By Nivedita Balu
TORONTO (Reuters) – Bank of Nova Scotia and Sun Life Financial’s asset-management division are partnering to tap into the demand from wealthy Canadians looking to invest in private credit, the firms said on Tuesday.
As part of the agreement, Scotiabank’s high-net-worth clients will be able to tap into alternative investments in private real estate, credit and infrastructure through Sun Life’s asset-management division, SLC Management.
Sun Life will also invest C$100 million ($73.63 million) of seed capital for future funding opportunities.
The move comes as private credit becomes one of the fastest growing and most attractive private asset classes, forecast to grow to $2.3 trillion in assets globally by 2027, according to Preqin data.
At the same time, affluent Canadian investors are increasingly looking for alternative investments as they look to add new sources of yield and return.
“Once the domain of the most sophisticated institutional investors, private alternative investments have been increasingly sought after for their important role in enhancing portfolio diversification and risk-adjusted returns,” Scotiabank’s Global Wealth Management head Glen Gowland said.
More private capital providers and traditional banks are looking to offer credit to companies and consumers since the global financial crisis as heightened regulation and higher costs weigh on banks’ lending and services businesses.
The private credit market is less mature in Canada than in the U.S. and Europe but is slowly gaining attention. In a recent survey taken out by Canadian firm Ninepoint Partners, nearly two-thirds of financial advisors said they expect to increase their client or model portfolios’ exposure to private credit in the next 12 months.
Some Canadian banks are also looking for new avenues of growth and are doubling down on the wealth management business as some other segments face challenges in an uncertain environment.
Scotiabank Global Wealth Management is the third-largest business of its kind in Canada with C$631 billion of assets globally, while SLC Management manages $361 billion in assets.
($1 = 1.3582 Canadian dollars)
(Reporting by Nivedita Balu in Toronto; Editing by Marguerita Choy)