Monday Market Minute | Jan 04, 2021

Canadian private markets enter 2021 with full risk-on momentum

What Moved

Canadian private markets opened the year with palpable optimism. The Bank of Canada held its overnight rate at 0.25%, providing a continued tailwind for leveraged deal structures. Private equity deal pipelines, rebuilt after the COVID shock, entered 2021 at their deepest levels in a decade. Institutional allocators signaled increased commitments to alternatives, with pension funds and family offices both expanding their private market mandates.

Why It Matters

For private market investors, the setup was almost unprecedented: ultra-low rates, recovering portfolios, and a vaccine-driven reopening thesis. Private credit portfolios that survived 2020 intact were now positioned for strong vintage-year performance. The risk, already visible to careful observers, was that abundant capital and compressed timelines would erode underwriting discipline across the sector.

Signal to Watch

The pace of BoC bond purchases under QE remained elevated. Any signal of tapering would shift the cost-of-capital equation that was fuelling the private markets surge.

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