What Moved
March 2020 was one of the most extraordinary months in financial market history. The Bank of Canada cut rates three times in 23 days: 50 basis points on March 4 (to 1.25%), another 50 on March 13 (to 0.75%), and a final 50 on March 27 (to 0.25%) — the effective lower bound (BoC, Mar 2020). The US Fed made similar emergency cuts, reaching 0.00-0.25% by March 15.
The TSX plunged 37% from its February peak to its March 23 low. On March 12 alone, the index fell 12% — its largest single-day decline since 1940. Oil prices collapsed as Saudi Arabia and Russia entered a price war, compounding the COVID-driven selloff (TSX data, Mar 2020).
Every asset class correlated. Equities, bonds, gold, real estate — all sold off simultaneously as investors scrambled for cash. The market crash tested alternatives of every kind, as the diversification benefits that normally cushion portfolios evaporated.
In private markets, the stress was building but not yet visible in returns. MIC managers were assessing their loan books. PE fund managers were focused on portfolio company survival. Real estate development timelines were being extended.
What It Means
March 2020 tested the core thesis of alternative investing — and the results were mixed.
The good news: private market investors didn't experience the 37% drawdown that public equity holders suffered. The illiquidity of private investments shielded portfolios from forced selling and mark-to-market panic. MIC investors continued to receive distributions in March, even as public markets imploded.
The concerning news: private markets weren't immune — they were just slower to reflect the damage. Borrower stress, project delays, and tenant difficulties were all building beneath the surface. The question wasn't whether private markets would be affected, but when and how severely.
The government response was swift and massive. The Canada Emergency Response Benefit (CERB), wage subsidies (CEWS), and emergency business lending programs aimed to prevent a temporary health crisis from becoming a permanent economic collapse. For private market investors, these programs were a crucial backstop — they supported borrowers, tenants, and businesses that would otherwise have defaulted.
What We're Watching
The immediate question was whether the government stimulus would be sufficient to bridge the economy through the shutdown period. If the recession was brief, private credit could weather the storm. If it extended, defaults would rise and fund structures would be tested.
Redemption requests were the immediate concern for open-ended private funds. Investors spooked by the crisis might try to exit — and if enough investors redeemed simultaneously, fund managers could face the choice between fire-selling assets or gating withdrawals.
The health trajectory would determine everything. Until the virus was contained, economic recovery was theoretical.
Closing
March 2020 was a stress test for every investment thesis and every investor's risk tolerance. In the weeks ahead, private markets would reveal which structures were resilient and which were fragile. The answers would reshape Canadian alternative investments for years to come.
For the full quarterly analysis, see Q1 2020: When Everything Correlated.
Alts Insider provides educational content for Canadian accredited investors. This is not investment advice. Always consult qualified professionals before making investment decisions.