‘Psst! Want to buy some receivables?”
Well, now you can, through a fund for high-net-worth investors that makes factoring and bridge financing its business. Or you can buy a share of timberland (a hot topic at cocktail parties in recent months, wealth managers say), prime commercial buildings or farmland in the U.S. Midwest.
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Private investing is growing up in Canada. Far from the old notion of alternative strategies being a bit dicey – littered with the bleached bones of failed hedge funds, as it were – some recent offerings had even the biggest investors pushing to get in the door.
Last summer, Brookfield Asset Management flew right past its target of raising $750-million (U.S.) in a fund to buy timberland in the United States, Brazil and Australia. The company closed the Global Timberlands Fund at $1-billion. In October, Brookfield had even greater success with an infrastructure fund, the Brookfield Infrastructure Fund II for big investors, such as sovereign wealth funds, pension plans and insurance companies. It closed the fund at $7-billion, well beyond its initial target of $5-billion.
“We’re seeing a lot of interest in private assets,” says Sam Sivarajan, head of investments and sales at Manulife Private Wealth in Toronto – “commercial real estate, agricultural land, timberland, private mortgages.” The appeal, Mr. Sivarajan says, is that these assets are not correlated to the stock market or interest rates.
“They’re a pretty good buffer, especially in volatile markets,” he says. Long term, they’re a good hedge against inflation. The Manulife Canadian Real Estate Investment Fund gives high-net-worth investors a share in a portfolio of about 20 blue-chip commercial buildings across Canada.
“One of the advantages of buying private assets is that when the market sneezes (or worse), private assets hold their value because they are not traded on a daily basis,” Mr. Sivarajan says.
You don’t have to be a sovereign wealth fund to participate in alternative investments – so called because they provide an alternative to marketable securities such as stocks and bonds – but you do have to be wealthy, or what is called an accredited investor.
In Ontario, for example, an accredited investor is a person who alone or with a spouse has financial assets of more than $1-million or net assets of at least $5-million, or whose net income before taxes surpasses $200,000 alone or $300,000 with a spouse.
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