President

David Sung

Who We Are

Founded in 1994

$4.8 billion in AUM

Vancouver, Toronto, Kelowna, Richmond

Time of Change

How can we make entertainment more accessible?

How can we make transportation more reliable?

How can we make it easier for customers to get their products?

How can we diversify beyond stocks and bonds?

A History of Innovation

2003 2005 2006 2009 2010 2011 2013 2014

Launch of original

SPIRE LP

Global Equity

Real Estate

Primary Mortgage

Balanced Mortgage

Preferred Shares

High Yield Bonds

SPIRE U.S.

Global Bond

Tactical High Income

Van Edge – Digital

Caledonian – Royalty

Renewal 2 – Sustainable

Private Equity LP

Alternative Strategies

Precious Metals

Bonds

NWM Core Portfolio

Bonnefield – Farmland

U.S. Equity Income

1995-

2003

Individual

Real Estate LPs

Mortgage Investments

+ NWM develops

Private Giving

Foundation First Private

Investment Pool

(Strategic Income

Fund)

A History of Innovation

2016 2017 2015

SPIRE Value Add Grosvenor Partnership

NWM Farmland LP

Chief Investment Officer

Rob Edel

Our Agenda

2016 in Review Investment Strategies

Dr. Trump

Treatment

Options

Economic

Diagnosis

Make the Economy

Great Again

2016 in Review S&P 500

Trump

Bump

Election

Uncertainty Search For

Yield

Recession

Fears

Brexit Trump Elected

2016 in Review U.S. 10 Year Treasury Bond Yields

Trump

Bump

Election

Uncertainty

Search For

Yield

Recession

Fears

Brexit Trump Elected

U.S. GDP Purchasing Manager Index

2016 in Review U.S. Economy

New Jobs NFIB Small Business Optimism

WSJ – July 30, 2016

2016 in Review U.S. GDP

Symptom: • Why isn’t the economy great?

4.1% 3.8% 2.7% 2.1%

Economic Diagnosis Why the Economy isn’t “Great”

Economic Diagnosis Doctor Robert Gordon – Productivity Slowdown

WSJ – Aug 10, 2016

Dr. Robert Gordon

Productivity Slowdown • Supply-side secular stagnation

• Productivity gains from IT over

• Norm is lower productivity

“We wanted flying cars, but instead we got 140 characters.” - Peter Thiel

Economic Diagnosis Doctor Larry Summers – Secular Stagnation

Dr. Larry Summers

Secular Stagnation • Not enough demand

• Leads to lower investment

• Lack of demand creates lack of supply

• Need to borrow more – fiscal stimulus

Business Insider – Aug 17, 2106

Economic Diagnosis Doctor’s Reinhart & Rogoff – De-leveraging

Dr. Carmen Reinhart

Dr. Kenneth Rogoff

Deleveraging • Too much debt

• Deleveraging takes 8 years

• Recoveries are weaker

https://www.newyorkfed.org/microeconomics/hhdc.html

Recession

• Deleveraging made recession worse

• But GDP Growth was slowing

well before deleveraging began

• Debt increased because GDP slowed

WSJ – Oct 6, 2016

Economic Diagnosis Doctor Mervyn King – Savings Glut

Dr. Mervyn King

Savings Glut • Unsustainable trade imbalance

• Since early 2000’s

• US growth - consumption

• Asia/Europe growth - Exports

• US consumer add debt

• China buy US Treasury’s

• Lower US interest rates

• Lower US inflation WSJ – Nov 16, 2016

Treatment Options Dr. Trump or Mr. Burns

POSSIBLE OUTCOMES

OF A TRUMP

PRESIDENCY AT

VARIOUS PLACES ON

THE RISK CURVE

NUCLEAR WAR

BRINGING EMBARASMENT TO

AMERICA ON THE WORLD

STAGE

GOOD DEALS

SOME COOL

INFRASTRUCTURE

STUFF

MEXICO PAYING

FOR THE WALL

Treatment Options Dr. Trump or Mr. Burns

Business Insider

Probability

Return + -

TRUMP IMPEACHED

DUE TO RUSSIAN COLLUSION

TRADE WAR

WITH CHINA

This presentation is not an endorsement of President Trump or an endorsement of any of President

Trump’s policies. NWM has had no contact with any Russian foreign nationals in the past, nor do we

intend to in the future. Any statements to the contrary are fake news.

Treatment Options Dr. Trump or Mr. Burns – Five Pillars

TRUMP UNIVERSITY

FACULTY OF ECONOMICS

JP Morgan Eye on the Market – Michael Cembalest Jan 23, 2017

George Mason University • Regulations across 22 industries reduce GDP 0.8%/yr.

