New division leaders pave the way for institutions to benefit from first-class service and multi-asset investing expertise
Nicola Wealth is coming into the new year with a new goal: to hone its focus on serving the needs of institutional investors.
Recently, the firm took a crucial step toward that objective by welcoming two new names into the fold: Nigel Stewart as vice president, Institutional Sales, and Lucy So as vice president, Institutional Sales & client relationship manager. Between them, Stewart and So have over three decades of experience in the Canadian institutional space.
“In the days that Lucy and I started, many people within this firm were asking ‘What is institutional?’” Stewart (pictured above, left) told Wealth Professional. “A ton of people have asked that question because ultimately, the wealth advisors that work at Nicola are excited about this opportunity for the firm and want to know how they can help.”
In simple terms, Stewart defines institutional investors as organizations that invest money on behalf of clients or members. That encompasses a broad range of entities including foundations, schools, pension plans and charities – to name a few – with capital size requirements ranging from $5 million to $500 million.
Crucially, institutional investors don’t need financial planning services because they often invest capital on behalf of other investors. A pension plan invests on behalf of pensioners, for example, and foundations often have a board investing the capital on behalf of the foundation and its beneficiaries.
“When you look at the philosophy that Nicola Wealth utilizes in managing the investment portfolios for private clients, it bears resemblance to how some of the largest and most well-respected institutions invest their capital,” So (above, right) says. “Instead of having a traditional 60-40 portfolio, these institutional investors will employ a portfolio that is diversified across many different asset classes. The combination of these asset classes works together with the goal of minimizing the impact of market volatility and increasing risk-adjusted returns.”
Even before Stewart and So came on board, Nicola Wealth employed an investing model comparable to those used by the Canada Pension Plan or the Ontario Teachers’ Pension Plan. Even for institutions with less than $50 million to invest, Stewart says there’s increasing interest in pension-style asset allocation given the current market volatility.
More specifically, they see a strong shift among investors away from public securities and toward private securities. For those with capital that they don’t need immediate access to, the ability to invest in private markets can improve the risk and return profile of the portfolio over long time horizons.
“If you’re huge like The Canada Pension Plan (CPP), you have your own ecosystem. You can build whatever you want from within,” Stewart says. “For a lot of these smaller capital pools of sub-$100 million, it’s either they can’t afford to invest in these strategies, or they don’t have the expertise on how to get started. We’re a perfect fit because we have a strong track record of managing investment portfolios for over 25 years.”
Citing a 2020 research report from the Canadian Institutional Investment Network, So said there are about 68,000 institutional investors in Canada, and only 173 have more than a billion dollars of investable assets. That means the majority of institutional investors in Canada have less than $50 million in investable assets – in other words, a vast blue ocean of opportunity.
“The window of opportunity for Nicola Wealth in this space is really with those small- to mid-size institutions that are looking for professional money management who simply don’t have the resources or expertise to do it in-house,” So says.
Another trend Stewart sees is an increased interest in ESG issues, including matters relating to carbon emissions, and diversity and inclusion. That shifting interest, according to So, will have implications with respect to the companies that institutions will invest in, as well as the investment managers they partner with.
“Not only is Nicola Wealth a signatory of the United Nations Principles for Responsible Investment, the principles of community, partnership, caring and integrity guide everything we do” So says. “This is evidenced in the diversity of our leadership, employee and shareholder base.”
