Alternatives investing

Target a 9% yield with private credit

We make loans to companies that meet our high standards for trust. And unlike lots of other funds, there's no million-dollar minimum to get started.

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Loan companies money. Earn monthly income.

Performance

We partnered with top-performing asset management firm Sagard to build an institutional-grade portfolio that targets a 9% yield on your investment.

Protection

All loans are held to Sagard's strict standards. They're 100% senior-secured, meaning the fund is the first in line to get paid back if borrowers run into trouble.

Diversification

Adding private credit can be a great way to diversify a portfolio of traditional stocks and bonds — especially when interest rates go up.

Private credit at Wealthsimple

Although private credit has traditionally been reserved for the ultra-wealthy and institutional investors, our partnership with Sagard allows us to offer a high-quality fund to a wider group of individuals.

The fund works by making loans to private companies and distributing the interest payments among its investors. Distributions are made monthly, and investors are typically given quarterly withdrawal opportunities.

Exclusive access

As part of our alternative investments program, Private Credit is available to all qualified Premium and Generation clients.

$100,000

In assets at Wealthsimple

$10,000

Minimum investment

3+ years

Minimum investment horizon

Fund performance

11.1%

Total return

The total return is made up of two things: the income paid to investors in the form of distributions and the change in value of the loans that make up the fund.

9.0%

Annualized distribution yield

This number represents what the fund's yielded so far over the course of a year. Unlike total return, it measures performance based on monthly distributions and excludes data like price appreciation or depreciation.

For more information on the fund’s performance, click here.

SINCE JUNE 2023

Performance history

Based on an initial $10,000 investment, here’s a look at how the fund has been performing month-over-month, including distributions and investment value.

$9.5K$10K$10.5K$11K$11.5K

This data is for illustrative purposes. Past performance is not indicative of future results and may not be repeated. See disclaimer.

Sector diversification

We lend money to companies across a variety of industries. That way, if one sector underperforms, others can potentially offset losses.

Banking, finance, insurance & real estate

Hotel, gaming & leisure

Healthcare & pharmaceuticals

Chemicals, plastics & rubber

Business services

Other industries

21%

21%

20%

20%

9%

9%

7%

7%

7%

7%

Other industries

36%

Breakdown shown as at March 2024. Fund sector composition may change over time and chart may not be reflective of current composition.

Risk management

Higher returns often come with higher risk. That’s why Sagard carefully selects each company and then structures the debt to help protect your principal.

100%

Senior secured/first lien credit
In the event of a default, senior secured loans have a priority claim on assets. This means that if a borrower can’t make interest payments on their debt, lenders will be the first to get paid back before bondholders or stockholders. This adds extra security and makes these types of loans less risky.

If a company runs into trouble, our fund is first in line to get paid back fully before other creditors.

44%

Weighted average loan-to-value
This measures the amount of collateral backing the secured loans if a borrower defaults.
Since the fund's loans are, on average, 44% of the value of their collateral, there is a significant cushion protecting the assets.

Our fund has more than twice the collateral needed to repay its loans.

4.1x

Weighted average senior leverage
This measures the amount of debt a company has relative to its cash flow.
A 4.1x multiple means that, on average, it would take the fund's companies that many years to pay off their loans if they used all of their cash flow to pay down principal.

On average, companies will take 4.1 years to pay off debt based on their annual income.

Based on par value as of March 28, 2024

We’re here to help

The decision to invest in private credit isn’t one you have to make on your own. Once your application is approved, our team of advisors will learn about your financial goals and make sure it's the right fit.

Ready to start the process and make a transfer?

Start a transfer
Photo of one of Wealthsimple's advisors sitting in the office

Silvio Molina, advisor, CIM® (Chartered Investment Manager)

Earn more money on your money, every month

Add private credit to your portfolio.

By signing up, you agree to Wealthsimple's Terms of Use and Privacy Policy. By providing your email, you are consenting to receive marketing communications from Wealthsimple. You may withdraw consent at any time. Visit our Privacy Policy for more info, or contact us at privacy@wealthsimple.com or 80 Spadina Ave., Toronto, ON.

Alternative investing

Did you know that real estate, art, and even antiques are considered alternative investments? But there's so much more to know about this asset class, like which ones we offer and (and which are legit).

FAQs

Private credit — also called “private lending” or “direct lending” — refers to loans made directly by investors to companies. It is private credit because the debt is not issued or traded on the public markets.

Wealthsimple private credit invests in two types of loans: the first are loans made directly by our credit management team to medium-sized companies, and the second are loans made by banks to medium-sized companies. These companies aren’t as risky as many private equity-backed companies and aren’t taking on as much debt, relative to their earnings. This means there’s a higher likelihood that the debt will be repaid.

Much of the private credit landscape consists of loans made as part of private equity deals, known as “sponsored” private credit. This investment avoids these kinds of deals because we believe that their risk-reward is lower than loans originated by our credit managers.

This investment differs from most private credit options available to Canadians in two ways.

Firstly, the focus on directly originated loans where our team has deep expertise, as opposed to loans made alongside private equity deals.

And secondly, the quality and experience of the management team. The credit team is led by Adam Vigna, who led Canada Pension Plan’s Principal Credit Investments group. This group invested $20B in bank-led and direct credit investments. He has recruited an investment team with high-quality investment experience managing significant credit portfolios across the private and syndicated markets for Canada Pension Plan, KKR, and Garrison Investment Group.

