The alternative investment platform Sagard, from the Montreal conglomerate Power Corporation, wishes to further democratize non-traditional investment by offering individual investors access to products usually offered to institutional investors such as pension funds, sovereign wealth funds and wealthy families.
Sagard, with assets under management of more than US$25 billion, is preparing to launch two new investment funds in the coming months. One of them is a private credit fund (direct lending to businesses) and it will be launched in September.
The other is a private placement product allowing individuals to invest in a fund composed of direct equity participations in companies, private equity in financial jargon. The launch of this fund, the details of which will eventually be clarified, is planned for the fall.
“There is a very strong trend of democratization of alternative products, that is to say that we are taking products which were essentially reserved for institutional investors to make them accessible to individual investors,” explains Jonathan Tétrault in an interview. , managing partner at Sagard.
“Sagard is trying to position itself as a leader in this sector,” he adds.
Alternative or non-traditional investments help diversify a portfolio beyond traditional investments in stocks and fixed income securities. The advantages put forward by promoters of alternative investment products are complementary diversification for a portfolio and reduced volatility.
Sagard’s private credit fund will be eligible for registered plans such as RRSPs, RESPs and TFSAs. The fund will target an initial indicative annual return of 9% to 10% net of fees. “It is not a guaranteed return,” insists Jonathan Tétrault, but rather a “target” return.
The fund will focus on financing profitable companies – operating profit (EBITDA) of 5 to 500 million – and provide loans to mid-sized private companies. There should be between 50 and 75 positions in the loan portfolio.
“Essentially, it will be 80% North American companies and 20% companies from Europe and Australia,” explains Jonathan Tétrault.
“Each of the loans will count for 0.5% to 2% of the portfolio with a limit of 10%. »
Only accredited individual investors will have access to this investment product by contacting their financial advisor or broker.
Because it is a less liquid product and considered more risky, to qualify an investor must have an annual income of at least $200,000 or hold net financial assets of $1 million, excluding property real estate, or at least 5 million including real estate.
Subscriptions on a monthly basis will be possible and the fund will offer liquidity windows on a quarterly basis.
Sagard launched a private credit fund last year for the robot’s clientele – Wealthsimple advisor -, another Power Corporation platform.
Earlier this week, Bloomberg announced the creation by Indian investment firm Vivriti Asset Management of a US$240 million private credit fund to invest in small and medium-sized businesses in India.
Bloomberg highlighted that private credit is rapidly growing in importance in India, despite global warnings about the rising risks associated with the direct lending market which has seen explosive growth over the years.
US bank JPMorgan chief executive Jamie Dimon was quoted in the media in late May as saying at a conference in New York that he expects “to there are problems” referring to the rise of private credit.
“There could be hell to pay,” he said, if small investors in these funds suffered big losses.
Jamie Dimon argues that the rise in lending by private equity firms, money managers and hedge funds increases the opportunity for risks that fall outside the regulated banking system to escape oversight.
If Sagard is controlled by Power Corporation, the Bank of Montreal, the insurer Great-West, the sovereign wealth fund ADQ of the United Arab Emirates and the management team are also shareholders.
