Monday Market Minute | May 8, 2023

Ninepoint fund challenges persist as redemption pressures test private fund liquidity

What Moved

Ninepoint Partners continued to manage through a difficult period, with several of its alternative fund strategies facing elevated redemption requests. The firm's challenges reflected a broader industry pattern: open-ended funds holding less-liquid private market assets faced structural mismatches when investors sought exits simultaneously. Rising rates had given investors attractive alternatives in GICs and high-yield savings accounts, reducing the relative appeal of complexity.

Why It Matters

The Ninepoint situation underscored a fundamental lesson in private markets: liquidity terms must match the liquidity profile of the underlying assets. Funds that offered monthly or quarterly redemptions on assets requiring years to realize were structurally vulnerable to runs. For Canadian HNW investors, the takeaway was not to avoid alternative investments but to match expectations to fund structures — closed-end vehicles with defined terms, proper lock-ups, and transparent valuation practices offered a more honest alignment of interests.

Signal to Watch

Whether other Canadian alternative fund managers would face similar redemption pressures as the "GIC at 5%" competition continued to draw capital away from complex strategies.

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