mass affluent” and other retail investors appreciate the risks posed by misused SBL, are fully warranted.


Click here to download a PDF version of this article.



Economic Substance Regime

By | News | No Comments



If you use a BVI (or comparable) company to hold an investment account then you may have recently received a, possibly confusing, letter from your corporate services provider. The letter likely described a new set of rules that cover a specific set of activities, referred to required levels of employees, premises and activity in the offshore jurisdiction along with a compliance warning and perhaps provided a recommendation.

This new “Economic Substance” regime will create some compliance and tax issues for those with complicated structures, but they need not create as much difficulty as you may initially have feared.


In the late 1990’s, the OECD began initiatives addressing many practices of multi-national companies and wealthy families that were identified as being used to avoid taxes. Many of these practices are legal tax avoidance schemes that take advantage of gaps created because the domestic tax systems of different countries treat certain types of income or transactions inconsistently.

The OECD’s objectives include greater transparency and better alignment of domestic tax regimes, especially with respect to income-producing activity that is geographically mobile (e.g., royalty and licensing payments, inter-affiliate loans, trading units). In 2013, the OECD and G20 countries adopted a 15-point Action Plan.

Action 5, describing the proposed economic substance rules, primarily addresses entities within corporate groups that facilitate the shifting of profits to low-tax jurisdictions, potentially eroding the tax base where the key income generating activities actually occur.

The OECD was not focused on personal holding companies (“PICs”) when devising this new regime.  Most of their initial work for Action 5 was actually focused on intellectual property rights and associated transfer pricing / income shifting.  And while PICs are often associated with tax evasion, the Common Reporting Standard and other AML regulations are seen as adequate to deal with transparency issues for this type of vehicle.

However, your PIC may not look much different, superficially, from the shell companies actually targeted by these rules and as a result may be drawn into these rules.


Broadly, the EU supports the principle that companies pay taxes in the jurisdictions in which their commercial activities generate income; and when taxpayers claim that income is actually generated in low-tax jurisdictions, that they demonstrate that real income generating activities actually occurred to those jurisdictions – thus the “economic substance” moniker.

The EU / OECD has issued guidelines as to the type of activities covered and rules that would be helpful to demonstrate substantial economic activity. At the same time, they threatened to black-list those countries that did not commit to introducing such helpful domestic regulations.

The so-called “offshore jurisdictions” have been surprisingly compliant and all of the well-known places (e.g., BVI, Cayman, the Crown Dependencies) have responded with proposed changes to their domestic rules.

For example, the BVI enacted an economic substance reporting regime effective January 1, 2019, although the draft code was only introduced in April and the final Rules in October, 2019.

Impact on a Typical PIC

There are nine categories of “relevant activities” covered by the rules. If your PIC is caught in these rules, then it would likely be as a holding company – described more specifically as a “pure equity holding entity”.  Assuming your PIC holds equity investments in a passive nature, then there are three general considerations:

First, the new rules might not even apply to your PIC. This relevant activity is defined as holding only equity investments.

Some corporate service providers are suggesting that the least disruptive non-equity asset classes to add to an otherwise all-equity portfolio include bonds or bank accounts. (There is the issue of proportionality – i.e., what size is required to establish a true “investment” in the context of the total portfolio).  The purpose of adding other sources of income is to remove the PIC from the scope of the regime itself.

Second, even if your entity is a pure equity holding entity, then the entity may be tax-resident somewhere else.  This doesn’t remove your PIC from the reporting regime, but you will not be required to demonstrate economic substance.

It would greatly assist if you had actually filed a tax return in that other jurisdiction. If not, your corporate services firm will likely ask you to get a tax certificate. Those might be difficult to obtain without a real economic connection to that jurisdictions.

Finally, your entity, even if caught within the new rules, likely meets a reduced threshold show the economic substance designed for passive pure equity holding entities.

