Private placements
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Thread: Private placements

  1. #1
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    Private placements

    New member, first post.

    I recently parted ways with my advisor and am doing research and looking at moving towards an all index portfolio. Still in the early stages, reading up and transferring to a direct investing account, staring at a lot of DSC too! So far I've been reading this forum, couch potato, BG Intelligent Investor and RF Power of Passive Investing. I'm now looking into asset allocation.

    My question is regarding asset allocation and ROI Funds. Most of what we own is clearly either stock or bond, Cdn, US or international, but between my wife and I we have significant holdings in LSIF, in particular ROI Funds, a fave of my previous advisor. It's about 15% of our total holdings. The website for ROI indicates that most of the money is invested in 'private placements' or loans to businesses. What kind of asset is a private placement? Is it similar to a high-yield bond?

    Since I can't sell these funds for a while without tax implications I need to fit them into my new portfolio. Any input is appreciated. We also have a bit of Vengrowth (now Covington) which and I would be curious how to treat that.


  2. #2
    Senior Member kcowan's Avatar
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    IMHO most private placements are equity. Depending on the fund, it will usually also have leverage.

  3. #3
    Administrator CanadianCapitalist's Avatar
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    I agree with Keith. You should probably consider these funds as equity. If you have made allocation to small-cap stocks, consider LSIF funds as part of small-cap allocation.

    Also, if I were you, I would redeem these funds as soon as I can. These funds are not very good products for retail investors: high cost, high risk and very illiquid.
    Canadian Capitalist -- Helping you invest & prosper

  4. #4
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    I'm attempting to calculate the weighted allocation of these funds, which has led me to the annual report for 2011. Certainly they are entirely equity, which is rather hilarious as our former advisor treated them as entirely bonds. His rational IIRC was that they are mortgages and REITs.

    Anyway, on to my follow up question. ROI 104 is 33% Whiterock REIT so I'm certainly thinking that should fall under REIT allocation. Then there's actual equity ownership of various Canadian companies, which I will allocate thusly. But what about mortgages and secured debentures? Is it somehow split between equity and REIT/real estate?

    Another approach would be to treat this fund separately from my portfolio in terms of asset allocation due to the high illiquidity since it can't be rebalanced. Of course I will be redeeming as soon as possible, once per year for the next few years.

  5. #5
    Senior Member kcowan's Avatar
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    Because it is illiquid, it is best to treat it on its own. Or allocate it as to what you intend to do with the funds once liquidated. Think of it like a cottage during slow real estate times.

  6. #6
    Senior Member HaroldCrump's Avatar
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    Quote Originally Posted by Loon View Post
    Anyway, on to my follow up question. ROI 104 is 33% Whiterock REIT so I'm certainly thinking that should fall under REIT allocation.
    Whiterock REIT got bought out by Dundee earlier this year.
    I believe it has stopped trading now.
    What are you talking about?

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    Quote Originally Posted by HaroldCrump View Post
    Whiterock REIT got bought out by Dundee earlier this year.
    I believe it has stopped trading now.
    What are you talking about?
    I'm talking about what it says in the 2011 annual report for ROI Fund. I noticed the Whiterock website directed me to Dundee but I have no newer information than what's in the report. I wouldn't want to speculate but maybe the fund has some interest in Dundee now.

  8. #8
    Senior Member HaroldCrump's Avatar
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    Quote Originally Posted by Loon View Post
    I'm talking about what it says in the 2011 annual report for ROI Fund.
    Ah ok, got it. I thought you meant you bought WRK.


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