Navigating Low Yields: How Canadian Investors Can Access Institutional-Grade Private Credit

In a world where traditional fixed-income assets struggle to deliver meaningful returns, Canadian accredited investors face a pressing dilemma: how to secure steady income without overexposing portfolios to risk. Enter the NBI Apollo Private Credit Fund, a new vehicle designed to bridge this gap by offering exposure to senior secured loans and investment-grade private credit—typically reserved for institutional investors. For those willing to embrace a medium-term commitment, this fund could be a cornerstone of strategic diversification.

The Case for Private Credit in a Low-Yield World

Interest rates remain near historic lows, squeezing returns on government bonds and high-quality corporate debt. The Bank of Canada's key policy rate, for instance, has hovered around 5% since late 2022 (), but even AAA-rated bonds yield little more than inflation. Meanwhile, equity markets oscillate between volatility and stagnation. Enter private credit: a middle ground that combines the capital preservation of fixed income with the yield potential of riskier assets.

The NBI Apollo fund targets a net yield of 5–7%—a compelling spread above the 2–3% offered by Canadian government bonds. This edge stems from its focus on senior secured loans, which sit atop the capital structure of borrowers and are often overcollateralized. For context, senior loans historically outperform investment-grade bonds in rising rate environments, as their floating rates reset quarterly ().

The Power of Scale and Investment-Grade Discipline

Apollo Global Management, the fund's backbone, oversees $785 billion in assets and 16 specialized origination platforms. This scale allows it to source high-quality deals in large corporate direct lending and broadly syndicated loans—segments where smaller players often lack access. The fund's investment-grade focus is critical: Apollo's underwriting prioritizes borrowers with strong balance sheets, limiting default risk to historically low levels (under 2% in stable cycles).

The fund's structure, however, demands attention. It invests in a non-traded U.S. BDC (Business Development Company), Apollo Debt Solutions, which offers quarterly repurchase opportunities of 5% of outstanding shares at NAV. While this provides partial liquidity, investors must plan for a 12–18 month redemption timeline. The trade-off? Avoiding the illiquidity extremes of direct private lending while maintaining exposure to institutional-grade deals.

Mitigating Risks in an Uncertain Market

No strategy is risk-free, and the NBI Apollo fund is no exception. Private credit's performance hinges on macroeconomic stability. A recession could strain even investment-grade borrowers, while rising interest rates might pressure floating-rate loans. Additionally, the $2.5 trillion private credit market's rapid growth raises concerns about overvaluation in certain sectors.

Apollo's defense? A sector-agnostic, top-down approach that avoids overconcentration. The fund's portfolio is weighted toward large corporate issuers (which dominate its senior secured allocations), with middle-market lending playing a smaller, opportunistic role. This balance aims to insulate investors from sector-specific shocks while capitalizing on Apollo's deal-sourcing prowess.

Strategic Fit for Canadian Portfolios

For accredited investors seeking diversification beyond bonds and equities, this fund offers a compelling middle layer. Its yield profile aligns with core-plus fixed-income mandates, while its senior loan focus provides downside protection akin to high-quality corporate debt. Consider it a “sweet spot” for portfolios stuck between the Scylla of stagnant bonds and the Charybdis of volatile equities.

Final Considerations and Advice

• Suitability: Only for investors who can tolerate 12–18 months of illiquidity and moderate credit risk.
• Risk Management: Pair with short-term government bonds or cash reserves to offset the fund's lockup period.
• Due Diligence: Review Apollo's historical performance in stressed markets ().

In a landscape where “safe” investments are anything but rewarding, the NBI Apollo Private Credit Fund stands out as a disciplined alternative. For those willing to trade liquidity for yield, it's a pragmatic step toward building portfolios that endure—not just today, but in the next downturn.