For example, unlike the other eight categories of relevant activities, there is no requirement that your entity be directed or managed from within the BVI.

Many commentators believe (and the final BVI Rules strongly suggest) that passive PICs that

  1. have a local registered agent with suitable local premises and staffing (and that ensures mandatory filings are completed), and
  2. comply with the general statutory requirements for BVI companies,

should meet that threshold.

The primary practical impact for you may be a modestly higher annual corporate services fee.

If you have a PIC incorporated in any of the jurisdictions imposing economic substance reporting requirements, then you probably need to seek specific professional advice, at least for the first reporting cycle.

This note is not intended to be advice in any form (except that you should seek advice).  There are complicating aspects of the new economic substance rules and the rules and definitions are not uniform from one jurisdiction to another.

Click here to download a PDF version of this article.



Vintage Wine Market Update Oct, 2019

By | News | No Comments


Vintage wine auctions in 2019 so far are turning out well for the major auction houses. The first half saw strong results and it was not rare to see 100 percent of lots sold.

US-based Acker Merrall and Condit reported a superlative first half when top Burgundy producers like DRC and Leroy continued to lead. Interestingly, a lesser known producer, Domaine Comte Liger-Belair, made a strong impact and has been slowly building a leading position among the top 10 sellers in auctions.  Liger-Belair’s wines include world-renown grand cru such as La Romanée, Clos de Vougeot and Echezeaux.

For the first half of the year, Sotheby’s fine wine sales increased 23 percent year- on-year to USD 65 million. It was their highest spring total since they began auctioning wine in 1970.   Notably, the three-day auction held in Hong Kong in March established a new record, selling 2,700 lots for USD 34.5 million against an estimate of USD 20-30 million.

Although Christie’s May auction in Hong Kong saw most wines sold below their high estimates, the exceptions were Domaine Leroy, Roumier and DRC in top vintages and appellations. A two-bottle lot of Domaine Leroy Musigny 2000 sold for HKD 375,000, which was 97 percent above the high estimate.

October marks the beginning of the Fall auction season in the major markets of Hong Kong, London and New York. Despite the unsettling situation here in Hong Kong, both Sotheby’s and Acker reported strong results. Online bidding allowed buyers to purchase their favorite wines and Sotheby’s reported a 44 percent increase in phone bidding for their early October auctions.

It is noteworthy that there appears to be different preferences in different geographies. The US and UK auction markets remain very keen on top Bordeaux, whereas in Hong Kong the focus seems to be more on Burgundy and less on Bordeaux. Nevertheless, not every wine performs well in auction. As mentioned earlier, only a select few among the Burgundy and Bordeaux estates will sell at levels exceeding their high estimates. For Bordeaux, Chateaux Lafite Rothschild and Petrus in the best vintages usually do very well.  For Burgundy, Leroy, Roumier, DRC and Rousseau are the leaders, but not in every appellation.  Roumier’s Bonnes-Mares, Leroy’s Musigny and Rousseau’s Chambertin Clos de Beze are the most desired, whereas Romanée Conti and La Tache are top sellers for DRC.

It is important for potential sellers to understand that the auction market is uneven and a majority will sell below or just within market price. As is often the case, larger formats seem to attract more attention and enjoy a premium.

While sales in the auction market appear to be doing well in these turbulent times, the broader vintage wine market is feeling the effects of global trade tensions, confusion around Brexit and recent social discontent in Hong Kong. The Liv-Ex indices listed below clearly illustrate this slowdown.

Returns of various vintage wine indices for the latest 12 months to the end of September 2019:

Liv-ex 100 1                       -1.55%

Liv-ex 50 2                          -3.01%

Liv-ex Burgundy 150 3    +6.31%

It is increasingly apparent that Bordeaux first growths are no longer the major driving force in the fine wine world that they once were.  Lesser classified Bordeaux, as well as the second wines from the 1st growth are becoming more attractive to wine merchants and ultimately to wine drinkers.

