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April 1st Call Recording: Weathering the Coronavirus Market Downturn Thumbnail

April 1st Call Recording: Weathering the Coronavirus Market Downturn


In this call recording, Simon Quick Chief Investment Officer, Christopher Moore, and Head of Investment Research, Wayne Yi, discuss the market downturn in light of the coronavirus. Please feel free to reach out to us with any additional questions.

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The below transcript was produced using a transcription software and may not be verbatim. Please refer to the video recording for exact phrasing or increased clarity.

Darcy O'Brien: [00:00:00] Good afternoon and thank you for joining us for this afternoon's live call: Weathering the Coronavirus Market Downturn. My name is Darcy O'Brien and I am the Chief Marketing Officer at Simon Quick, and I will be moderating today's discussion. Given the increased market volatility, our Chief Investment Officer and Managing Partner, Chris Moore, and our Head of Investment Research, Wayne Yi and I are going to host the weekly market update calls for the foreseeable future until markets stabilize.

Before we dive into the discussion, I have a few housekeeping items to mention. Please note that questions can be submitted through the Q and A function on Zoom. You may also submit questions by emailing me at: dobrien@simonquickadvisors.com.

In addition to me managing our client's investment portfolios, our advisors are looking for opportunities to implement financial planning strategies that will take advantage of the market downturn. Please keep an eye out for an email from us tomorrow, which will include the recording of today's call, as well as the piece written by our Head of Financial Planning, Bill Lalor, titled for financial planning strategies to implement during a market downturn.

There are some great tips in there and I hope you will have the opportunity to read it. For our small business owners on March 27th, $2 trillion dollar stimulus package dubbed the Cares Act was signed into law.

This act allocated $350 billion to help small businesses manage through this pandemic and economic downturn. These programs include a paycheck protection program, SBA back loans, debt, and tax relief. Our advisors have been combing through the Cares Act to better understand the benefits available to small business owners, and they will be reaching out individually to clients to discuss their options.

If you are a small business owner, but not a client of Simon Quick, please reach out to me directly and I can help provide you with some resources. Now that I have gotten through those housekeeping items. Please note the following disclaimers. This presentation is for information and discussion purposes only.

Please remember that past performance may not be indicative of future results, and there is no guarantee that the concepts and ideas discussed during the presentation will be profitable or proved successful. So now I will dive into the questions. The first one comes in from Dorel and it has two parts.

He asks, why are you recommending we move out of international, cyclical, and small cap manager to add to quality exposure/lower beta managers right now? Isn't the quality play to wait? Small cap, cyclical value, and an international have been hit hardest. So why wouldn't you be recommending I add there, assuming these managers will bounce back stronger than lower data quality exposure.

Chris Moore: [00:03:04] Thanks Darcy. This is Chris. I will take that question. Our thought process there is first and foremost to hedge against future weakness in equity markets.  Typically, when markets decline due to economic weakness, or just a de-risking more generally those sectors, and market caps are hardest hit. It is the more cyclical oriented, the materials, the energy, the industrial sectors, or the smaller capitalization stocks that do not have the same strong balance sheets or access to capital markets that their larger competitors would.

Those are generally the companies and stocks that are most hit when markets decline. And yes, that point is absolutely correct, and that they are certainly the most beaten down now and we appreciate that certainly.

We have been fortunately reducing the exposure over time and have done so even more in just the last couple of weeks. We use last week's rally in markets to reduce that exposure even further and today that if the economy weakens worse than some are expecting, or the spread of the virus and ultimate number of deaths that the virus turn out to be worse than some are expecting.

The potential for markets to decline further, certainly increases. We are not at the point where we feel like it is likely that that would happen, such that we would need to be reducing equity exposure altogether. But what we're saying is let's maintain our equity exposure, but make sure it's as high quality and defensive as it can be in preparation for the potential of things may be getting worse, over the next 30 to 90 days.

And theoretically should markets decline further those higher quality growth-oriented kind of domestic stocks would also fare better in that scenario. They wouldn't decline as much. So not only would the more cyclical names, the most impacted or smaller capitalization names would be most impacted should things get worse in the economy and in markets.

