Opening
In February 2022, Ninepoint Partners—a well-established Canadian alternative asset manager with a strong institutional reputation—froze redemptions on four of its funds, affecting approximately $2.9 billion in assets. This wasn't a small regional manager or an unknown boutique. Ninepoint had built credibility over years of solid alternative investing and had earned the trust of many Canadian accredited investors. The redemption freeze was significant not because Ninepoint failed, but because it revealed something structural about Canadian private credit: the gap between what investors thought they owned (quarterly liquidity) and what they actually owned (illiquid loan portfolios that could be locked down when stress emerged).
What Happened
The timing of Ninepoint's freeze was instructive. It came in February 2022, just as interest rates were about to begin rising sharply. The Bank of Canada had signaled that the emergency low-rate era—which had persisted since March 2020—was ending. Markets were already beginning to reckon with the implications: cheap debt was becoming more expensive, and borrowers who had built their business models on low rates would face immediate pressure.
Ninepoint's four affected funds were primarily mortgage investment companies (MICs) and private credit vehicles. MICs had become a significant part of Canadian alternatives—they offered decent yield (typically 5-8%) with what appeared to be quarterly redemption flexibility. For investors accustomed to the near-zero rates of 2020-2021, MICs seemed like a reasonable alternative to GICs or bonds. Ninepoint's freeze changed that calculus for thousands of investors. (Canadian Securities Administrators, 2022)
The firm initially froze redemptions, citing market conditions and the need to assess fund valuations carefully. The freeze lasted several months. By June 2022, Ninepoint proposed a formal restructuring of the funds, acknowledging that the portfolio composition needed to be recalibrated for a higher-rate environment. In September 2022, unitholders approved the restructuring. The process meant that investors who had expected quarterly access to their capital experienced a lockup lasting many months.
What made this situation particularly notable was that Ninepoint wasn't alone. In April 2020, Romspen Investment Corporation—another significant Canadian mortgage lender—had frozen redemptions on its mortgage investment fund. Two major freezes in less than two years established a pattern: Canadian private credit had been structured and marketed with assumptions about liquidity and redemption access that proved conditional when stressed. (Canadian Mortgage Investment Funds Association, 2022)
Why It Matters
The Ninepoint freeze illustrated three interconnected structural issues in Canadian alternatives that investors needed to reckon with.
First: "Quarterly liquidity" is not the same as liquidity. This cannot be overstated. Mortgage investment companies and other private credit vehicles marketed themselves as offering quarterly redemptions—making them seem accessible and different from truly illiquid alternatives like private equity. But those quarterly redemption windows came with implicit gates. When managers needed to preserve capital, reassess valuations, or manage liquidity risk, the quarterly redemption promise became conditional. The reality is that you own illiquid assets, and you should price and plan accordingly. The quarterly feature is a distribution convenience, not a guarantee of access.
Second: Private credit was priced for a low-rate world. The entire Canadian mortgage and private credit space had expanded dramatically during the 2020-2021 period when rates were at emergency levels. Borrowers took on mortgages and loans at rates that reflected a zero-rate environment. Many MIC portfolios were full of loans extended at rates that were profitable for the lender but barely viable for the borrower once rates began to rise. As the Bank of Canada moved toward hiking—which happened on March 2, 2022, less than three weeks after Ninepoint's freeze—the economics of those portfolios shifted immediately. Borrowers faced higher refinancing costs, and lenders faced the prospect of losses if borrowers couldn't absorb the shock. (Bank of Canada, March 2022)
Third: The system hadn't been stress-tested at scale. Romspen's 2020 freeze came during the initial pandemic panic, a moment of severe market dislocation. The 2022 Ninepoint freeze came during conditions that were bad but not emergency conditions. That suggested the Canadian private credit system could freeze at relatively low levels of stress. Once one major fund locked redemptions, others faced pressure from investors seeking to exit—creating the potential for cascading redemption gates across the entire sector.
This isn't an argument against mortgage investment or private lending. It's an argument for understanding what the asset actually is. A MIC isn't a liquid bond fund. It's an illiquid loan portfolio in liquid packaging, and the packaging can be taken away. (Canadian Pension Investment Association, 2022)
What to Do
For Canadian accredited investors, the Ninepoint situation offered several practical considerations:
Reassess your assumptions about liquidity. If you own private credit or MIC funds, test your assumptions: What happens if you need the capital in 12 months? What's the realistic timeline? Many investors had assumed quarterly redemptions meant they could access capital "when needed." The freeze revealed that wasn't true. Model scenarios where redemptions are locked for 6-12 months and ask whether that changes your allocation decisions.
Understand portfolio composition. MICs and private credit funds don't all contain the same things. Some focus on prime mortgages backed by strong real estate. Others lend to construction projects or to borrowers with marginal credit. Ask your manager: What's the loan-to-value profile? What's the borrower quality distribution? How much leverage is embedded in the portfolio? In the Ninepoint situation, the portfolio included loans to borrowers who were highly sensitive to rising rates.
Price illiquidity explicitly. If you own an illiquid investment, you should demand a higher return to compensate. During 2021, many investors accepted the same returns (5-7%) for ostensibly "quarterly-redeemable" private credit as they might have demanded from truly illiquid private equity. That was a pricing error. Higher illiquidity should demand higher expected returns.
Watch rising-rate environments carefully. The Ninepoint freeze came at the inflection point when rates were about to accelerate upward. If you own mortgage-heavy or floating-rate private credit exposure, rising-rate environments are when those bets become most dangerous. The yield you received during falling-rate years is being tested by the fundamentals during rising-rate years.
Consider duration mismatch in your portfolio. If you have illiquid holdings, make sure your liquid holdings are truly liquid and accessible. Don't assume you can exit alternatives to meet liquidity needs in a stress scenario.
Closing
The Ninepoint redemption freeze was resolved without investor losses, and the restructuring ultimately positioned the funds for a higher-rate environment. But the experience itself—the months of lockup, the uncertainty about valuations, the experience of "quarterly" redemptions becoming unavailable—was the real message. Canadian alternatives investors learned, in real time, what happens when the conditions that underpin the strategy change sharply. It was an expensive education, but it was also a valuable one.
Alts Insider provides educational content for Canadian accredited investors. This is not investment advice. Always consult qualified professionals before making investment decisions.