Top Burgundy remains the focus of both wine buyers and collectors, but given the strong upward trend in prices one must wonder if the region has reached its peak and if there is a speculative bubble. However, what makes Burgundy different from other leading wine producing regions is the sheer scarcity of the product.  There are 33 Grands Crus in Burgundy (the equivalent of Bordeaux 1st growths) and they represent only 1.5 percent of total Burgundy production. There are only 5,000 bottles of Romanée Conti produced annually. The coveted Musigny from Domaine Leroy comes from a vineyard of 0.27 hectares and in 2009 only 600 bottles were produced.

How was the 2019 vintage?

We have heard reports of lesser quantities across the board due to the extreme hot weather during June/July across Europe which caused uneven flowering during the beginning of the growing season. Burgundy could see its production down by 30-40 percent. In Bordeaux, 2019 will be a smaller vintage compared to 2018.  So far, Italian producers are expecting a drop of at least 15%.

In terms of quality, 2019 looks like a very good year for most European wine regions with the exception of Spain which saw the potential of a great vintage dashed by the diluvial rains of last month.


  1. Industry benchmark comprised of the 100 most sought-after wines from the secondary market
  2. The latest 10 vintages of the 5 Bordeaux First Growths
  3. Latest 10 vintages of 15 Burgundy wines including 6 DRC


Click here for download version


Canadian Real Estate Market Update 2019 Q2

By | News | No Comments


Vancouver’s housing prices have started to level off after 6 to 9 months of decline. Prices declined between 1.9% and 2.5% in Q2 compared to Q1; however, this is lower than the 3% to 4% experienced in Q1 2019 compared to Q4 2019.

As price declines began to slow, it is not surprising to see sales increase across all three markets (single detached, condos, townhomes). Compared to Q1, sales increased by 70% for single detached homes, 47% for condos, and 84% for townhomes. Furthermore, with price declines slowing and sales increasing, the number of listings on the market has risen.  Currently, the Vancouver market appears to be a buyer’s market, as we expect prices will start to rise as buyer interest surges.  Vancouver’s current market provides investors the opportunity to enter the market at a price point which hasn’t been available since beginning 2017.

In Q2 2019, Toronto’s residential market continued its upward trend as prices, sales and listings all increased. Compared to Q1, prices have increased by roughly 5% for both single detached and condos, and 2.4% for townhomes.  Compared to prices from a year ago, single detached home prices have decreased by 8%, condominiums have returned to the same price, and townhomes have decreased by 1%. Despite the increase in prices, sales have drastically increased, especially for single detached and townhomes which increased by 113% and condos by 50%.   As is the normal trend when sales increase, the number of listings increased as well.   Single detached listings increased by 54%, condos by 31% and townhomes by 89%.

Montreal’s hot market continues in Q2 2019 with sales and prices increasing while listings decline, creating a tighter market. Prices increased by roughly 3% across the single detached, condo, and the plex markets and single detached and condominiums YoY prices grew, by 1% and 2% respectively, whilst plex YoY prices decreased by 1%. Sales picked up during Q2 compared to Q1, rising by 28% for single detached, 22% for condos, and 50% for plexes. Unlike Vancouver and Toronto, the uptick in sales and prices in the Montreal market hasn’t led to a drastic increase in listings.  Listings increased by only 7% for single detached, and decreased by 6% for condos and plexes. As a result, Montreal’s residential property high demand – low supply environment has continued to fuel international property investors interest in Montreal’s property market.

Victoria’s residential market is experiencing an increase in price, sales, and listings for the first time since Q3 2018.  Compared to Q1 2019, prices increased by 1.6% for single detached, 2.5% for condos, and 1.1% for townhomes. There has also been positive YoY price growth across the three markets as single detached homes increased by 2%, condominiums by 4%, and townhomes by 2%.  Sales have increased drastically in Q2, increasing by 74% for single detached, 52% for condo, and 57% for townhomes. Following its neighbor Vancouver, Victoria’s increase in prices and sales have led to a drastic uptick in listings, increasing 31% for townhomes and 41% for single detached homes and condos.   Overall, the Victoria market is a balanced market leaning slightly more towards a seller’s market as a result of the minor increase in prices as well as the strong increase in sales.

