Gotta risk money to make money

Let’s take a peek behind the curtain and into the exclusive world of private investments. 

Driving the news: Wealthsimple is letting retail investors into an industry once reserved for institutions and the superwealthy by expanding into the private credit market. Wealthsimple Private Credit, a private fund, will be managed by the alternative asset manager Sagard. 

  • Private credit is a way for businesses to raise money through investor loans. In turn, investors make their money on the repayment of those loans. 

Why it matters: It’s become easy for investors to manage their money alongside the rise of online trading platforms, but current economic conditions (read: bad) have sparked interest in assets beyond stocks, with firms like Wealthsimple and Brookfield very happy to deliver. 

  • Or, we guess, you could invest in bonds (which is basically what BlackRock’s Kurt Reiman told us to do last month), but where’s the excitement in that? 

Yes, but: There’s a reason private funds aren’t that accessible—they’re riskier investments. Wealthsimple CEO Michael Katchen told The Globe and Mail the fund isn’t just for everyone. “If you can’t take any risk then you may be better suited to a GIC or savings account.”

  • Clients must meet a deposit threshold and invest at least $10,000, but investments will be limited to 20% of an investor’s portfolio, given, you know, the risk.
  • According to Sagard, its private credit portfolio only targets companies they believe can withstand the current economic environment (read again: bad).

Zoom out: As governments look to ramp up regulation for banks, Wealthsimple and Sagard are betting that a shift to conservative lending practices will leave private investors in pretty good shape. These opportunities (and associated risks) are now up for public grabs.—SB