Wealthsimple launching private credit fund with Sagard

Wealthsimple is launching a private credit fund for retail investors, albeit one with restrictions on who qualifies for access.

The online advice and trading platform is launching Wealthsimple Private Credit with alternative asset manager Sagard. Sagard is owned by Power Corp., which also owns a large stake in Wealthsimple.

The private credit fund is targeting a 9% annualized yield with monthly payouts. The firm is positioning it as an opportunity for retail investors to access an asset class typically reserved for institutional investors. Wealthsimple launched a venture capital fund last year.

The private credit fund will lend to companies selected by Sagard’s private credit team, which is led by Adam Vigna, former global head of principal credit investments with the Canada Pension Plan.

In addition to standard advisory fees, the private credit fund has a 1.25% advisory fee. If the fund earns a 5% return or greater, a 15% performance fee is applied.

Assets in private credit and other alternative investments grew tremendously during the low-rate environment of the past decade as investors sought yield outside of public securities. The investments also come with additional risks, including illiquidity.

Wealthsimple said it plans to offer investors quarterly withdrawals beginning six months after the fund’s launch. However, withdrawals are limited to 5% of the fund and “the manager has discretion to suspend redemptions,” the firm said.

Private investment funds often have redemption limits, a practice commonly referred to as “gating.” Last year, Blackstone Inc. limited withdrawals from its flagship US$69-billion private REIT after redemption requests hit the fund’s pre-set limits, and private mortgage lender Romspen froze redemptions citing economic conditions and “unusually elevated investor demands for liquidity.”

The private credit fund is only available to Wealthsimple clients as part of its managed portfolios, and the firm built in additional restrictions.

Only clients with at least $100,000 in deposits with Wealthsimple will have access to the fund, and there’s a $10,000 minimum investment. Investment in the fund also can’t exceed 20% of a client’s portfolio.

Interested investors must take a short suitability survey either through the Wealthsimple app or with a portfolio manager.

“We ask a series of questions to ensure that the investor has a time horizon, investment objective, risk tolerance and liquidity profile that are suitable for private credit,” Wealthsimple said in an email. “We then work with clients to determine a suitable allocation based on their entire financial picture.”

Mark Burgess

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Mark was the managing editor of Advisor.ca from 2017 to 2024.