The asset-management divisions of Bank of Nova Scotia (BNS.TO) and Sun Life Financial (SLF.TO) are collaborating to meet the demand for private borrowing from wealthy Canadians, the companies announced on Tuesday.
Scotiabank’s high-net-worth customers will be able to access alternative investments in private real estate, credit, and infrastructure through Sun Life’s asset-management business, SLC Management, as part of the deal.
Sun Life will also put up $100 million in seed cash for future fundraising possibilities.
According to Preqin statistics, private credit is one of the fastest-growing and most appealing private asset classes, with assets expected to reach $2.3 trillion by 2027.
At the same time, as they seek new sources of yield and return, affluent Canadian investors are increasingly seeking alternative assets.
Since the global financial crisis, more private capital providers and conventional banks have sought to provide credit to businesses and individuals, while more regulation and greater costs have weighed on banks’ lending and services operations.
The private lending market in Canada is less developed than in the United States and Europe, but it is gaining traction. According to a recent poll conducted by Canadian business Ninepoint Partners, over two-thirds of financial advisers anticipate expanding the exposure of their client or model portfolios to private credit in the next 12 months.
Some Canadian banks are also seeking new development opportunities and are increasing their focus on the wealth management market as other areas confront problems in an uncertain climate.
With C$631 billion in assets internationally, Scotiabank Global Wealth Management is the third-largest company of its sort in Canada, whereas SLC Management oversees $361 billion.
(1 US dollar = 1.3582 Canadian dollars)