Opening
The Bank of Canada ended 2024 the way few had predicted at the start of the year: with two consecutive 50 basis point cuts that brought the overnight rate from 4.25% to 3.25% in the space of seven weeks. The acceleration from measured 25 basis point reductions to aggressive 50 basis point moves signalled that the Bank had concluded restrictive policy was no longer appropriate for an economy showing clear signs of softening. By December 11, the overnight rate had fallen 175 basis points from its peak — a pace of easing that rivalled the urgency of previous downturns, even as this cycle was driven by normalization rather than crisis. For Canadian private markets, Q4 delivered both the capstone of a year-long story of rate cuts and private credit recovery and a landmark regulatory moment: the Ontario Securities Commission's fraud ruling against Bridging Finance executives on October 29.
The Macro Picture
The October 23 rate decision marked a decisive shift in the Bank of Canada's approach. After three consecutive 25 basis point cuts, the Governing Council opted for a 50 basis point reduction, bringing the overnight rate to 3.75% (BoC, Oct 23, 2024). The decision reflected the Bank's assessment that inflation had returned sustainably to near the 2% target — Canadian CPI was running at approximately 2.0% by year-end — while economic growth remained below potential and the labour market continued to soften (StatsCan, Q4 2024).
The December 11 decision repeated the formula: another 50 basis point cut to 3.25%, the lowest level since mid-2022 (BoC, Dec 11, 2024). In total, the Bank of Canada had delivered 175 basis points of easing across five decisions since June — and 200 basis points from the 5.25% peak reached briefly in the overnight market during the tightening cycle's apex. Governor Macklem's language in December emphasized that the Bank was approaching a "neutral" rate range but would continue to evaluate the pace of further easing based on incoming data.
The divergence with US monetary policy narrowed somewhat as the Federal Reserve delivered additional cuts following its September move, but the Bank of Canada's faster pace meant that the Canada-US rate gap remained notable. The Canadian dollar came under pressure, trading weaker through Q4, which had mixed implications for private markets: negative for cross-border cost structures but potentially supportive of export-oriented businesses and Canadian assets priced in US dollars.
The housing market showed its strongest response to rate cuts in Q4. Mortgage rates fell substantially from their 2023 peaks, and CREA reported improving activity in major markets. The psychological threshold of rates moving definitively lower was bringing both buyers and sellers back to the market, though price recovery was uneven across regions (CREA, Q4 2024).
On October 29, the Ontario Securities Commission released its ruling in the Bridging Finance matter, finding that former executives had committed fraud in the management of the firm's lending funds (OSC, Oct 29, 2024). The ruling, which came after years of investigation following the firm's receivership in 2021, provided formal closure to one of the most significant failures in Canadian private credit history. The Bridging case had cast a long shadow over the private lending industry, and the fraud finding — while concerning in its specifics — drew a clear line: this was executive misconduct, not a systemic failure of the private credit model.
Private Markets Impact
Q4 2024 combined aggressive rate relief with high deal volumes and a regulatory milestone that, paradoxically, strengthened confidence in the Canadian private markets ecosystem.
Private Credit: Volumes Up, Accountability Established
The Bridging Finance ruling landed in a private credit market that was in the midst of its strongest quarter of issuance in two years. The juxtaposition was instructive: the market had matured past the Bridging episode, and the OSC's finding of fraud — rather than structural deficiency — reinforced that the problems at Bridging were about governance failures at a specific firm, not inherent risks in private lending.
Private credit origination volumes in Q4 were robust, driven by both new lending and refinancing activity as borrowers locked in substantially lower rates. The all-in yield on new private credit originations had compressed from the 10-12% range at peak rates to roughly 8-10%, reflecting both lower base rates and tighter credit spreads. While this represented meaningful compression from the peak-rate vintages, the premium over public fixed income remained substantial — investment-grade corporate bonds were yielding in the 4-5% range, leaving a private credit spread of 300-500 basis points.
Institutional allocators maintained strong interest in private credit through year-end. The asset class had demonstrated through the full cycle — tightening, peak, and easing — that it could deliver stable income with manageable volatility. Pension funds and family offices that had increased allocations during the tightening phase were largely holding those positions, viewing the yield compression as a natural feature of the cycle rather than a reason to reduce exposure.
