Bank of Nova Scotia's money management arm is creating a private assets unit and will launch its first private debt fund by year-end.
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Scotia Global Asset Management will partner with international debt managers to build the fund, which will be focused on mid-market companies in the U.S. and Canada, Neal Kerr, the head of Scotia GAM, said in an interview in Toronto. The idea is to capture some 200 to 300 basis points of premium that these riskier and illiquid assets would pay when compared to publicly traded fixed income.
Kerr : We d be happy that these huge volumes of dollars had increased over time, Kerr said.
Scotia GAM had C $300 billion and $243 billion in assets under management at the end of July 2021. Currently, most of its investments are in private markets, with public assets accounting for less than 1% of the total, Kerr said.
It plans to build a suite of products that include real estate and private equity. What we do next will really depend on the needs of our primary investor population, but real estate is an obvious opportunity, Kerr said.
Private debt markets are becoming more popular as investors hunt for higher yields. Quebec's Private Pension Plan said last month that it wants to expand further into private lending amid attractive returns and manageable risk. Private credit markets are less liquid than publicly traded stock and bond markets but typically offer higher returns as a result.
Caisse Chief's higher priority is on private debt as buyers as buyers multiplied.
Last month one of Scotia GAM's subsidiaries, HarbourVest Partners LP, joined Jarislowsky Fraser Ltd. to gain access to private investors in Boston.
Scotia GAM had its very small exposure to China, which was mainly in tech-oriented businesses, Kerr said. While acknowledging the headwinds facing China's second largest economy - including the crisis at China Evergrande Group, the government crackdown on Big Tech and the ongoing energy crisis - Kerr said value and opportunities could emerge in China. Supply constraints and the potential for rapid hike in interest rates globally are his major concerns.
Chair of Scotia GAM also said :
None Asset Management plans to launch new fixed income products early next year in order to facilitate entry into this business.
None Scotia GAM has 50% of assets invested in Canada, 30% in the U.S. 20% in international markets.
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