AIMA publishes handbook on Canada’s alternative investment landscape

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The Alternative Investment Management Association has published a new handbook on the Canadian alternative investment landscape.

Canada has a long history of excellence in alternatives,” says Belle Kaura, current chair of AIMA Canada and vice-president of legal and chief compliance officer at Third Eye Capital. “The stage is set for the Canadian industry to reach new heights with world-class talent ready to embrace the future and a thriving new liquid alternatives market.”

The handbook, which showcases industry thought leadership, is designed to promote the advancement of alternatives by creating greater awareness and understanding of the Canadian market both domestically and around the globe, she adds.

Read: Pension plans turning to alternatives for steady returns amid ultra-low bond yields

The last time AIMA published this handbook was in 2014. Notably, the 2019 version includes a new section on private credit.

Private credit can provide stable returns with modest leverage, notes Kaura, and distressed debt can act as a return-enhancer in downturn conditions. “And the appealing risk-return profile of private credit has led to its emergence as one of the most rapidly growing institutional investment classes, with more than of half of existing investors worldwide expected to increase allocations.”

The report also outlines results from an AIMA survey of Canadian investors, with respondents including wealth and investment advisors (37 per cent), family offices (17 per cent) and pension funds (seven per cent).

Within alternatives, it found private equity was the most popular asset class, at 73 per cent, followed by real assets (70 per cent) and hedge funds and infrastructure (67 per cent each). The most popular hedge funds strategies, according to further analysis, are multi-strategy (60 per cent) equity long/short (57 per cent) and credit long/short (43 per cent).

Also, while the AIMA report highlights a general trend towards considering environmental, social and governance factors, only 20 per cent of the survey respondents said ESG is a very important factor in their investments, with almost a quarter saying it isn’t important.

Read: How ESG factors play into alternative investments

The handbook is arriving at a good time, given the late stages of the economic cycle, says Kaura. “As we’re heading into a more challenging environment with global quantitative tightening, trade tensions and escalating macro-economic concerns, investors need to prepare for the volatility of equity markets and declining fixed income returns, as they can no longer rely on traditional 60/40 public market models. So they are looking for ways to protect against downside risk, while generating strong returns and history has proven that, unlike public markets, alternatives have delivered returns in positive and negative economic conditions.”

This sentiment comes through in the AIMA survey, with 70 per cent of respondents noting they expect their allocation to alternatives to increase by up to five per cent over the next 12 months, according to the handbook.

This article originally appeared on Benefits Canada‘s companion site, the Canadian Investment Review.

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