But those larger paths, higher quality domestic stocks would actually hold up better than the market, generally speaking. If you look at kind of which sectors have done well, year to date technology is one that stands out. Because of that, we have shifted exposure there. I think if we were to get into a position where we felt like we've rolled out the volatility, we feel like the economy is kind of going to get back on track, maybe we've come over the curve.  

As far as the virus goes, we could potentially see ourselves adding back that more cyclical exposure and more value-oriented exposure. But for now, we think this is kind of the prudent way to maintain equity exposure, and do so as you know, we have certainly seen equities decline here.

Darcy O'Brien: [00:06:36] Thank you, Chris. The next question comes in from Rebecca and she asks, how is Fiera doing in these volatile credit markets?

Wayne Yi: [00:06:47] Sure this is Wayne and I will field that one. For those who do or do not know, Fiera is one of our approved managers on the platform. The manager participates or invest in the municipal bond space. Overall, we view them as a more conservative investor in the asset class.

So, while we have not seen the final marks for the month end. We do typically see them holding in better than the broader markets. They don't capture as much of the upside when markets are rallying, but they also are more protective to the downside when markets are selling off, partly because they do retain a higher credit rating, as well as having a shorter duration than the let's call it the municipal bond benchmark.

So when we look at the muni bond index, it was down about a half a percent or so yesterday, but it was down about three and a half over on the month, which was from an asset class that's meant to be somewhat like a proxy to treasuries or the Barclays AG.

You know, it's a pretty weak number because of certain elements that we talked about, probably the last week and the week prior, where in the selloff I think it was really dramatic about this kind of market sell off was that it happened so suddenly.

While we might have been able to see the virus spreading in China back in December, the fact that it was not on it on U.S shores has supported overall markets. So, it did not really kind of come to play in the U S across any asset class until a guy that third week in February. As soon as it got really serious people look to sell the most liquid assets first, and we made these comments earlier and that's where he saw Treasury's even lag, what the fixed income markets and what the rates markets had done.

In high quality assets were the one that sold off first. And if you think about muni’s broadly, tends to be held more by individuals, as opposed to big institutions. So, when individuals are looking to sell to raise cash, there are not a lot of other buyers on the other side in a sharp dislocation, like what we saw.

So, the market has recovered as the fed implemented its different credit facilities and lending lines. We did see that market recover into the final week and a half or so of the month. But it did lag traditional experiences. Now we do think that the selloff was overdone.

And so, do you find some opportunity within munis and we are seeing some of that kind of sell off today as well. That is kind of the big characterization of munis generally. But Fiera tends to be more defensive in that vein, particularly because when you use Fiera at this stage, it has all been in managed accounts.

So, there is more control on what you sell and what you don't. So that has played well to the managers favor.

Darcy O'Brien: [00:10:01] Thank you, Wayne. The next question has come in from Brian and he asks, it feels like the market is pricing in a recession. Do you agree? What are your thoughts on the possibility of a depression? And what are some things that would have to go wrong to push us into a depression?

Chris Moore: [00:10:21] I can take that one. I think the market has priced in a recession at this point. If you look at kind of economic forecasts, certainly second quarter GDP growth is expected to be, you know, quite a severe contraction. Third quarter, likely a contraction that may be not as severe as second quarter.

However, third quarter is certainly to be determined based on the rate at which, the virus spreads and deaths continued to mount because ultimately that will dictate when the economy can get back to work.

I think the markets are really trying to determine when the economy is getting back to work and that will ultimately determine whether or not this is a recession, which is two quarters of negative GDP growth or not.

I think that the market today is pricing in a recession. The question around a depression that is defined as a severe recession or protracted recession. Meaning more than two quarters, I think the possibility of that happening is very low. And I think the thought process behind that is we have taken the social distancing efforts to extremes.

While painful in the short term. It should in the long term get the economy back working again. Whether or not that is, you know, 60 days or 90 days or 120 days is to be determined.

But I expect it to be short enough that a depression like scenario is really not possible. The question around what could change that is likely a function of, do we see, as some analysts have had commented on, do we see the virus resurfacing in the fall, right?

