Monday Market Minute | Dec 26, 2022

2022 in review — the year rates roared back, private credit thrived, and leverage was punished

What Moved

The year 2022 will be remembered as the most consequential for Canadian private markets since the global financial crisis. The BoC raised rates from 0.25% to 4.25% — 425 basis points in nine months. Inflation peaked at 8.1% before easing to 6.3%. Housing corrected 15%+ from peak. Bonds posted their worst year in modern history. Crypto lost over $1.4 trillion. And through it all, private credit delivered its best performance in a generation, vindicating the asset class's structural advantage in rising-rate environments.

Why It Matters

The dispersion of outcomes across alternative asset classes in 2022 was extraordinary. Private credit with floating-rate structures delivered 8-12%+ returns. Infrastructure held steady with mid-single-digit yields. PE faced headwinds from leverage costs and exit freezes. Real estate corrected sharply. Crypto collapsed entirely. The lesson for Canadian HNW investors was definitive: alternatives are not a monolith. Manager selection, structural design, and portfolio construction within alternatives determined whether 2022 was a banner year or a devastating one.

Signal to Watch

2023 outlook — with rates at 4.25% and a potential pause, the key question was whether the economy would achieve a soft landing (favoring continued private credit strength) or tip into recession (testing credit quality and PE resilience).

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