Who Invests In Private Debt

by Todd McLay

December 5, 2022

From the investment team at Precedence Capital - Harbourfront Wealth Management.

There are so many advantages to having Private Debt securities inside a well-diversified investment portfolio. And yet so many investment advisors and financial professionals still do not offer these solutions to their clients.

Private debt also referred to as privately negotiated loans outside of the tier-one financial system, provides investors with senior secured positions in the capital stack making private lending an increasingly attractive option for portfolio diversification because it provides equity-like returns without the volatility.

Who Invests in Private Debt? – Private Lending has been broadly adopted by Institutional investors within Canada. Canada Pension Plan Investment Board (“CPPIB”), Public Sector Pension (“PSP”), and Ontario Teacher’s Pension Plan (“Ontario Teacher’s”) to name a few, have all increased contributions to private debt within their portfolios.

Since 2005, the nation’s biggest pension manager CPPIB has increased its private debt allocation from $0-$20.4B as of 2018 (CPP Investment Board, 2018 Breakdown of the Investor Base of Private Lending by Type, source: Preqin Private Debt Online 2018 Annual Report).

Other Canadian investment goliaths like the Public Sector Pension and Ontario Teacher’s followed suit, with PSP increasing its private debt allocation by 15% between March 2018-2019 (Public Sector Pension Investment Board, 2019 Annual Report) and Ontario Teacher’s by almost 5% from 2017-2018 (Ontario Teacher's Pension Plan, 2018 Annual Report).

The asset classes/companies featured in this article are for illustration purpose only, this should not be viewed as a solicitation of buy or sell. Always talk to a professional before investing to know if the product is right for you. Past performance does not necessarily predict future results, each asset class has its own risks.

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