Canada’s Financial Frontier: How Hedge Funds Shape Private Markets

Canada’s financial landscape is evolving at an unprecedented pace, with hedge funds and large-scale infrastructure projects at the forefront of this transformation. As private markets expand, financial innovation, capital reallocation, and strategic investment activity are redefining how capital is deployed across the economy.

This article explores the key trends shaping Canada’s private markets—from private credit and hedge fund expansion to infrastructure-driven M&A—and outlines actionable implications for Canadian businesses and investors navigating this changing environment.

The Rise of Private Credit and Evergreen Funds

Private credit has evolved rapidly in recent years, with evergreen funds emerging as a prominent structural innovation. These funds, characterized by continuous capital raising and reinvestment, now account for approximately 18% of new fund launches within the $1.7 trillion private credit industry.

Why Evergreen Funds Matter

Evergreen structures provide greater liquidity flexibility compared to traditional closed-end funds, making them attractive to a broader range of investors. For Canadian businesses, evergreen funds offer access to long-term capital without rigid investment horizons, supporting sustained expansion, refinancing, or restructuring initiatives.

Investors benefit from smoother capital deployment, diversification, and potentially more stable return profiles—particularly valuable in volatile market environments.

Hedge Funds Venturing into Private Markets

Leading hedge funds such as Point72, Millennium, and Jain Global are increasingly expanding into private markets through multi-billion-dollar private investment vehicles. This shift reflects a broader evolution in hedge fund strategy, as managers seek exposure to less efficient markets with stronger long-term growth potential.

For Canadian financial executives, this trend creates opportunities to collaborate with globally experienced managers who bring sophisticated risk management, data-driven decision-making, and cross-asset expertise. Increased hedge fund participation also raises competitive pressure across private markets, encouraging innovation and operational efficiency.

Infrastructure Projects Driving M&A Activity

Canada is entering a renewed phase of mergers and acquisitions (M&A) activity, driven largely by government-backed infrastructure investment. Nearly one-third of Canadian businesses are actively considering M&A as a growth strategy, supported by funding initiatives aimed at modernizing transportation, energy, and digital infrastructure.

A notable example is the $2.9 billion acquisition of First National Financial by Brookfield and Birch Hill, underscoring how infrastructure-linked assets continue to attract institutional capital.

For businesses, M&A offers access to new markets, scale efficiencies, and advanced capabilities. For investors, infrastructure-driven consolidation presents opportunities for durable, long-term returns tied to essential assets.

Public REITs and the 2026 Comeback

Public Real Estate Investment Trusts (REITs) are widely expected to regain momentum by 2026, supported by interest rate normalization and infrastructure-led economic stabilization. As borrowing costs moderate, REITs may once again appeal to income-focused investors seeking predictable yields.

Canadian investors should closely monitor REITs aligned with infrastructure development, logistics, residential housing, and urban regeneration. Strategic allocation to these vehicles could provide both income and capital appreciation as real estate markets recover.

Banks Retreating: A Boon for Private Credit

Stricter capital requirements and balance sheet constraints are prompting banks to retreat from certain lending segments. This shift has accelerated the growth of private credit providers stepping in to meet financing demand.

For Canadian businesses, private credit offers an alternative to traditional bank loans, often with more flexible terms and customized structures. These solutions can support growth initiatives, working capital needs, or balance sheet optimization—particularly for mid-market firms.

Major Fundraising Efforts Signal Market Confidence

Private market fundraising remains robust, highlighted by PGIM’s $4.2 billion close and Aperture’s $1 billion target. These capital raises reflect sustained investor confidence in private market strategies, even amid macroeconomic uncertainty.

For investors, participation in such funds provides access to diversified portfolios and specialized expertise. Canadian financial leaders may also view these managers as strategic partners capable of supporting long-term growth objectives.

IMF Warnings: Navigating Liquidity Risks

The International Monetary Fund (IMF) has cautioned against liquidity risks associated with semi-liquid fund structures. As private markets grow, mismatches between asset liquidity and redemption terms can pose challenges for fund managers and investors alike.

Canadian businesses and investors should prioritize rigorous due diligence, stress testing, and portfolio diversification. Understanding liquidity profiles is essential to maintaining resilience during periods of market stress.

Actionable Insights for Canadian Businesses and Investors

1. Leverage evergreen funds for flexible, long-term capital access

2. Partner with hedge funds entering private markets for innovative strategies

3. Explore M&A opportunities tied to infrastructure investment

4. Position portfolios for REIT recovery ahead of the 2026 rebound

5. Utilise private credit as banks reduce lending activity

6. Participate in major fundraisers to access institutional-quality opportunities

7. Actively manage liquidity risk through balanced portfolio construction

For a deeper look at how operational scale supports private market growth, see our guide on scalable investment operations in alternative markets.

Conclusion

Canada’s financial frontier is being reshaped by powerful forces across private markets, driven by hedge fund expansion, infrastructure investment, and evolving credit dynamics. For businesses and investors, understanding these shifts—and aligning strategies accordingly--can unlock meaningful opportunities for growth.

As private markets continue to mature, success will depend on adaptability, disciplined risk management, and informed capital allocation across this increasingly complex ecosystem.