• Economy would be 25% larger if no regulations since 1980

World Bank - Ease of Doing Business Report • U.S. 51/190 for starting a business

• 2012 – 40 days to get a construction permit

• 2016 – 81 days

1950 – 5% of workers required a license or certificate

2016 – 30%

Treatment Options Dr. Trump or Mr. Burns – Deregulation

WSJ – Nov 28, 2016

U.S. companies hold

$2 trillion offshore

Treatment Options Dr. Trump or Mr. Burns – Tax Reform

JP Morgan Eye On The Market Michael Cembalest Feb 8, 2017

Bloomberg – Jan 11, 2017

Average U.S. commuter

wastes over 40 hours/yr.

waiting in traffic

$1 trillion spent over 10 years

Moody’s Analytics:

Every $1= $1.21 in GDP

Treatment Options Dr. Trump or Mr. Burns – Infrastructure Spending

WSJ Mar 10, 2017

$1 trillion = +5% to Debt

$4.6 trillion = ~ +25% to Debt

The Daily Shot – Aug 24, 2016

The 1%

Top 2-5%

Top 1%

Treatment Options Dr. Trump or Mr. Burns – Trade

$347 Billion

$69 Billion

$65 Billion

$63 Billion

• U.S. Trade Deficit ~ $500 billion

• Not just Tariffs - VAT

• U.S. Exporter pay VAT

• Foreign Exporters get a VAT Credit

Treatment Options Dr. Trump or Mr. Burns – Trade

Oxford University • Nearly 50% of U.S. Jobs will be automated in 20 years

McKinsey &Co. • 45% of today’s activities can be automated

• But less then 5% can be full automated

Deloitte • Automation could lift global productivity 0.8% - 1.4%/yr

over next 50 years

Pew Research - 2020-2040 • Working population +0.3%

• 500,000 less +0.1%

• 1,000,000 less -0.1%

Treatment Options Dr. Trump or Mr. Burns – Immigration

Pew Research • 8 million undocumented workers

• 5% of civilian workforce

• 92% between 18-64 years old

• 70% in Agriculture and Construction

Treatment Options Make the Economy Great Again - Education

Math U.S. #38 of 71

Canada #9 of 71

Reading U.S. #39 of 71

Canada #3 of 71

Science U.S. #24 of 71

Canada #7 of 71

WSJ – Dec 8, 2016

President’s Council of Advisors on Science and Technology U.S. will need ~1 million more STEM

professionals over next decade than will currently produce. Need to increase STEM degrees by 34%.

Treatment Options Make the Economy Great Again - Healthcare

The 2016 Long-Term Budget Outlook

Treatment Options Make the Economy Great Again – Entitlement Spending

WSJ – Aug 21, 2016

Low/Negative Interest Rates • Lowers consumer confidence – communicate fear

• Hurts savers

• Increases wealth gap – low rates helps financial assets

Treatment Options Make the Economy Great Again – Monetary Policy

Monetary Policy • Need to normalize interest rates

• If only U.S. then US$ will increase

Trade • Need to balance trade flows

• China, but also Germany

Investment Strategies Equities – Bull Market

Strategas – Mar 20, 2017

Second Longest

Fourth Highest

Investment Strategies Equities

WSJ - Jan 27, 2017 RBC - Jonathan Golub “In Defense of Trump Rally – Dec 13, 2016

Investment Strategies Equities – Active Management

Bloomberg – Jan 26, 2017

Correlation low

% of Managers beating benchmark high ?

During QE everything went up.

As interest rates normalize,

correlations will decrease

Economy starting to reflate

Trump policies could help

Risks are too the upside

Monetary policy to finally normalize

Equities in the short term

Active Management

Diversification!

Summary

Chairman & CEO

John Nicola

Federal Budget March 22nd

Issues and Questions

• Size and length of deficits

• Response to border taxes

• Changes to capital gains tax?

• Impact of SBD on incorporated

professionals

• Restrict who can incorporate

• Limit Income splitting

• Limit retention of corporate

earnings

Where is America?

Three Themes

Demographics

Shale Oil

U.S. Isolationism

Trumped?

Populism

n

25% swing in 100 years

Demographics are destiny?

By The Numbers

35 years

130% increase

Demographics

It’s

windy

today.

No,iit’s

Thursday.

So am I,

let’s get a

beer.

Senior Moments

https://familyinequality.wordpress.com/2013/02/04/is-low-fertility-americas-problem/

Demographics

More

Saving

Less

Spending

Peak

Spending

Age 50

Is this deflationary?

+60% gas production

-65% oil imports

Will the U.S. need any foreign energy?

