Recently, so many of our conversations with industry insiders have been on the same subject: the struggle to find good returns in the current low rate, low growth environment. What’s clear is that there is no simple ‘one size fits all’ solution. Investors are having to look in unfamiliar places to get the returns they have come accustomed to. But strong alternatives are out there and increasing numbers of Canadians are taking up these new opportunities.
One alternative investment that’s providing some strong yields for Canadian investors this year has been private debt.
“Where we are with interest rates really underscores the challenges investors face in generating an income: it’s a struggle for people,” says Ramesh Kashyap, Senior Vice President, Alternative Income at Sprott Asset Management
. “Private debt is growing as an area of interest because increasing numbers of investors are generating good income and creating some diversification. There are now some good options in the retail channel.”
After the financial crisis of the last decade, banks were forced to withdraw from certain lines of business, including private debt, in an attempt to increase their capital. Regulations have also impacted banks, many of whom were forced to abandon their private debt strategies altogether. Although this has affected the banks’ ability to create profit, it has created fresh alternative investment opportunities for savvy investors who want to fill the gap.
“Investors are finding that traditional income strategies are fully valued, so they’re being forced to work harder for diversification and reduced correlation to the market - and private debt does that,” Kashyap says. “But there is a trade-off between liquidity and returns, and investors need to be aware of that. A private debt strategy is not suitable for every investor.”
Although the private debt space is providing some lucrative returns, it does require an added level of knowledge that some investment professionals understandably do not possess. New opportunities are being presented in the private debt space on a regular basis, but without the know-how, investors and advisors are encouraged to step tentatively.
In an attempt to educate the Canadian investor community on the private debt space, Sprott Asset Management
will host a free webinar on October 25th
. The webinar will offer guidance on the growth and utility of the private debt space, and detail how retail investors can access it more easily. The webinar will outline effective strategies and feature a Q&A with Kashyap and his colleague Scott Colbourne, Co-Chief Investment Officer and Senior Portfolio Manager at Sprott Asset Management