Presented By: Jeffrey Olin, President, CEO & Portfolio Manager olin@visioncap.ca October 24 th 2019
Capitalize for Kids Vision Opportunity Funds: Overview & Strategy ‣ Increasingly recognized by institutional investors as a differentiated asset class Real Estate Securities ‣ Alternative to investing in hard assets and direct property investing as an Asset Class ‣ Listed real estate securities have outperformed direct property holdings and private equity real estate funds over the recent 25 years (a) ‣ Differentiator Vision’s investments have minimal overlap with other alternative asset funds ‣ Cumulative return of 314.1% and 13.5% CAGR since inception (July 2008) (b) vs the Vision benchmark indexcumulative return of 105.8% and 6.6% CAGR Returns ‣ Down market capture ratio of 0.17% serving to preserve capital in down markets ‣ After 11 years: No years of negative performance ‣ Active Investing Vision has benefited from 17 takeovers with an average takeover premium of 30% ‣ Low correlation to (c) ‣ S&P TSX Index: 0.49 ‣ Low Correlation S&P/TSX Capped REIT Index: 0.30 ‣ MSCI US REIT Index: 0.43 ‣ Negative correlation to bonds since inception (d) Geographic ‣ Invests primarily in North America Focus ‣ Depth of Experience The 3 portfolio managers/advisors have a combined total of over 100 years of experience in property and real estate securities ‣ The portfolio managers/advisors have significant personal investments in the Vision Opportunity Funds ‣ The Vision Opportunity Funds’ strategic investor base consists of pension funds, endowments, family offices and high net wort h individuals ‣ Alignment Investors Include: ‣ Over 40 Executives of North American REITs/REOCs, direct property family offices and; ‣ 15 Prominent Portfolio Managers Notes: (a) Source Cambridge ‘Comparing listed REITs with Private Equity Real Estate’ by Brad Chase 08/16/2017 (b) Vision Opportunity Fund Limited Partnership Class A units, (c) Correlation to the indices calculated over a rolling 5 year period (d) Refers to the iShares 7- 10 Year Treasury Bond ETF (IEF). / Capitalize for Kids – About Vision Capital 2
Capitalize for Kids Summary Overview The Vision Opportunity Funds’ focus on publicly -traded real estate securities ‣ The ability to buy real estate cheaper in the stock market than in the property market Long Real Estate ‣ Generate positive performance by buying real estate at a discount to its net asset value ‣ Capitalize on a bearish outlook from negative supply and demand factors ‣ Shorting Real Estate Generate positive performance through long-short pair trades without taking market exposure ‣ One can’t short an overvalued mall or office building, but can short overvalued securities ‣ Active, value-add, and strategic investing by property type and geographic region Value-Add ‣ Concentrated portfolio of ideas Approach ‣ Vision has benefited from 17 takeovers with an average takeover premium of 30% ‣ Spread one’s limited capital over a range of properties ‣ Diversification Provides diversification by property type (multifamily, office, industrial, etc.) ‣ Geographic and regional diversification ‣ Anticipate and respond to changes in economic, political and real estate fundamentals ‣ Significantly lower transaction and friction costs relative to property market transactions Liquidity ‣ Flexibility to act quickly and reposition ‣ Nobody calls in the middle of the night to fix the heater ‣ Access to professional, best in class management teams Superior Quality ‣ Protected by corporate governance and financial transparency Investments ‣ Access to highest quality property portfolios not available in private markets / Capitalize for Kids – About Vision Capital 3