Observations

• Demographics matters and in this

case the US wins

• Shale oil is a game changer

• Globalization is under pressure

• The US is more independent then

perhaps any other single country

• Russia is aging and in decline

• The Euro shows how hard it is to

have a monetary union without a

fiscal one

A Genius Bromance

Daniel Kahneman • Introvert

• Holocaust Survivor

• Psychologist

• Taught at UBC

• Nobel Prize 2002 in

Economics

Amos Tversky • Extrovert

• Israeli Sabra

• Psychologist

• Taught at Stanford

• Died before Nobel

prize

Loss Avoidance

Win

85%

Lose

15% Guaranteed Win Majority

Guaranteed Loss

Win

15%

Lose

85% Majority

Seven Habits of Highly

Ineffective Investors

We’re in the

Gifted Program

Over-Optimism

80% Think they are in the top 50%

Gambling with House Money

Can we up

the minimum

bet?

Investors increase their

aggressiveness when they win first.

Increase risk when

market rises

Reduce risk when

market drops

Gambling with House Money

Can we up

the minimum

bet?

4-5% annual loss of return

The Impact of Emotion in Investing

Emotional Investing

5.8%

1.8%

Fund Investor

Vanguard Value Fund

10-year return (01/2017) Name Fund Investor

Vanguard

Growth Stock

Index

8.1% 5.3%

Vanguard

Small Cap

Value Index

7.5% 4.2%

Vanguard

Small Cap

Growth index

8.1% 7.2%

http://www.theglobeandmail.com/globe-investor/investment-ideas/strategy-lab/index-investing/how-factor-based-investors-take-bigger-risks/article34179810/

-2.8%

-0.9%

-3.2%

Managing Assets More Efficiently

Canadian Equities,

16.7%

High Yield Bonds, 7.3%

Preferred Shares, 4.5%

Alternative Strategies,

15.0%

Real Estate, 20.0%

Mortgages, 11.0%

Bonds, 9.0%

Foreign Bonds, 5.4%

Cash, 4.0%

Foreign Equities, 12.1%

11.4%

Re-Balance

-7.5%

7.48%

Blended

2015

What Happened ?

• Prices were down 35%

• Yields were up more than 50%

• Rate resets and new bank preferreds were the

reason

• Taxes on income 20% less than interest (equal to

bonds paying 8%)

• Good chance of capital recovery over five years

A Tale of Two Shares

7.9% after fees

5.3% before fees Purchases at

depressed prices

35% recovery

In one year

The Vulcan Investor

• Good investor behaviour is difficult

• 90% of investors do not earn the benchmarks

• Volatility can bring on bad behaviour

• Diversification is both safe and effective

• Picking quality assets takes time and patience

Behaviour and Diversification

Many Happy Returns?

Can a 4% real rate of return be achieved

without significant increase in risk?

Above Normal

Drivers

• Aging populations

• Reduced productivity growth

• Rising interest rates

• Lower profit margins

• Higher Taxes

What Are The Odds?

Higher PE = lower future

returns

http://mebfaber.com/2010/06/09/shiller-pe-

ratios-and-10yr-annualized-real-returns/

Passive vs. Active Investing

146,000 results

How Do ETFs Compare Over 10 Years?

10% 10% 22%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Canadian

equities

Canadian Bonds S&P 500 MSCI

ETFFunds1st quartile over ten years

Active vs. Passive Investing

What is an Active Manager?

• 2007 Yale Study (Updated 2013 FAJ)

• Cremers and Petajisto

• Focused positions (example

Oakmark Select with 20 positions)

• Not always within the benchmark

• Different trading strategies and not

market weighted Source: Goldman Sachs Asset Management

Passive vs. Active: Another Side

Can you find this?

6.9%( .54% MER)

11.7%(.53% MER)

Active vs. Passive Investing

4.03%

6.84%

7.73%

Average Return, 5 years

ETFs NWM Active Client Returns

Dalbar Effect means

Average investor

lower than this

Disciplined rebalancing

and asset allocation creates results better

than buy/hold

Summary

The Absent Super Power Know Thyself and Behave well

Low Cost Active investing Rebalanced

THANK YOU

This presentation contains the current opinions of the presenter and such opinions are subject to change without notice. This material is distributed for informational purposes only and

is not intended to provide legal, accounting, tax or specific investment advice. Please speak to your NWM Advisor regarding your unique situation. Forecasts, estimates, and certain

information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or

investment product. NWM fund returns are quoted net of fund-level expenses. Past performance is not indicative of future results. All investments contain risk and may gain or lose

value. NWM is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities’ commissions.

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