The shift comes as the size of markets for both private debt and equity have swelled over the last decade as all sorts of companies have steered away from traditional finance, leading fund managers to look for ways to market these alternative investments to more average investors.
Both Wealthsimple's recent entry and one launched by Mackenzie Investments last year have responded to the challenge by creating private credit investment options for non-accredited investors that allows them to add to their holdings monthly, while being able to take money out quarterly. The products are more flexible than most private market options, but still have some restrictions around qualifications and minimum investments.
"It's particularly important for retail investors to have access to those private market strategies because they have different sources of return, different sources of risk, different characteristics, different investment universes." The firm expects more growth ahead with assets under management set to rise to US$18.3 trillion by the end of 2027, though Preqin said in its forecast that the push will come increasingly from retail investors as more institutions reach their investment threshold in the space.
There is however still the potential for defaults, and both funds reserve the right to halt investor withdrawals as both Ninepoints Partners LP and Romspen Investment Corp. did with funds last year. The lack of transparency also makes it harder to compare between various funds, said Danielle LeClair, director of manager research at Morningstar Canada.And while the roughly nine per cent returns that Mackenzie is pulling in and Wealthsimple is targeting is a notable premium to public fixed income options, rising interest rates have created more options for investors looking for a reasonable return with lower risk, she said.
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Private markets getting more accessible to public as funds roll out credit options - BNN BloombergInvesting in private markets, once the exclusive domain of institutions and the ultra-rich, is getting increasingly accessible to the public. Ya bc the institutional investors see the writing on the wall and want to dump on retail Why would anyone want to invest in private equity when a mortgage and commercial real estate debt crisis about to hit the road
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