Private equity and private debt as an allocation to your portfolio

Today’s low-rate environment and increasingly complex market have led to a growing number of investors seeking out opportunities beyond traditional asset classes to achieve their investment goals.

Enter alternative asset classes: a key strategy to add significant value to a portfolio.

At a high level, you could divide the alternative asset classes into 4 categories:

  • Private Market (private equity/private credit)
  • Hedge Funds
  • Real Estate
  • Infrastructure

In this post, we will look at one type of alternate asset class in particular – private markets – to allow you to determine if such a strategy would benefit you.

alternative investment universe


What are some of the characteristics of private markets investments?

Private equity investments are long-term in nature, with time horizons typically extending beyond 10 years from the date of your initial investment.

Private debt offers a way of generating higher yield (vs. traditional debt) while doing so at lower risk and with lower correlation to asset classes you probably currently find in your portfolio today

They are not listed on public exchanges, consequently, you cannot just buy these assets yourself.


Why would I want to allocate a portion of my portfolio to private markets?

Enhanced long-term returns: this is reliant on the manager’s ability to improving the underlying companies’ operating performance, which in turn creates an opportunity for enhanced portfolio performance.

Potential for reduced volatility within your overall portfolio: since private investments are not traded on public markets, they are less impacted by market sentiment.


Are private market investments right for me?

When considering whether to explore private market investments, here are a few points to keep in mind.


Do I qualify?

There are certain restrictions to access private markets. The key step is to determine if you are an accredited investor. There are certain qualifying requirements you need to meet. The illustration below offers a simplified representation on how to determine if you are an accredited investor. It could be more complex, depending on your circumstance.

Essential qualifying metrics

Do my investment objectives allow me to lock up a certain percentage of my assets for a certain number of years?

Private market investments are not nearly as liquid as those on the public markets and you can expect to go many years before being eligible to access your investments in them.


Do I have enough money to allocate to such a strategy?

This consideration is twofold:

  • There are usually minimum investments amounts that need to be met to be able to access private markets investments.
  • You would not want to allocate a particularly large percentage of your overall portfolio to a private markets strategy, so you need to have a large enough portfolio in order to section off a small percentage and still meet the minimum requirement.


Assume that the minimum requirement investment is $100,000
Your overall portfolio is valued at $1,000,000
You only want to allocate a small percentage of your portfolio to such a strategy; let’s say it is 5%
That gives us $50,000 to allocate, which is not enough to meet the minimum set out in this example.


Final thoughts

There is no doubt that private market investments make sense in the portfolio of most high net worth and ultra-high net worth investors. The performance enhancements and diversification they bring are welcomed additions to any portfolio, but they do come with certain restrictions that you need to be mindful of.

If you qualify for such investments, it is important that you seek professional guidance in determining if they are the right fit for your objectives and personal circumstance.

If you would like to know if you can benefit from including such a strategy, please feel free to reach out on LinkedIn or by completing our Meet With Us form.

– Darren

As a strategic wealth advisor, I can help you gain peace of mind and achieve your dreams for the future through various wealth management strategies. Whether it’s a worry-free retirement, saving for your children’s education, fulfilling a lifelong ambition, running a prosperous business or leaving a legacy to your loved ones or a cherished cause, I can work with you every step of the way.

Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and is registered with the Investment Industry Regulatory Organization of Canada.
This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances.

Commissions, trailing commissions, management fees and expenses, may all be associated with alternative investment funds. Alternative investment funds are not guaranteed, their values change frequently, and past performance may not be repeated. Hedge funds use aggressive strategies for growth, and they are generally offered to “accredited investors” only. Liquid alternative investment funds have the ability to invest in asset classes or use investment strategies that are not permitted for conventional mutual funds. The specific strategies that differentiate alternative investment funds from conventional mutual fund structure include: increased use of derivatives for hedging and non-hedging purposes; increased ability to sell securities short; and the ability to borrow cash to use for investment purposes. While these strategies will be used in accordance with the funds’ investment objectives and strategies, during certain market conditions they may accelerate the pace at which your investment decreases in value. Please read the Fund Facts or offering memorandum and consult your Assante Advisor before investing.

*Note to the reader: This article was originally published on LinkedIn on March 17, 2021.

Darren-St-Georges, team of Strategic Wealth Advisors of The St-Georges Group

About the Author

Darren St-Georges is a senior wealth management advisor at Assante with over 15 years of experience. Assisted by a team of experts, he has helped many clients, such as dentists, health professionals and business owners, simplify complex financial issues and achieve their financial goals. Darren offers a personalized and integrated approach to wealth management. His mission is to use his experience and skills to bring financial peace of mind to his clients. Contact Darren for expert wealth management advice.

Follow Darren on LinkedIn.