S1E4: First Quarter Letter 2022

Foreign. This podcast is brought to you by Gensler Wealth. The information discussed today is meant to be general in nature and not tailored to your specific investing circumstances. This means that you should talk to your regular Gensler wealth advisor, or your own advisor, if you have one, before acting on any information we discuss today. Nothing in this podcast is intended to be a solicitation and past performance does not guarantee future returns. This podcast is also brought to you slightly by COVID 19 as I am just getting over Covid and you may hear it in my voice, I apologize in advance for the raspiness. This is the first quarter 2022 client letter from Gensler Wealth. We review uncertainty again and surprises in investing. We talk about Russian oil and ESG investing, a new mortgage strategy we're allocating to and we actually introduced this unlimited podcast. Enjoy. Foreign. 2022 first quarter client update April 2022 to Gensler Wells clients well, I was right. In my last quarterly letter I said uncertainty is the only thing I know with certainty. In the three months since I released that letter, in the words of Chamath Palihapitiya from the all in podcast on Friday, April 1 we've had massive exposition of inflation. We've had massive disruptions to the supply chain. We've had the beginning of a war whose end is somewhat indeterminate today that's causing a bunch of spikes in a bunch of really critical commodities the entire world needs. We've had a Federal Reserve that went from hiking 50 or 75 basis points to hiking 200 to 250 basis points by the estimated average. And so all of these things have happened, yet the market is basically at an all time high, plus or minus 5%. That really doesn't hang together at some really basic logical level. And Balaji Srinivasan, speaking on the Knowledge Project with Shane Parrish on April 5, reminded listeners of past events. Every single thing over the last 20 something years 911 was a surprise. WMDs in Iraq, that was a surprise. The collapse of Bear Stearns and then Lehman Brothers, that was a surprise. The Snowden revelations were a surprise. Trump was a surprise. Covid was a surprise. Everything's a surprise, end quote. And of course in February 2022, Russia's terrible invasion of Ukraine was a surprise. All of the above is simply to reinforce that trying to predict and forecast the future is very hard or in my opinion, impossible. I therefore remind you that at Gensler wealth we organize your financial affairs and investment portfolios with the goal of being prudent and resilient while striving for reasonable returns. I will note that Chamas comment above also reinforces a comment from a message we sent out on February 24, the morning after Russia invaded Ukraine. Equity markets are resilient even in the face of challenges and as it relates to your investments, we encourage you to keep calm and carry on with your long term investment plan. Russian Oil and ESG Investing if there is one thing the war in Ukraine has brought to the forefront, it is the world's and in particular Europe's heavy reliance on Russian oil. As an oil rich country and producer, Canada's energy heavy stock market has actually performed very well relative to its global peers. That being said, in addition to sourcing oil supplies from countries other than Russia, we believe this crisis will be yet another catalyst for countries to seek alternative, clean and renewable sources of energy. Coincidentally, over the past quarter we welcomed a new client family that pushed us, actually mandated us, to build an ESG environmental, social and governance focused portfolio for them. Many of the core strategies and managers we utilize were already signatories to the UNPRI or United Nations Principles of Responsible Investing and employ ESG factors in their investment process. However, we now have a more robust and comprehensive portfolio of strategies we can employ for clients that meet rigorous ESG criteria. If you would like to learn more about ESG investing with Gensler wealth, please let us know. New Mortgage Strategy in addition to a select few new strategies employed through our ESG project, after five months of due diligence, we were pleased to begin allocating client assets where appropriate to a new Canadian private mortgages investment through a related entity. This manager originates over $1 billion of mortgage loans each year and through its investment vehicle will lend directly to a small subset of those borrowers. The mortgage portfolio is diversified by asset class and geography within Canada and pays a target 8% annualized distribution paid monthly with the opportunity for a top up at the end of the year. In 2021, the strategy returned 9.3% in the lower fee class Ginsler wealth clients get access to the manager provides Ginsler wealth with complete transparency into every single loan in the portfolio and access at all times to a full electronic data room for investors holding this investment. Within a corporate structure, the interest income may be treated as active business income. Talk to your own accountants about this and therefore subject to the lower active business corporate tax rates versus passive income tax rates. Perhaps most unique, the manager's main principals have currently invested approximately $22 million in a class of units in first loss position and contractually must have at least $15 million in first loss position. Notwithstanding the fact that there have been no or $0 of losses to date, this means that the mortgage pool would have to suffer $22 million of losses before its investors would face any loss of principal. This is a rare find. We have found this strategy to be a good addition for clients seeking high income from their portfolio. As always, we are happy to discuss this strategy with you should you wish the Unlimited Podcast by Gensler Wealth One of my early roles in my wealth management career was overseeing the Manager of Managers program at one of Canada's leading multifamily offices. In order to share manager updates with clients, we would record a phone call with each manager, burn them all onto CDs and put the CDs in the mail to clients who could listen to the manager interviews at their leisure. As an alternative to sending you all physical CDs, we decided instead to launch a podcast. The unlimited podcast, as the name implies, will not be limited only to interviews with investment managers. While investing in financial concepts will certainly be a big component of the podcast, the goal is to bring you insight and expertise on a variety of topics from experts that you and other listeners may find interesting. One of our clients told me that my last quarterly letter was too long, so for those who prefer to listen to my long winded letters as opposed to reading them, the podcast will also include audio versions of these letters. The first live Interview Podcast was released last week and contains my interview with David Vanka, President and Partner of ICM Asset Management and Portfolio Manager of the ICM Crescendo Music Royalties Fund. We review the Music Royalties Asset class, dive into a Taylor Swift case study, and discuss why music royalties could be a good addition to traditional stock and bond portfolios. Here's a quote from Mike Tyson Everybody has a plan until they get punched in the mouth. Mike Tyson once famously said that quote prior to a fight with Evander Holyfield. Tyson lost, by the way, in organizing your financial and investment affairs. We do so knowing that we will be punched in the mouth. We just don't know when or by who or in other words, we know surprises are coming and we believe we are ready for them. Thank you for your trust, support and confidence. We are available 247 should you need us. Sincerely, me Brian Gensler, President and CEO, Gensler Wealth As a postscript to the letter, Gensler wealth was pleased to welcome Safal Batarai, cpa, cga, fcca, CFA to our team this past quarter. As you can hear, Safal has earned a variety of professional accounting, investment and finance designations. Our regular business cards may not be big enough for all his accreditations. Safal joins us from another wealth management firm and will work closely with me on financial and portfolio matters along with playing a major role in our manager research, due diligence, selection and monitoring process. And we look forward to having you meet Safal in due course. Well that was our first quarter 2022 letter to clients. Lots of surprises in the world. More to come. Stay tuned for more letters and more updates from Gensler Wealth. Thank you very much.

This has been a Gensler wealth audio production. The unlimited podcast is hosted and produced by Brian Gimsler and edited and mixed by me, Katherine Donville. Always remember that past performance is not indicative of future returns. If you're interested in hearing more from us please like subscribe and give us a five star rating and follow us on all social media. We can be found at genzerwealth. See you next time.