Is this a point at which the spread of the virus is contained, maybe sometime in late spring or early summer, and then the economy gets back to work. And the summer everyone is back to normal activities for the most part, and then all of a sudden, we see a second wave of Coronavirus spreading and more people being infected and potentially more deaths.

I know the administration and a variety of private companies are working on a vaccination that prevent against that ultimately happening. But certainly in that scenario, you could experience a more severe recession and maybe it's, you know, a kind of ‘W’ shaped recovery in the economy where you have a negative quarter or two of GDP growth.

And then a positive quarter to GDP growth and then another negative quarter or two of GDP growth and then back to kind of normalization and the second wave. Whether or not we see that is to be determined. I think it is unlikely just because of the extreme efforts that both kind of private and public entities are putting towards stopping the spread and continuing the social distancing and ultimately developing a vaccine.

But we are of the view that a depression like scenario is very unlikely.

Darcy O'Brien: [00:14:15] Thank you, Chris. The next question comes in from one of our anonymous users and they ask, why has traditional U.S. large cap value underperformed, the broader market?

Wayne Yi: [00:14:29] Yeah, I can take that one. I would say value broadly has underperformed. More core like or growth markets and you see that to some of the comments that Chris made earlier, international markets have lagged the U.S. Not even from a value or gross perspective but a geographic perspective, emerging markets equities are cheaper than U.S. stocks and have lagged as well.

And I would say one of the kind of more notable factors underlying that, or underpinning that is that value stocks or value industries tend to be more cyclical sensitive and I think that's something that we had to be pretty mindful on when we construct portfolios and asset allocations.

Within the value construct, you will see much larger exposures to kind of industrials, materials, financials, and underweighting towards growth industries or more defensive industries like technology or healthcare. So, because of that there's just more economic sensitivity. So, in the current sell off, it makes some sense, right?

In the current sell off, if the GDP is going to soften or from our perspective, turn negative here, the more cyclical the sensitive stocks will sell off. It makes a lot of sense. I think the more interesting question here is: well, in this kind of expansionary period, up until February, value stock, still lagged growth stocks.

So that I think was a little bit more of a kind of an element that we tried to scratch our heads and try to figure out. And I think there was a buy in or belief that kind of winners are kind of taking more market share, which drove technology to be a much meaningful part of the S&P index.

Technology companies being just more high margin businesses with higher growth prospects. And a lot of that drove some of the strength behind growth stocks versus value.  

So, I think there's kind of two different movements, where dicey stocks are more sensitive to the economy, so sold off harder right now and dice stocks are tending to be older industry in certain sense and didn't have the benefit of kind of growing with broader GDP through 2019.

Darcy O'Brien: [00:17:22] Thank you, Wayne. Just a quick announcement to our folks on the line. We have three questions remaining in the queue right now. So if you're on the line and you have a question that you would like to have answered today, please go ahead and submit that through the Q and A function on Zoom, or if you would like to email me once again, that email address is: Dobrien@simonquickadvisors.com.

And now I will dive into the next question in the queue, which comes in from Manny and he asks. Before the impact of the current COVID-19 situation and its perceived future changing impact, it was generally understood that impending market adjustments and potential election outcome expectations were embedded in the market flow at that time, how much of what we are experiencing now may still be attributed to those previously anticipated impacts and may now have also been accelerated.

Chris Moore: [00:18:27] I can take a crack at that one and then Wayne can jump in if he has anything to add.

If I understand the question correctly, the market was digesting certain outcomes pre COVID-19, specifically around the election. And in many cases, pricing those in the market still pricing those in or accelerating some of those outcomes that is contributing to the decline in the market.

That is how I am interpreting the question. So, if the user that posed it, was asking it differently. Please send us some other question to make sure we answer your question correctly.

I think the market right now is less focused on the election than it has been in a long time, truthfully. Because I think it is laser focused on economic output and how much that is going to slow in response to the shutdown.

And the market is really trying to digest the public health concerns and the economic concerns related to the spread of the virus. The election at this point, I think has taken a back seat as far as potential impact on the market. I do not think the situation that we are all faced with today is accelerating any potential concerns around election outcomes.

