Other Financials


Why AGF Should Sell Itself in 2016

Since 2013, we have travelled throughout Canada giving a research presentation entitled “Canadian Banks – the End of an Era?”, which is based on an essay we wrote in 2011 (and reprinted in the Globe). In this presentation, we reviewed the evolution of the banks over the previous 20+ years and provided a 5 to 10 year outlook for sector. Read More»

Business Development Corps: Notes from NYC Field Trip

We recently travelled to New York City to meet with executives from a group of business development companies (“BDCs”), a diverse category of “other financials” focused on yields. There are over 30 publicly traded BDCs in our investable universe, with market capitalizations ranging from ~$100 mln to several billion dollars. Yields for these financials are generally over 8%. Read More»

European Trip to London, Frankfurt, and Madrid: Notes from the Field

A recent trip to Europe – 3 days in London at a European financial services conference, and 1 day field trips to Frankfurt and Madrid – gave us an opportunity to meet with executives from more than 25 financial services companies and agencies (including 19 banks and 3 insurers) representing 9 countries. Notably, the trip reinforced our European investment thesis, although a disparity of country and subsector specific issues remain, leaving different companies (and countries) at different stages of recovery/normalization. Below, we outline our key takeaways from the trip. Read More»

Why the Canadian Financials Will Likely Underperform their Global Peers

We are often asked for our thoughts on the Canadian financials relative to the global financials. Regular readers of our work will know that we favour financial services companies outside of Canada. There are many reasons, but the most compelling is that the Canadian financials have fully recovered (both in terms of valuation and earnings) from the most recent cycle, while the U.S. and global financials have not. Read More»

Are MICs the “Canary in the Coal Mine”?

Over the past several months, there has been a lot of discussion about the potential for Canadian home prices to fall and the possible impact on the Canadian financials (and banks, in particular). After a near-vertical rise in over the past decade (see chart), Canadian home prices appear vulnerable to a decline. The speculated impact of a decline on the domestic financial services sector has ranged from: (i) slower economic growth causing slower revenue growth (most likely), to (ii) a credit downturn (a possibility), or worse, (iii) some sort of systemic event (highly unlikely, in our view). Read More»

For MICs, Time to Exercise Caution?

We were recently asked to look at and give our opinion on mortgage investment corporations, or MICs. Given the ultra-low interest rate environment, high yielding MICs have become a popular product among retail investors. What we found behind these high yield products was concerning to us, particularly given the potential for a generalist investor to significantly underestimate the actual credit risk of certain MICs. Read More»

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