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Hussein Amad's statement regarding embattled Canadian mortgage lenders

 

To all Yorkville Asset Management Private & Institutional Clients, Advisors, and Friends:

 

This is a quick note to let you all know that Yorkville does not presently have exposure to Canadian alternative mortgage lenders. Furthermore, we have a short to mid-term negative bias toward Canadian real estate.

Our concerns began three years ago and were driven mainly by ballooning consumer debt-to-disposable-income ratios that have reached an all-time high. This concern is compounded by sluggish employment growth and worsening salary growth across all provinces. The potential for the Bank of Canada to meaningfully raise interest rates in 2018, CMHC tightening their policies, and new banking and government rules could further squeeze the real estate market in many areas.   

We have concerns over indirect exposure that Canadian banks and insurers have to the real estate market and alternative mortgage lenders. We believe their exposure may be material enough to cause prolonged stock price declines. Further, we could experience a short term drop in Canadian Financials as this negative news may continue in the summer months. 

For this reason, Yorkville has reduced our equity exposure to Canadian banks and insurers in favour of cash. We choose to be cautious at this stage and sit on the sidelines ready to reinvest with the view to increase our exposure to Canadian banks once the dust settles.

I hope you take confidence that we have never had exposure to embattled Canadian alternative mortgage lenders, and our recent conservative actions are consistent with our practice of Managing Risk and Nurturing Wealth.

 

Regards,

Hussein Amad

 

 

IMPORTANT DISCLOSURES

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Yorkville Asset Management Inc. is registered with the Ontario Securities Commission as a registered portfolio manager, investment fund manager and exempt market dealer.

This newsletter does not constitute and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation by Yorkville Asset Management Inc. or its affiliates, or any other third party, of any security, including any mutual funds managed by Yorkville Asset Management Inc. or any other third party.

This information is provided for general informational purposes only. It is not intended as investment, financial, legal, insurance or tax advice and you should not construe it or rely upon it as such. Professional advice should be obtained with respect to any investment. Views expressed regarding a particular company, security, industry or market sector are the views of only that individual as of the time expressed and do not necessarily represent the views of Yorkville Asset Management Inc. or any of its representatives and are not a recommendation to buy or sell. These views may not be relied on as investment advice or other advice. Market information used on this newsletter is obtained from non-proprietary market sources. While we believe this information is accurate, Yorkville Asset Management Inc. and its affiliates cannot attest to the validity of information culled from other sources and cannot guarantee that it is current or complete at all times. The information contained is subject to change without notice and Yorkville Asset Management Inc. and affiliates cannot be held liable for any loss arising from any use of or reliance on the information contained in this newsletter.

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