The response to all of this from the administration could certainly kind of make or break, this presidency's upcoming new term potentially. But I think the market is not really factoring in a change in presidency or the president staying as is come November. I think the market is really just focused on the economy and the public health risks associated with the virus.

Darcy O'Brien: [00:20:50] Thank you, Chris. Do you have anything to add there Wayne?

Wayne Yi: [00:20:56] Nothing significant, but I mean, kind of coming into February or just kind of thinking about where we were at the end of last year. I mean, multiples were high, and people were kind of scratching their heads. How much higher can multiples go?

But what was really driving us into last year in the beginning of this year was kind of this re-acceleration of growth as phase one of the U.S. China trade deal came into effect. And you had strong corporate earnings, obviously a little more thinking about what 2020 elections might look like in that time period, there's still a kind of other positive factors within the economy that were supportive of equities and risks assets.

That kind of underpinned some of the strength in broader markets with the recognition that it was a very long expansionary cycle where there was the potential for kind of presidential change. And obviously everyone was going through just the initial primaries amongst the democratic party.

And you saw some volatility around there and as Biden started taking a little bit more delegates the market was kind of piping that in and taking some risk or de-risk that felt like there was less risk in the system versus a Sanders.

Darcy O'Brien: [00:22:26] What great points, Wayne. We have a couple more questions. They have been rolling into the queue here. Our next one comes in from an anonymous caller and they ask, for balanced investors is now the time to be more opportunistic at these levels in the markets, or are we still in a catch a falling knife environment?

Chris Moore: [00:22:49] I could take that one.  

I think this is a great time to be opportunistic. There are a lot of things that we are seeing at very attractive levels right now. We have been allocating to distress strategies. We have been allocating to a closed end fund strategy that's buying close end funds that are trading at deep discounts, so there are plenty of ways to be opportunistic here. And I think, there are going to be more ways to be opportunistic over the next 30 or 45 days certainly.

Wayne Yi: [00:23:27] Yeah. I wanted to kind of add onto that. We think there is significant opportunity right now across the risk spectrum. While we did go from an underweight equity to target weight equities, for clients that might not want to take that kind of risk. We are seeing an expansion of opportunities across fixed income, across credit, across shorter duration assets, across high quality structured assets, like things that have really moved out truly because of market steers in kind of short-term liquidity concerns.

And I think that's really kind of opened up the playing field. So, I think you will probably hear across the board, that we are seeing significant opportunity across the asset class set. And it is kind of really just dialing into the type of risk you want and the type of return expectations you're kind of setting in over the next year or three or five years.

But yeah, we are seeing a lot of ideas without having to take that view that it is a falling knife.

Darcy O'Brien: [00:24:40] Great. Thank you, Wayne. I am just going through some of these questions. They are really flooding in now, so I just want to make sure I get to them all.  Our next question comes in from an anonymous attendee and they ask, can you provide some real time sense of liquidity or lack thereof in the bond market?

Wayne Yi: [00:25:01] Yeah. I can comment a little bit on that. Whoever asked the question, if you want some hard numbers, let us know and we can dig up some empirical data on the back of it. Qualitatively coming into this market, we knew that there was less liquidity overall in the system, this goes across the base, right? Like in equities, high frequency trading, the algos, a lot more computer driven investing models, the expansion of passive investing via ETFs. While it shows like liquidity in a bigger market, they tend to be a little bit more directional and correlate together in short spurts.

Even in equity, you could say, well, maybe there is not the same kind of two-way flow in equities. It tends to be directional flow and equities. Then on the fixed income slash credit side, direct lending has become a big source of kind of capital flow from the banks.

The bank inventories have shrunk dramatically in terms of kind of credit risk, as well as other kind of proprietary holdings that are now in a hedge fund or private vehicle hands, as opposed to a market maker.

And banks themselves through regulation have had to take down a lot more risks. So, while banks are in a much better place from a capitalization perspective, they are less able to step in and participate in market volatility and make the two-way flow that we have seen historically. So, I would say that there have been over multiple years, a decline in liquidity, obviously in equities, but also across fixed income as well.

