Q2 2025 Quarterly Update

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I’m Kyle Smith, with your Q2 2025 Quarterly Summary from Newport Private Wealth.

On April 2nd, any hopes of a second quarter reprieve from trade policy uncertainty and market volatility were dashed. “Liberation Day” in the U.S. quickly knocked 10% off the value of the S&P 500 Index (S&P 500).

By the time a “90-day pause” was announced on April 8th, the Index had experienced its 11th worst three-day sell-off since World War II and found itself 21% below mid-February highs. While the pause served as a temporary tourniquet, decoding tariff threats and predicting potential economic consequences remained a daily exercise.

Despite threats global commerce, mixed economic data, military conflicts in the Middle East and the U.S. losing the last of its major triple-A credit ratings, investors seemed to shrug off any concerns. In May, the S&P 500 posted its best month since November 2023 and by June 30th, U.S. equity markets had rallied to their February peaks.

Bonds held steady after an early April selloff. The geographic rotation in public equities also continued as markets in Asia, Europe and Canada posted strong second quarters. Both valuation gaps versus U.S. peers and global investors looking at new places for capital fueled this reversal.

Our approach to public equity investing involves a diversified approach so we continue to find this rotation to be healthy.

Newport’s Investment Committee approved $150 million in allocations in the second quarter, with the split between private and public asset classes coming in at 60/40, respectively. This puts the total for 2025 at nearly $245 million, exceeding activity at the same time last year by $80 million. This is unsurprising as periods of increased volatility typically provide opportunities for portfolio re-positioning.

The average investor is limited to owning traditional bonds or dividend paying equities. In contrast, our diversified yield strategy also incorporates investments in private income producing asset classes. These investments typically reduce volatility while generating stable, high quality and predictable sources of income.

This remained a focus in the second quarter as more than $75 million was allocated to four private debt managers, while $10 million was allocated to a private mortgage manager. We have an extensive history with both asset classes and these investments help to maintain our weightings in a Balanced Mandate at 9% and 7%.

A portion of our public equity exposure has been directed towards an actively managed portfolio of exchange-traded funds. This strategy complements our roster of well-diversified specialty managers. It also enables our Investment Committee to quickly obtain core market exposure, especially in periods of elevated volatility.

More than $60 million was allocated throughout the quarter to Canadian, U.S. and International markets. These allocations, combined with the rally in public equities, bring the public equity exposure in a Balanced Mandate from 39.8% on March 31st to nearly 43.2% on June 30th.

Even with the increase in investment activity in 2025, the cash weighting in a Balanced Mandate grew from 6.1% to 8.8%. We are managing through less predictable times so we believe it is prudent to have cash on hand should the public markets experience another pullback.

With approximately 45% of our capital invested in U.S. dollar denominated assets, currency fluctuations can impact performance in either direction. While we benefitted in recent years, the weaker U.S.-dollar has had a slight impact on short term performance. To mitigate this risk, and to lock in currency gains, we maintain an active currency hedging program.

Returns for growth-focused private investments have been flat for the year, however, we are optimistic. Our multi-family real estate managers believe that demand for rental properties remains strong. As economic conditions normalize and investors adjust, deal volume—an important driver for private equity to realize value—should improve. We believe that interest rates could move lower, which would help valuations for both asset classes.

Despite the recent rally, current risks need to be taken seriously. As experienced in February and April, sentiment reversals are swift. The 90-day pause from April is set to expire and tariff-related threats are beginning to ramp up.

We expect trade-related developments and their economic impacts—along with concerns over the U.S. government debt burden and rising geopolitical tensions—to dominate headlines into year end. We are confident that we are positioned to navigate and thrive in whatever conditions we may face.

On a lighter note, we hope that you are enjoying the warm weather, and that the summer months will provide an opportunity to relax and spend time with family and friends. For those of you with vacation plans, we wish you safe travels.

As our firm moves towards its 25th anniversary, we remain grateful for the trust you have placed in Newport.