WP talks with Jay Bala, CEO of Toronto-based AIP Asset Management
Canada’s new government is in its infancy and despite the pledges and rhetoric of the election campaign, it’s yet to be seen how Mark Carney and his team navigate the economic challenges they face.
Much has already been said by the new prime minister about tax reforms including capital gains tax and carbon tax, but should Ottawa’s tax regime go bigger and bolder to help boost Canada’s competitiveness in an uncertain world? And what can advisors do to ready their clients for what may be ahead?
Wealth Professional has spoken to Jay Bala, CEO of Toronto-based AIP Asset Management, for his take on tax.
As well as helping businesses, how might eliminating capital gains tax impact the average retail investor’s portfolio strategy, particularly in terms of asset allocation and risk tolerance?
“Eliminating capital gains tax would likely help boost market performance by encouraging more investment. This could directly benefit middle-class retail investors, whose wealth typically comes from jobs and savings, by increasing the value of their portfolios. It would also create an incentive for businesses to expand and hire, supporting broader economic growth. From a portfolio construction standpoint, this potential shift underscores the importance of proper diversification. Retail investors should revisit their asset allocation to ensure they’re holding a healthy mix of equities, fixed income, and alternatives—each playing a key role in managing risk across market cycles.”
What steps can financial advisors take today to help clients position themselves for a potential shift in tax policy under the Carney government?
“Advisors should begin evaluating the relative attractiveness of Canadian assets under new policy scenarios. That means looking to reduce exposure to US and international markets where tax advantages may erode, while potentially increasing allocations to Canadian equities and bonds if local policies become more favourable. It’s also a good time to model different after-tax return outcomes to see where clients might benefit most from reallocation.”
With private markets gaining attention as a hedge, what types of private investments should advisors be educating their clients about—and what are the key risks?
“Private credit is particularly compelling right now. With interest rates projected to drop—BMO expects three more cuts this year, pushing the Bank of Canada rate to 2%—there’s a limited window to lock in attractive yields, with some private debt opportunities offering up to 9%. That said, advisors must guide clients through key risks: liquidity (these are long-term, less tradable assets), transparency, and suitability. Unlike public assets, private investments require deeper due diligence and a clear understanding of fund structures, redemption terms, and manager expertise.”
How can retail investors access the kinds of innovative, growth-oriented opportunities that institutional investors typically dominate?
“Access has broadened significantly. Thanks to changes in regulation, retail investors working with portfolio managers who have discretionary authority may now gain exposure to alternative investments—such as private equity or credit—previously reserved for institutions. The key is ensuring product suitability. Advisors must assess client goals, risk tolerance and time horizon to determine if an outsourced alternative sleeve is a fit. As we've written recently, these products are no longer niche—they're essential tools in a modern portfolio.”
What macroeconomic indicators should advisors watch closely to anticipate shifts in capital flows into or out of Canada?
“Watch the spread between Canadian and US interest rates, shifts in domestic GDP growth, and changes in foreign direct investment patterns. These indicators signal how attractive Canada is to global capital. Policy clarity, particularly around taxation and innovation, will also play a large role in investor confidence and long-term flows.”
How do you see the role of alternatives evolving in a retail investor’s portfolio over the next five years?
“Alternatives will move from being optional to foundational. As traditional stocks and bonds face headwinds—volatility, low yields, and inflation pressure—private markets offer differentiated returns and income potential. We're seeing increased adoption of a 50/30/20 portfolio structure (equities/fixed income/alternatives), with some advisors allocating even more to alts depending on client needs. The bottom line: alts help build resilience.”
If Canada remains less competitive globally, what does that mean for long-term returns in domestic equities—and how should advisors respond?
“Underperformance becomes a real risk. If Canadian policy doesn’t keep pace with global peers, capital will flow elsewhere, pressuring domestic equity returns. Advisors need to monitor competitiveness indicators and consider diversifying internationally to seek better long-term growth, particularly in sectors or regions benefitting from innovation and capital formation.”
What should advisors understand about policy-driven investment risk, and how can they communicate that effectively to clients?
“Policy shifts—especially around taxation, regulation, or climate—can materially change investment outcomes. Advisors should treat this as a core portfolio risk, not a side note. Communication should be clear: these aren’t theoretical risks, they directly affect returns. Use scenario analysis to illustrate how different policy paths might impact performance and reallocation strategies.”
How can tax efficiency strategies evolve under a more innovation-focused government—are there new tools or structures advisors should be exploring?
“We could see new incentives emerge for investments aligned with innovation, climate transition, or Canadian competitiveness. Advisors should stay informed about potential structures like tax-exempt vehicles for specific sectors, innovation funds, or capital gains deferrals. Flexibility in product design may also expand, especially for alternatives, giving advisors more tools to work with.”
What’s one thing most retail investors—and even advisors—get wrong about capital formation in Canada, and how can they rethink their approach?
“Many assume capital formation in Canada starts and ends with public markets. In reality, the most dynamic growth often happens in the private space—early-stage companies, infrastructure, and private credit. To rethink their approach, advisors should start viewing private markets not as exotic, but essential. They’re where innovation is capitalized—and where tomorrow’s public winners are born.”