And I think what we saw in March was an expression of that, where, everyone moved in the same direction.  In normal markets, you see two way flow, but when there is a sudden risk-off move across the board, it doesn't matter what you owned, high quality or low quality, the people just wanted to get out.

So, I think that is a qualitative kind of expression of how liquidity is really changed. And honestly, some of it is a little bit more thoughtful, versus like in 2008, where people had over levered took on a lot of illiquid risk and then were forced to sell out those illiquid positions, and trying to deliver in the midst of that.

Today, or kind of this past month, what you saw was because hedge funds and kind of holders are more complex vehicles. They understand liquidity risk. So, they look to sell what is typically liquid and everyone’s sold the highest quality, most liquid stuff, while retaining the less liquid stuff. And that caused another pain point that you typically wouldn't expect in a more normal trading market.

So, yes, to the question, there is less liquidity in the system and I think the suddenness of the market freeze, kind of really kind of express that, but I think this would have been expressed in certain to any extent, in any kind of recessionary environment to some degree.

Darcy O'Brien: [00:28:38] Thanks Wayne. We have received just a follow up question on one of the earlier topics that was brought up, by Manny. And that is: what about the thought that the market was inflated and was prime for an adjustment?

Chris Moore: [00:28:54] I could take that one. We did think that the market was overpriced. On the back of kind of last year's run up and in the first half of the year, which continued throughout the remainder of the year, equities were on the expensive side. And, you know, we had reduced our target to equity so that coming into this last month, we were underweight equities and that was our rationale. We thought, you know, the volatility was historically low for the year.

And valuations were stretched, and equities were certainly kind of pricing in a perfect scenario. We thought this year would experience some volatility that was normal, you know, 10 to 15% pullback in equities, certainly not what we have seen here. We were expecting more volatility expecting that kind of a pullback, which is typical every 18 months in equity markets.

So the share buybacks post 2008 were a big reason why equities rallied the way they had over the last 10 years and quantitative easing, flushing, you know, markets with liquidity was another reason why equities had rallied significantly over the last 10 years.

So, you could argue that valuations were quite stretched. I think the shock to the system that we experienced with COVID was just so dramatic and so black Swan like that it caused a very, very severe de-risking and de-leveraging.

Darcy O'Brien: [00:31:00] Thank you, Chris. The next question comes in from one of our anonymous attendees, and they asked. If more stimulus is offered by the administration, do you think at some point it will lose its efficacy on investor sentiment, like pushing on a string?

Chris Moore: [00:31:21] Go ahead Wayne, you can take it.

Wayne Yi: [00:31:23] There's two parts to that, right? Because there is the fiscal side and the monetary side. And obviously we saw the monetary side work first where, you drop rates to zero. Now that in itself is a pretty big move. But if you are going from zero to negative 50, does that make any sense? Does that add any value?

I do see the argument of kind of pushing against that string in kind of a situation like that. But then the credit facilities, the fed backing more risk assets, I think that is a positive element in stabilizing the market. So, I think it kind of pulls down volatility and creates liquidity for the financial system.

So, I think that was a positive effect. That is a little bit more complex than a headline number, but I think that does create stability that is appreciated by the market and you did see that in fixed income. The fiscal actions, I think those are real and I think the $2 trillion package I think is big and material.

It is 10% of the GDP and it seems like there is going to be more to support GDP in the ensuing weeks as well. So, I think it depends on how it is being expressed. And I think right now, both in the monetary side and from the fiscal side, they both were and should be impactful.

Now the next question is how do you do more and is it an infrastructure spend? I think that can be productive and it is beneficial long-term, and it gets people back working and kind of eases a strain on the government to backstop everything. So, I think there still are some positives and ability to extract positives right now.

Now, if we kept on going down this path, and if you look at Europe and what the ECB has been trying to kind of address, like, I do think there are questions around that, but I think because we have the ability to be more aggressive from a fiscal perspective, we might not need to rely so much more heavily from a monetary perspective.

But the Fed's there to backstop stuff. We are in QE unlimited. So, they are there to kind of support lots of different parts of the market, which at least should create a floor to risk.