Capitalize for Kids Outperformance through Volatile Markets Since inception, the Vision Opportunity Funds have significantly outperformed global real estate focused funds, broad stock market indices and Global and Canadian alternative investment fund indices. Vision Opportunity Fund vs. Major Indexes (Total Return & CAGR) Performance Record from July 1, 2008 – Sept 30, 2019 The Vision Opportunity Funds 350% have received numerous Global 314.1% and Canadian industry awards 300% and recognition for their leading 250% absolute and risk-adjusted total 199.6% returns including multiple awards 200% 157.0% from Morningstar, S&P Capital 150% IQ and the Canadian Hedge 105.8% 82.1% 100% Fund of the Year Awards. 61.3% 43.0% 50% 22.4% 0% Scotia Canadian HFRI Index S&P/TSX MSCI IPD US Vision MSCI US REIT S&P/TSX Vision Hedge Fund Composite Property Index⁴ Performance Index⁵ Capped REIT Opportunity Index¹ Index² Benchmark Index Fund LP ⁶⁻⁷ Index³ CAGR 1.8% 3.2% 4.3% 6.0% 6.6% 8.8% 10.2% 13.5% Notes: 1-2, 4, 5-7: Please see footnotes slide. 3: The Vision Performance Benchmark Index is an equally weighted average of the S&P/TSX Capped REIT Total Return Index, Scotiabank Canadian Hedge Fund Index, HFRI Index and the MSCI US REIT Index and assumes monthly rebalancing to an equal-weight benchmark. For additional clarifying notes and details of the Vision Opportunity Funds, please contact us and/or refer to www.visioncap.ca / Capitalize for Kids – About Vision Capital 4
Capitalize for Kids Vision’s Focus on Risk -Adjusted Total Returns Vision’s strategy of targeting long -term out-performance on a risk-adjusted basis is favourably reflected by several metrics, including the up-market and down-market capture ratios. Variability of portfolio returns S&P/TSX Index Vision LP Vision’s near zero down-mar market et captur ture Sharpe Ratio (a) 0.27 1.20 ratio io reflects the managers’ view that the Sortino Ratio (b) 0.44 2.16 “best way to make money for investors is 5-Year Standard Deviation of Returns 8.8% 5.8% not to lose it.” Up- and Down-Market Capture Ratios (c) Up-Market Capture Ratio 70.7% Down-Market Capture Ratio 0.2% Correlation of Monthly Returns (d) In addition, since inception, the average ge S&P/TSX Index 0.49 prof ofit t per trade de on prof ofita itabl ble e trades des is S&P/TSX Capped REIT Index 0.30 3.75 times es the loss ss on unpr prof ofitabl able e trades. des. MSCI US REIT Index 0.43 iShares 7-10 Year Treasury Bond ETF -0.14 Notes: (a) The Sharpe ratio measures the return in excess of the risk-free rate relative to the volatility of the return. The higher the Sharpe ratio, the better returns the fund has yielded in relation to its risk. (b): The Sortino ratio is a variation of the Sharpe ratio which differentiates harmful volatility from volatility in general by replacing standard deviation with downside deviation in the denominator. Thus the Sortino Ratio is calculated by subtracting the risk free rate from the return of the portfolio and then dividing by the downside deviation. The downside deviation is defined as the volatility of returns below the risk free rate. The Sortino ratio measures the return to "bad" volatility or a measurement of return per unit of risk on the downside. A large Sortino Ratio indicates a low risk of large losses occurring. (c): Up-Market and Down-Market Capture Ratios are statistical measures of an investment manager's overall performance in up and down markets. The ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen or fallen. A negative down market capture ratio indicates that the fund increased on average during the months when the index decreased. (d): Correlation is a statistical measure of how two securities move in relation to each other. A Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. A correlation co-efficient close to 0 implies that the performance of two securities have little to no correlation. The correlation figures presented are the coefficient of monthly net returns comparing the Vision LP A vs. the stated index over the last 5 years. / Capitalize for Kids – About Vision Capital 5
Capitalize for Kids Why U.S. Rental Apartments? • Most defensive real estate sector • Everyone needs to live somewhere • Mortgage financing from Fannie Mae and Freddie Mac: • Offer cheap debt • Unlike commercial real estate, even in credit crisis financing is always available • Affordable apartments provide offense and defense • Offense: • If supply and demand favourable, short term leases generate highest rent growth • Defense: • Recession resilient due to low price point 20.0% Top Performing Sector 18.0% 20-Year Annualized Returns by REIT Sub Sector (1998-2018) 16.0% 14.0% 12.1% 12.0% 9.8% 9.2% 10.0% 7.1% 8.0% 6.0% 4.0% 2.0% 0.0% Multifamily Retail Industrial Office Strong demand for multifamily throughout cycles provides outsized returns / Source: S&P Global Capitalize for Kids – Why U.S. Multifamily 6
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