What Moved
The Bank of Canada cut its overnight rate by 50 basis points to 3.25% on December 11, closing the 2024 year in review with 200 basis points of cumulative easing since the June pivot. The rate was now at its lowest level since September 2022. The Bank signaled that further gradual reductions were likely in 2025 as it aimed for a neutral policy setting (BoC, Dec 11, 2024).
Canadian CPI was stable near the 2% target, confirming that the inflation fight was effectively over. The combination of 475bp of tightening in 2022-2023 and subsequent easing had returned the economy to a more balanced state (StatsCan, Dec 2024).
Housing ended 2024 with positive momentum. National sales and prices showed year-over-year improvement, with the recovery gaining traction across most markets. The market had stabilized at sustainable levels — well below 2022 peaks but recovering from the correction lows.
Canadian PE deal activity for 2024 was dramatically higher than 2023, with deal value up approximately 258% in H1 alone. The full-year tally reflected one of the strongest recoveries in Canadian PE history (CVCA, 2024 Annual).
What It Means
2024 was the year of recovery for Canadian private markets — and the numbers confirmed it. After the stress of 2022 and the patience of 2023, the easing cycle delivered tangible improvement across every alternative asset class.
For private credit, the year's trajectory was constructive from start to finish. Borrower conditions improved steadily as rates declined. Portfolio metrics recovered. Distributions stabilized. And the yield advantage over traditional fixed income, while narrowing from peak levels, remained meaningful at 3.25% base rates.
The 200bp of easing meant that a borrower who faced a 5.00% base rate in July 2023 was now at 3.25% — a dramatic reduction in debt service costs. This translated directly into improved loan performance across MIC portfolios and reduced the probability of default in private credit holdings.
For PE, the recovery was even more striking. The deal surge, conservative deal structures, and improving exit conditions positioned the 2024 vintage as potentially one of the strongest in years. Investors in Canadian PE funds were seeing the benefits of the discipline maintained during the downturn.
The Bridging fraud conviction in October provided a capstone to the regulatory cleanup. With the case resolved (pending sentencing), the private credit sector could fully move forward with stronger governance and clearer standards.
What We're Watching
The 2025 rate outlook: markets expected the BoC to continue cutting toward a neutral rate of approximately 2.50-3.00%. The pace would depend on economic data.
Housing in 2025 would be shaped by the continued easing cycle. A spring recovery could be substantial given the pent-up demand and improved affordability.
Whether the lessons of 2022-2023 — conservative underwriting, manager transparency, liquidity management — would persist as conditions improved. The true test of institutional learning is whether it endures in good times. The regulatory environment heading into 2025 was also worth monitoring, as provincial securities commissions continued to refine disclosure requirements for exempt market products in the wake of the Bridging and Fortress cases.
Closing
2024 closed the chapter that 2022 opened. From the first hike in March 2022 to the December 2024 cut to 3.25%, Canadian private markets navigated the most consequential monetary policy cycle in a generation. The sector emerged leaner, more disciplined, and better positioned. For those engaged with Canadian alternative investments, the year delivered on the promise that patience through the cycle would be rewarded.
For the full quarterly analysis, see Q4 2024: The Easing Accelerates.
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