The investment will target a 9% annual yield, net of fees, which will be distributed monthly to provide investors with income. The yield is based on a floating rate, which resets with interest rates so returns will vary year to year. The income will be reported out on a monthly basis right in your Wealthsimple app.

As an asset class, private credit typically offers 2–5% higher returns than public credit.* For example, from 2012 to 2021, private credit as an asset class has offered a 9.7% internal rate of return. This has provided a similar return profile to real estate and infrastructure, which have returned 10.4% and 12.8%.**

*From March 2007 to September 2022, private credit returned 8.9% annualized while U.S. Corporate Bonds returned 4.1% annualized (see chart above). **Data compiled by J.P. Morgan Asset Management (p11). Sources: Cliffwater Direct Lending Index; NCREIF Property Index (U.S. real estate only); MSCI Global Quarterly Infrastructure Asset Index. All data represent the period from 12/31/2011 to 12/31/2021.

Figures represent the past performance of private credit; they do not represent investments made by Wealthsimple’s private credit product. The past performance of private credit or any other security or investment strategy is not an indicator of future performance, and past performance may not be repeated.

Although Wealthsimple’s private credit product may seek targeted yield and monthly distributions, its performance and distributions may be affected by numerous factors and targets. Wealthsimple’s private credit product is new and has no performance history. Past performance of the Sagard private credit funds or other security or investment strategy is not an indicator of future performance, and past performance may not be repeated.

The information contained herein is based on sources believed to be reliable and is provided for information purposes only. Where such information is based in whole or in part on information provided by third parties, we cannot guarantee that it is accurate, complete or current at all times. It does not provide investment, tax or legal advice, and is not an offer or solicitation to buy."""

The investment holds loans that come with the risk of loss in the event that a creditor cannot repay. This can and does happen to borrowers who use private credit. We expect the value of the loans to fluctuate as the price of credit fluctuates in the broader market. The investment uses leverage, which can amplify returns but comes with borrowing costs and a wider range of outcomes. There is also liquidity risk, where loans may decline in value due to a lack of willing buyers, irrespective of the underlying credit quality.

The investment primarily targets senior secured credit, meaning that it will have a first claim in the event borrowers run into trouble. This makes it less risky than high-yield bonds, which typically would come after senior debt in these scenarios, and equity, which pays out to shareholders after debtholders have been paid.

The management team conducts due diligence on each investment and only invests in industries in which they have deep expertise. In addition, the loans made have investor protections in place with strong credit documentation and covenants that require lenders to meet certain financial health metrics or incur penalties (known as financial maintenance covenants).

The investment will target floating rate loans, meaning that as interest rates change, the rates paid by lenders will increase or decrease in lockstep. This differs from most bonds, which have fixed interest rate payments. Plus, it will target companies that the management team believes will be resilient to economic conditions, including stagflation.

Finally, the investment manages foreign exchange currency risk, which we believe will allow it to target oingoing returns in Canadian dollars. We believe this is an attractive feature for Canadian investors.

You will be charged an asset management fee of 1.25%, on top of Wealthsimple’s standard managed account fees, to invest in the Wealthsimple private credit Fund. If the fund returns more than 5%, a 15% performance fee applies to those returns. Our promoted targeted yield of 9% is net of these fees.

Management fees are designed to cover the costs of diligence and sourcing to find attractive credit opportunities and to structure the terms of those loans to manage risk aggressively. Historically, private credit has provided competitive returns even net of management fees, though past performance may not be repeated and is not an indicator of future performance.

The investment targets floating rate loans so that the interest paid by borrowers automatically adjusts as interest rates rise (and fall).

However higher inflation comes with additional risk to repayment. For that reason the investment will manage the risk of inflation through credit selection. The investment has sectoral tilts that can handle a stagflation scenario, and the credit management team assesses the fixed and variable costs of each borrower to understand the potential impact of stagflation.

There is a minimum investment of $10,000. Additionally, private credit is available exclusively to clients who have deposits of $100,000 or more across their Wealthsimple accounts and have otherwise met the suitability requirements as determined by our portfolio management team.

The maximum recommended allocation is 20% of your managed investing portfolio. Private credit is a diversifying asset, so can be added and increase expected risk-adjusted returns. Our portfolio managers will review your profile to find an initial commitment that works for you and your goals. Factors that will determine your recommended contribution include the value of your total investments, your risk tolerance, and your investment time horizon.

Beginning two quarters after the fund closes, you’ll be given the opportunity to make a redemption (a withdrawal from the fund) every quarter. You’ll be able to indicate you want to redeem (pull some or all of your money out) at any point by sixty days before the end of the quarter, and the redemption will happen at the next quarterly opportunity, with cash available 30 days after the end of the quarter. In the event that many investors want redemptions at the same time, some may need to wait until the following quarter or quarters. In addition, the fund manager has the discretion to suspend withdrawals.

The higher yield is due to the private nature of the investments and the premium for lower liquidity. These investments, particularly in the non-sponsor market, are not widely marketed so require a network of relationships to source and structure transactions, and expertise is required to conduct due diligence. Given the relative lack of efficiency of these markets, it offers the potential for higher returns.