As a newbie to wealthsimple. Just trying it out. I see they do private equity and private credit.
Is this something worth looking at as a portfolio grows for added diversification?
Do you know much about their capital partner and it's history. Looking for some quality direction here from the pros.
Thank you.
Private credit is a category that did really well when interest rates were 0%, but it has been a disaster in Canada. Many funds have been 'gated' and restrict sales. Bridging Finance lost investors $1B+ and was a view a total fraud. There are too many leeways in funds to record asset values and interest-in-kind rather than cash. Not all are bad, of course, but more diligence is needed. VPC is a small US fund doing well. For the category we would be comfortable with it. INCM is a small new fund recently launched in Canada. Too small to endorse yet. Generally speaking, unlike with private equity, we do not think the extra yield on private credit offsets the additional risks that investors incur. Private equity has a better historical record, but it can be very illiquid and again, companies get a lot of leeway in pricing assets which do not trade. There have been problems in this field as well, including a fund that owned the rights to two glaciers in Greenland and extorted high fees on the assumption they increased in value (the fund collapsed and the manager was banned). At WealthSimple, LGT Capital has a long history and we do not have any objections to the manager. For new investors, investing in a public company that makes private equity investments is often a better option. Companies such as BN, KKR and BX can be suggested here.