Private Equity: The Recovery Year in Full
By the close of Q4, the scale of the PE recovery was unmistakable. The CVCA's full-year figures showed Canadian PE deal value up approximately 258% compared to the first half of 2023, a rebound that exceeded most market participants' expectations at the start of the year (CVCA, 2024). The acceleration in Q4 was particularly notable, as sponsors rushed to close transactions before year-end and took advantage of the improved financing environment.
The easing cycle had worked through PE markets in a textbook fashion: lower rates reduced the cost of leverage, supporting higher enterprise valuations and making leveraged buyouts more economical. Sellers and buyers found common ground on pricing as the rate trajectory provided confidence in forward earnings and exit multiples. Sectors including technology, healthcare services, and financial services saw the strongest deal activity.
Exit markets improved in Q4, with several notable Canadian PE-backed businesses completing sales or secondary transactions. The improved exit environment was critical for fund performance, as sponsors who had held portfolio companies through the downturn could realize gains at improved valuations. Distributions to limited partners, which had been depressed through 2023, showed meaningful recovery.
Real Estate: The Turning Point
Q4 marked the clearest turning point for Canadian commercial real estate since the tightening cycle began. With the overnight rate at 3.25% and mortgage rates substantially lower than their peaks, both the residential and commercial segments showed renewed activity. Cap rate compression — the reversal of the expansion that had characterized 2022-2023 — began in earnest in prime assets, particularly multi-residential and industrial.
Institutional real estate investors, including pension funds and major REITs, shifted from defensive to acquisitive postures. Development pipelines, which had been paused in many markets, showed early signs of reactivation. The combination of pent-up demand, lower financing costs, and limited new supply — a consequence of projects deferred during the tightening — created a constructive setup for real estate heading into 2025.
What We're Watching
The final quarter of 2024 brought the easing cycle to a pace that underscored the Bank of Canada's commitment to normalizing monetary policy. For Canadian accredited investors, several themes from Q4 deserved consideration.
The full-year picture was one of substantial recovery. Across private asset classes, 2024 delivered a broad-based improvement that rewarded investors who maintained or increased their alternatives allocations through the difficult period of 2022-2023. PE deal values surged. Private credit demonstrated stability and income generation. Real estate began to turn. The diversified alternatives portfolio was the primary beneficiary of the easing cycle.
The Bridging resolution was a governance lesson, not an asset class indictment. The OSC's fraud ruling provided accountability and closure. For investors evaluating private credit, the lesson was about the importance of due diligence, independent governance, and regulatory oversight — not about avoiding the asset class. The Canadian private credit market had grown substantially since Bridging's collapse, with improved regulatory scrutiny and institutional governance standards.
Rate-sensitive strategies could continue to benefit, but the easy gains were narrowing. With the overnight rate at 3.25% and expectations for further cuts in 2025, the most dramatic phase of the easing cycle was potentially behind. Private credit yields, PE entry multiples, and real estate cap rates had all adjusted meaningfully. Investors deploying capital in Q4 were entering at more normalized conditions than those who deployed at the cycle's peak or during the early cuts.
The 2025 outlook favoured continued normalization. The Bank of Canada's aggressive cutting pace in Q4 suggested the overnight rate could approach 2.50-3.00% in the first half of 2025, depending on economic conditions. For private markets, this implied continued support for valuations and deal activity, but at a more moderate pace of improvement. The recovery phase was maturing into a normalization phase.
Closing
Q4 2024 brought the year to a close with an exclamation point. The Bank of Canada's back-to-back 50 basis point cuts were the most aggressive easing in the post-pandemic cycle, bringing the overnight rate to 3.25% and firmly into territory that most economists considered less restrictive. Private markets responded with conviction: PE deal activity surged to levels that erased the drought of 2023, private credit volumes reached new highs, and real estate turned the corner. The Bridging Finance ruling provided necessary closure to a chapter that had tested investor confidence in Canadian private lending. Taken together, 2024 was the recovery year — the year the easing cycle arrived, accelerated, and reshaped the landscape for Canadian alternative investments. The foundation for 2025 had been laid.
SOURCES
- Bank of Canada, Interest Rate Decisions, October 23 and December 11, 2024
- Statistics Canada, Consumer Price Index, Q4 2024
- Canadian Real Estate Association (CREA), National Resale Housing Activity, Q4 2024
- Canadian Venture Capital & Private Equity Association (CVCA), Annual Market Overview, 2024
- Ontario Securities Commission (OSC), Bridging Finance Ruling, October 29, 2024
- Government of Canada Bond Yields, Bank of Canada Financial Statistics
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