Private capital may be the key to mitigating the volatility of public markets while achieving greater portfolio diversification
Investing in companies that are not publicly traded presents investors several key advantages. “In order to achieve greater multi-asset diversification, investors need to invest in more than just publicly traded securities,” says Bijal Patel, CFO and head of private capital at Nicola Wealth. “In fact, the number of listed companies on public exchanges has declined over the past two decades.”
Another advantage is that private company valuations are to a greater extent based on actual earnings versus outside factors that often influence public market valuations. And finally, private companies are less influenced by a shorter-term focus on quarterly earnings. Staying private often allows investment for long-term earnings generation and enhanced growth.
Historically, private markets were largely only accessible to institutional investors, such as pension funds, due to barriers such as high minimum investment thresholds, concentration of investments and lack of liquidity. But Nicola Wealth’s private capital funds offer a unique way for investors to participate in this hard to access market.
“We remove the barriers to entry, offering low thresholds to invest in individual pools,” Patel says. “We provide an evergreen structure, so investors get immediate diversification in all the existing investments within each fund, and we support liquidity needs if the clients’ asset allocations change in the future.”
Nicola Private Capital investment funds offer choices across a broad risk-return spectrum. “Our lowest risk offering is in our commercial mortgage fund, where clients can get exposure to a diversified source of cash flow generating loans secured by real estate,” Patel says. “Here, we focus on investments in multi-unit residential, industrial and office properties.”
Next, Infrastructure is where Nicola Wealth invests in companies and projects focused on renewables, transportation, utilities and commodities, providing investors with long-term attractive returns, low correlation to other asset classes, and inflation protection.
“Our Nicola Private Debt Fund focuses on lending to private middle-market companies through funds and direct lending,” Patel says. “This asset class provides access to a growing market, with historically strong risk-adjusted returns.”
Nicola Wealth also has two funds that focus on providing capital in exchange for equity to private companies.
“Our recently launched Nicola Venture Capital Fund participates in helping companies through the early growth stage,” Patel says. “Meanwhile, our Nicola Private Equity LP invests in more mature companies with positive cash flows, but still has ability for above market growth.”
“Part of the team’s strategy is pivoting to more direct deals as we grow,” he adds. “Historically, we invested in other manager’s funds, and now at over $2B in AUM, we have become large enough to internalize the sourcing and underwriting of our investments.”
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This investment is intended for tax residents of Canada who are accredited investors. Residency restrictions apply. Please read the relevant documentation for additional details and important disclosure information, including terms of redemption and limited liquidity. All investments contain risk and may gain or lose value. Please speak to your Nicola Wealth advisor for advice based on your unique circumstances. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities commissions.