After a long stretch of strong price growth, the Whistler market has experienced a slowdown since the end of Q3 2018 and this slowdown continues in Q2 2019. Prices decreased 5.5% for single detached homes, while increasing by 1.6% and 1% for condos and townhomes. However, the YoY prices have all decreased; single detached by 4%, condominiums by 12%, and townhomes by 19%.  Sales also decreased with single detached homes dropping by 29%, condos declining by 6%. However, Townhome sales increased by 29%.   Despite the relatively quiet sales activity, apart from townhomes, listings increased by 4% for single detached, 8% for condos, and 2% for townhomes.


Please click here for PDF report


ESG Factors should be applied to the Emerging Markets

By | News | No Comments



We recently posted notes reflecting on the tremendous increase in interest in sustainable or responsible investing.

Many clients would like responsible investing to play a fundamental role in the decisions shaping their investment portfolios. The goal is to feel that you are doing good while seeking financial returns, by supporting positive social and environmental changes.

Investment managers increasingly understand the need to accommodate sustainable investing. This is, in part, because surveys suggest that millennials and women are particularly focused on responsible investing, two demographics that will become increasingly active in selecting investment managers.


Applying ESG factors to investment decisions likely leads to a more complete analysis because it involves analysis that might have been overlooked by traditional approaches.

While there are significant definitional and measurement issues to applying or measuring sustainable or ESG investing, investors appreciate that certain key sustainability issues will certainly impact a company’s ability to generate long-term financial returns.   These include a failure to anticipate changes in environmental standards, poor governance and financial transparency and labour practice that impede retention or promotion of qualified employees.

Not all ESG risks are company-specific. Investment surveys have also identified countries with poor ESG performance that contribute to poor financial outcomes for investors and domestic companies.  This could be the result of inequitable regulatory regimes, political interference or corruption, inadequate preparation for extreme weather or poor-quality financial infrastructures.

For these and other reasons, many commentators suggest that emerging economies may be more vulnerable to ESG-related issues than are developed economies. In addition, emerging market companies themselves often rate poorly on ESG measures.  This may be, in part, a measurement issue resulting from managements often failing to appreciate the importance of providing useful information.

As a result, proper implementation of ESG factors into the investing process may well enhance performance or reduce volatility to a greater extent than would be the case with respect to developed markets.  For instance, Blackrock has found that application of ESG factors in EM resulted in a more significant improvement than they found in DM.

And yet, ESG issues appears to be less embraced by Asia-based investors than has been the case in Europe. A UBS survey suggests that the majority of HNW investors in China are concerned that “sustainable investing” will result in lower investment returns.

Letko, Brosseau & Associates, a Montreal-based investment manager that manages our client portfolios, takes the same bottom-up approach to stock selection to its emerging markets strategies. LBA takes a long-term investment approach and believes that integrating ESG considerations into its investment decision-making as part of their mandate to deliver long-term returns. Oversight of ESG integration resides within their management committee.  Its investment committee is responsible for ensuring that all material ESG considerations are incorporated into the analysis and selection of each emerging market investment.

Those fund managers applying ESG factors to EM, including LBA, have identified a number of useful signals:

  • strong (or lack of), independent board oversight,
  • the competence, experience and diversity of senior management,
  • exposure to inappropriate political interference or involvement,
  • transparency in financial reporting and with respect to related party transactions and interests,
  • a commitment to global environmental and labour standards (or at least local standards), and
  • preparedness for environmental disasters, damages to important infrastructure or social unrest.


Click here to download PDF version of this article