Chris Moore: [00:34:00] One thing I would add. I think the new concern now, truthfully is post 2008, we had $4 trillion on the Fed's balance sheet. How do we unwind that over time? How does that eventually kind of roll off?

And we started to see that in 2018 and it was backed up last year and into this year now we're only adding to that balance and I think, you know, what I would say is it's likely that   it's just going to be that much longer for which the balance sheet is bloated and those assets eventually roll off. And certainly, the Wayne's point, if we do more to stimulate, it's only going to increase the balance sheet, and extend the time for which that it'll take to ultimately have all of that roll off.

Darcy O'Brien: [00:35:04] Thank you, Chris, to everyone on the line today, we have two remaining questions in the queue. So, if you do have any questions you would like address today, please do go ahead and submit them now.

Otherwise we will go through the remaining two questions and wrap up. Our next question in the queue comes from Terry and he asks, have you gotten any feedback from your managers on access to liquidity in the short term to whether this COVID 19 challenge?

Wayne Yi: [00:35:34] I’ll take that and I guess I'll give a quick shout out to the research team to just do their diligence on being on top of our managers and what's going on in their underlying portfolios. But we do actively invest in private equity, particularly in the middle market space, as well as having exposure to direct lenders and other credit related investment strategies.

And you could read the headlines, whether it's from the financial times or just kind of some of the larger buyout shops telling or just announcing: Hey, we're talking to our portfolio companies to kind of draw down their lines, pull whatever cash they can right now because while they are not yet in breach of covenant, and while they have liquidity, they might as well have the wherewithal of liquidity and the revolving lines to kind of weather through the next quarter or two quarters or what have you.

So, I think generally that is the fact that the sponsors private equity sponsors have been telling their portfolio companies, it might not be take a hundred percent of what is available on your revolver. Maybe it's taking half of it or some gradient of what's available, but making sure that there is some near term liquidity available to just be in a better position and not have to worry about making short term payroll, while people try to figure out how to kind of pivot their businesses.

So now more specifically to the question, are there challenges to accessing that liquidity? On the whole, I would say no in the sense that if you have credit agreements in place, and you have the appropriate liquidity provisions available, the borrower has access to that capital now.

I think because there is a flood of capital that that is trying to come in or capital, that's trying to be called down by the portfolio companies. There are conversations where the lender and the company are saying, Hey, do you really need this cash? Do you really need this right now? Not to say you cannot have it, but don't feel like we're going to just try and not give you access tomorrow if you don't draw it today.

So, I do think there is a heavier level of comfort conversation to make sure there's alignment on the borrowers and the lenders. But at this stage, as long as companies were within their covenant, if they're still above their covenants or their triggers, they still had generally been able to access that.

Darcy O'Brien: [00:38:26] Thank you, Wayne. Our next question comes in from Michael and he asks, do you think the market will decline further from here? Some folks that I speak to think that, that we will test the lows in the near future, if though why not reduce equity exposure and go to cash?

Chris Moore: [00:38:48] Oh, I can take that one. It is certainly something that we think about and talk to investors quite regularly about. I would say everyone is very focused on whether or not we test the low here. And the rationale for that is the last three bear markets experienced a peak to draw trough decline on average of roughly 50%.

And frequently during these periods, there is a testing of a low. In this case, the last low on the S&P, I think was around 31 or 33% that was about a week and change ago. And you know, I would say more investors than not, I speak to or have read their comments on markets and are saying that we are going to test those lows.

And it almost seems to me like now it is kind of become a consensus view. So, you know, I wonder if the consensus view is in fact priced into the market. Generally, if something is consensus, it is priced into the market today. Now, you know, we do not know whether or not we're going to test the lows or not.

We certainly appreciate that things could get worse before they get better. How much the market will decline in response to that is really unknown at this point. The way we're positioning for that potential, as I discussed before is just taking a higher quality approach as it relates to fixed income, you know, our exposure to treasuries and unions and investment grade corporates has increased over time.

As it relates to equities, more focused on, higher quality companies, those that are less likely to be impacted by recession or weaker than expected economic growth. So, we think we will likely see the markets continue to bounce around here for the time being, with days that could be4 or 5% moves in either direction.

