What Moved
The Bank of Canada held at 4.50% on April 12, extending its conditional pause for the second consecutive decision. The SVB episode had reinforced the Bank's cautious approach, and economic data was mixed — employment strong, but growth softening and inflation gradually declining (BoC, Apr 12, 2023).
Canadian CPI for March came in at 4.3%, continuing the downward trend from the 8.1% peak. The pace of disinflation was slower than the Bank would have liked, but the direction was clear (StatsCan, Apr 2023).
Spring housing markets showed genuine recovery. April sales were up significantly from winter lows, and prices stabilized or began modest recoveries in several major markets. The bottom-finding process that began in January was gaining conviction (CREA, Apr 2023).
Signs of a private lending recovery were becoming tangible. MIC managers reported declining extension rates, more successful loan resolutions, and stabilizing distribution levels. New origination was proceeding at more conservative terms — lower LTVs, higher yields, better borrower quality.
PE deal activity was picking up selectively. Mid-market transactions in defensive sectors — healthcare, business services, essential technology — were getting done at valuations that reflected the higher-rate environment.
What It Means
April marked the beginning of a genuine stabilization phase for Canadian private markets. After twelve months of relentless tightening and adjustment, the key metrics were moving in the right direction: inflation declining, housing stabilizing, rate hikes paused, and private credit portfolios adjusting to the new environment.
For MIC investors, the stabilization in housing was the most important development. With prices no longer falling, the collateral underpinning loan portfolios was holding value. Borrowers who had been unable to sell or refinance during the correction were finding more options as buyer activity returned. This meant loan resolutions were proceeding — not without difficulty, but without the crisis-level urgency of mid-2022.
The new origination environment was materially better than anything available in the previous three years. Loans originated in spring 2023 carried higher yields (reflecting the 4.50% rate environment), were secured by properties at corrected values (lower LTVs), and were made to borrowers who had survived the stress test of 2022. This vintage would likely outperform the 2020-2021 vintage significantly.
For PE investors, the stabilization opened a selective buying window. Companies available at lower valuations with more conservative financing structures represented attractive entry points for patient capital. Across Canadian alternative investments, the shift from defensive positioning to selective deployment was the defining trend of the spring.
What We're Watching
The BoC's June decision would be the next test of the pause. With inflation still above target and the economy showing resilience, the possibility of additional hikes couldn't be dismissed entirely.
Spring housing data through May and June would confirm whether the stabilization was durable or a temporary pause in the correction.
Private credit fundraising was beginning to pick up as the improved risk-adjusted return profile attracted new capital to the sector. Several Canadian managers who had paused fundraising during the turbulence of 2022 were returning to market with new offerings, positioning the 2023 vintage as one built on the lessons of the stress period.
The immigration-driven population growth Canada was experiencing — over one million new residents expected in 2023 — was also a constructive backdrop for housing-adjacent private credit. Structural demand for housing remained robust, which supported the long-term value of residential collateral even as cyclical factors continued to weigh on prices.
Closing
April brought the first sustained period of calm in Canadian private markets since late 2021. The storm wasn't over — inflation remained above target and rates were historically high — but the worst of the adjustment appeared to be behind. For alternative investors, the environment was transitioning from survival to opportunity.
For the full quarterly analysis, see Q2 2023: The Stubborn Pause.
Alts Insider provides educational content for Canadian accredited investors. This is not investment advice. Always consult qualified professionals before making investment decisions.