Asset manager Ninepoint Partners LP has suspended redemptions on four of its private credit funds, citing a spike in payout requests related to the collapse of Bridging Finance Inc. and the resulting tension in private debt markets.
The affected funds account for $2.9-billion of Toronto-based Ninepoint’s $8-billion in total assets under management, according to public fund disclosures. This week, Ninepoint said the funds’ assets amount to $2.1-billion of the $8.4-billion it manages in total.
The four funds are part of Ninepoint’s higher-risk alternative investment options, and such funds have exploded in popularity among retail investors eager for greater returns in an era of ultralow interest rates.
The largest of those funds, the Ninepoint-TEC Private Credit Fund, manages $1.4-billion and is marketed as a lender to public and private companies unable to access traditional bank financing. The fund is co-managed by Third Eye Capital Management Inc., another Toronto-based private credit specialist.
The Ninepoint-TEC fund initially postponed redemptions in early February. Ninepoint has attributed the move to heightened investor anxieties related to Bridging Finance’s receivership.
Bridging, which managed more than $2-billion and also was marketed to retail investors as a specialist in lending to riskier borrowers, was placed under the control of PricewaterhouseCoopers LLP in 2021 at the request of the Ontario Securities Commission. OSC investigators discovered several problematic loans and alleged Bridging executives had engaged in impropriety. In mid-February, PwC estimated investors will lose 58 per cent to 66 per cent of their money, or $1.3-billion in total at the midpoint of this range, after it winds down the troubled loan portfolio.
No impropriety has been alleged on the part of Ninepoint, and it is not subject to the OSC probe. In a statement to investors sent on Monday and obtained by The Globe and Mail, the money manager said tensions in the investment community remain high from the fallout of Bridging Finance, leading to a sharp increase in redemption requests.
Ninepoint is now going further to suspend redemption requests altogether – not just for the Ninepoint-TEC fund, but also for three other funds: the Alternative Income Fund, the Canadian Senior Debt Fund and the Ninepoint-Monroe U.S. Private Debt Fund.
“We regret having to take this action, but do so for the good of all unit holders,” Ninepoint wrote to investors.
John Wilson, Ninepoint’s co-chief executive officer, said in an e-mailed statement to The Globe: “Ninepoint has determined that it is in the best interest of all unit-holders to suspend redemptions temporarily in four of our private credit funds due to tensions in the marketplace and the illiquid nature of the asset class.”
The company has cancelled all redemption requests from the Ninepoint-TEC fund, as well as the Alternative Income Fund, that it received on, or after, Feb. 1. The statement to investors said there is “no determined time-frame” for settlement of those cancelled requests.
The statement also does not offer an expiry date for the postponement of redemptions from those two funds. In an e-mail, Ninepoint said it has the right to suspend redemptions indefinitely if market conditions make it impractical to sell the assets of the fund.
The postponement of redemptions for the other two funds – the Canadian Senior Debt Fund, which manages $340-million, and the Ninepoint-Monroe U.S. Private Debt Fund, which manages C$418-million, according to public fund disclosures – is less severe. Ninepoint is instituting a 90-day pause on redemptions for those two funds, and requests that were received in February will be fulfilled, the note states.
Ninepoint did not explicitly lay out in the note why it was pausing redemptions in those two particular funds, but said: “We note that these funds have not had noticeable increases in redemption requests this month.”
Ninepoint was a driving force behind the push to give Canadian retail investors the opportunity to invest in private credit, and in marketing materials has said it offered the first such fund in Canada. In exchange for lending to higher-risk corporate borrowers, investors received outsized monthly payouts that amounted to around 8 per cent annually.
Although Ninepoint is not a target of the continuing regulatory probe into Bridging, it has a tumultuous history with the troubled lender. The two companies co-managed Bridging’s Income Fund until 2018, when their relationship disintegrated. That year, Ninepoint threatened to sue Bridging after Mr. Wilson questioned the private lender’s management team about an unusual transaction involving the fund’s capital.
After the dispute, Bridging bought Ninepoint’s stake in the management contract of the fund for $45-million.
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Greg McArthur
Tim Kiladze