Plus: what we expect next ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ LETTER FROM BEN Chief Investment Officer Here’s what happened in Q1 COMING UP 2024’s strong start Private credit and private equity updates Why I’m watching IPOs That was a strong first quarter. Global equity markets continued their bull run, primarily due to two factors: increased investor optimism, which is reflected in stocks’ high valuations (the price investors are willing to pay for them relative to expected earnings). corporate earnings exceeding expectations. Inflation remained high, however, delaying expectations for interest rate cuts and causing government bonds to decline slightly. Gold rose due to a variety of factors, including central bank demand, increasing geopolitical risk, and high retail demand in Asia. Portfolio performance In the first quarter, all of our portfolios performed near the higher end of expectations. Our Balanced 60/40 portfolio returned 4.8% and our Growth portfolio returned 6.9% (see charts below), bringing annualized returns since inception to 4.9% and 7.1%, respectively. Our halal portfolios gained 6.4% to 7.5%, matching their annualized returns since inception. And our SRI portfolios gained 3.1% and 4.9%. Their annualized returns since inception are now 4.3% and 6.4%, respectively. Private credit Wealthsimple Private Credit returned 2.6% in the first quarter as borrowers continued to make regularly scheduled interest payments. The fund has distributed income at a 9.1% annualized yield.1 Since its June 2023 inception, returns are 9.8%,2 which is at the high end of our expectations. Overall, borrower health also remains strong, with a loan-to-value ratio of 44%.3 Private equity Although March results are pending for a few more weeks (we’ll post an update in the app for investors as soon as they’re available), our private equity fund returned 13% in January and February — also at the high end of our expectations. This performance is primarily due to the revaluation of assets initially acquired at discounts, as well as the successful sale of one of the fund’s holdings, Systems Control. The fund remains well-diversified with more than 300 underlying investments in companies across North America, Europe, and Asia. Outlook Since late 2022, much of the market’s returns were driven by optimism toward the potential of Microsoft, Alphabet, Nvidia, and a handful of other technology companies. But this past month, a broader group of companies performed well, particularly in the energy sector and in industries that are more sensitive to economic growth, like tourism, luxury goods, and cars. This suggests that investors have a more positive economic outlook. High valuations like the ones we’re currently experiencing have tended to be associated with lower returns going forward. But periods of valuation-driven increases in stock prices can persist for much longer than they have so far, so that isn’t necessarily a signal of an imminent decline in the market. There are plenty of things that could derail the current market trajectory, including geopolitical risk, the persistence of inflation, and the economy slipping into recession. While these factors might affect short-term performance, patient investors should continue to expect positive returns over the long term. Those returns just may come from different sources — and if you’re well-diversified, you’ll be ready to take advantage of them. WHAT I’M LOOKING OUT FOR After two slow years, the market for companies making their initial public offerings (IPOs) has gotten much busier: companies raised USD $8.4 billion through IPOs in the first quarter of 2024 as compared with USD $2.6 billion in the same period a year ago. This likely reflects increased investor risk appetite and company valuations getting high enough that private company owners are finally willing to sell again. If it continues, that’s a great sign of investor optimism. All the best, Ben Reeves Chief Investment Officer Wondering how long good times can last? On Tuesday, April 30, at 12 p.m. EST, portfolio manager Daniel Tersigni and I will go deeper on the market’s recent performance and where things may be heading next. Register now Let us do the hard stuff for you You can spend hours researching stocks, diversifying, and balancing (and rebalancing) your own portfolio. Or you can let us do it for you in a managed account, freeing you up to do… whatever you want. Open a managed account Thoughts on today’s email? Yes, useful Could be better Not for me Wealthsimple, 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Refer a Friend Privacy Policy Unsubscribe Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. All information and commentary provided is for illustration purposes only and is not investment advice or recommendations. All investments involve risk. To get more info on our products, investment decisions, fee schedules, user testimonials, promos & more visit wsim.co/disclaimers. Indicated performance data are historical for the period indicated. Rates of return do not take into account any fees or tax payable. Past performance may not be repeated. 1 Annualized distribution yield based on $0.077/share, divided by a starting NAV of $10.21 and multiplied by 12. To calculate this rate, we take a partial year distribution and convert it to a full-year amount as if it were paid in each period. We then divide this annualized amount by the fund’s value at the start of the period. Distributions are not guaranteed. Past performance does not guarantee future results. 2 Between the beginning of the fund and the end of September, the management and performance fees were waived to facilitate certain portfolio investments. In the absence of these temporary waivers, performance figures would be lower. Returns shown include all applicable fund management fees and performance fees, but excludes Wealthsimple’s standard management fees for its advisory services. 3 Based on par value as of 3/31/24. 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