If we do test those lows, I would not be surprised if we saw further stimulus. I wouldn't be surprised if even before we tested lows, we saw the phase four deal, or, you know, what happens if potentially the spread of the virus and the deaths from the virus come out lower than maybe some are expecting. Any of those scenarios or a vaccine or one of the drugs that's in the works now, potentially having a greater impact than expected.

Any of those outcomes could cause markets to move higher. So, we don't want to not be invested here. We don't want to be reducing equity exposure and going to cash, frequently investors that have done that historically have tried to time the bottom, have missed out on some of the biggest days in markets and a lot of the appreciation in the early rally.

So we want to stay invested and would rather be kind of thoughtful about where we're invested and then pick the right spots to be adding risk on the recovery going forward, where we're already invested, but maybe just shifting within risk profile in the equity portfolio.

Darcy O'Brien: [00:42:39] Thank you, Chris. Our next question comes in from an anonymous attendee and they asked several months out, do you think this correction will be a boom to private equity buyout firm?

Wayne Yi: [00:42:55] Yeah. I think this goes across the board, but if you have dry powder now, this is a great time to be investing. Now there is the question of kind of risk tolerance and time horizon and all that it takes into effect. But yes, this is going to be a fight it out market of kind of smaller cyclically sensitive businesses.

But those that can survive in whether it is through and kind of effect their changes like that makes a lot of sense for them. and this will be the time for them to be able to employ that. And if you have dry powder to be able to buy in distressed, stressed businesses, or maybe businesses that are fine, but you know what, there's less competition out there.

So, because of that, you can now buy business cheaper maybe incumbent management, they are fine, but they just, I do not want to go through another recessionary period. So, you could probably buy in some attractive assets from that perspective as well. So I think with everything kind of repricing lower, obviously you have to buy correctly in the sense that you have to buy sustainable long-term businesses, but the valuations around them had definitely gotten significantly cheaper and more attractive from a long-term return perspective.

So yeah, by kind of your traditional middle market buyouts, even the platform companies are not going to aggregate underlying businesses, venture tends not to have a lot of debt. They do have a lot of spend but if they have a good business and operate in an adjustable market, there's still growth opportunities from that perspective.

So, I think buyout businesses or private equity businesses, this is definitely a good time to be deploying into discrete assets.

Darcy O'Brien: [00:45:00] Thank you, Wayne. So, we are coming up on 45 minutes here, and that is all the questions we have in the queue for today. So, at this time I would like to thank everyone on the line for taking some time out of their day to participate in today's call. I would also like to thank Chris and Wayne for sharing their insights with us.

I hope that you have enjoyed today's discussion. If you have any additional questions that we were not able to address during the call. Please do not hesitate to send them to me at dobrien@simonquickadvisors.com and we would be happy to address them offline. Thank you again for joining us and have a great evening.


IMPORTANT DISCLAIMER

The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained herein is intended to constitute legal, tax, accounting, securities, or investment advice nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, product, or any noninvestment related content, made reference to directly or indirectly in this presentation will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Asset Allocation may be used in an effort to manage risk and enhance returns. It does not, however, guarantee a profit or protect against loss.

Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from Simon Quick Advisors. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Investing in alternatives may not be suitable for all investors and involves a high degree of risk. Many alternative investments are highly illiquid, meaning that you may not be able to sell your investment when you wish. Risk of alternative investments can vary based on the underlying strategies used.

Certain information contained herein may be “forward-looking” in nature. Due to various risks and uncertainties, actual events or results or the actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking information. As such, undue reliance should not be placed on such information. Forward-looking statements may be identified by the use of terminology including, but not limited to, “may,” “will,” “should,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology.

Simon Quick Advisors is neither a law firm nor a certified public accounting firm and no portion of the presentation content should be construed as legal or accounting advice. Please remember to contact Simon Quick Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Simon Quick Advisors is an SEC registered investment advisor with offices in Morristown, NJ; Chattanooga, TN; and Denver, CO. A copy our written disclosure brochure discussing our advisory services and fees is available upon request. References as being "registered" does not imply a certain level of education or expertise.

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