What Moved
The Bank of Canada held at 0.25% on October 27 but materially accelerated its rate-hike timeline, signaling that increases could come as early as April 2022 — months ahead of the previous "second half of 2022" guidance. The Bank also upgraded its inflation forecast and acknowledged that supply chain disruptions were lasting longer than expected (BoC, Oct 27, 2021).
In a notable move, the Ontario Teachers' Pension Plan invested US$75 million in FTX, the cryptocurrency exchange, as part of a US$420 million Series B round. OTPP cited the investment as part of its strategy to gain exposure to the digital asset ecosystem. It was one of the most prominent institutional allocations to crypto in Canadian history (OTPP, Oct 2021).
Canadian private equity and venture capital deal activity was exceptional. Q3 and Q4 deal flow was among the strongest in years, with technology, healthcare, and financial services leading transaction volumes. Fundraising was equally robust, with several Canadian PE managers raising oversubscribed funds (CVCA, Q4 2021).
Housing prices continued to climb, with the national benchmark up approximately 25% year-over-year.
What It Means
OTPP's FTX investment represented a broader trend: institutional investors extending their alternatives allocations into newer, less traditional categories. In October 2021, FTX was one of the world's largest cryptocurrency exchanges, and institutional interest in digital assets was at its peak. The investment was viewed as a bold but calculated institutional bet on the future of digital finance.
For Canadian accredited investors, the institutional move into crypto raised questions about how digital assets fit — if at all — in an alternatives portfolio. The case was speculative: high potential returns, high volatility, limited track record, and novel risks. The due diligence frameworks developed for traditional private credit or PE didn't directly apply to crypto exchanges.
The BoC's accelerated timeline was the more immediately relevant signal. Rate hikes in April 2022 meant that the emergency-rate era had roughly five months left. Every rate-sensitive investment — MIC portfolios, leveraged PE deals, real estate development — needed to be evaluated against a higher-rate scenario.
PE was making the most of the favourable conditions. With strong public markets supporting exit valuations, low borrowing costs facilitating leveraged transactions, and a robust economy powering portfolio company performance, the environment was ideal for deployment and realization alike.
What We're Watching
The OTPP-FTX investment would be one to track. Institutional crypto allocations were new territory, and the performance of these investments would inform future allocation decisions across the pension and alternative investment landscape.
November inflation data would provide another test of the BoC's increasingly hawkish stance. If CPI continued to rise, markets could begin pricing in more aggressive tightening.
Year-end housing data would set the stage for 2022. The BoC's rate-hike signal could begin to cool demand before any actual increase — expectations can move markets as effectively as actions.
Closing
October 2021 was a peak moment for the alternatives boom: PE surging, housing climbing, crypto attracting institutional capital, and rates still at zero. The BoC's accelerated hike timeline was a signal that the peak was approaching. For investors across the Canadian alternative investments landscape, the question was shifting from "how do I participate in the boom?" to "how do I position for what comes after?"
For the full quarterly analysis, see Q4 2021: Peak Everything.
Alts Insider provides educational content for Canadian accredited investors. This is not investment advice. Always consult qualified professionals before making investment decisions.