“Diversification always comes back to the same underlying theme: being diversified.” – Bob Sewell
In recent years, alternative investments have moved decisively into the mainstream for high-net-worth Canadian families and global investors. The conversation surrounding these strategies now centres not only on diversification and returns but also on enhancing portfolio resilience, managing risk, and achieving long-term goals—for Bellwether, that means delivering on the Life & Legacy promise.
Drawing on the insights from a recent panel discussion with Bob Sewell, the founder of Bellwether Investment Management, and Alex Singh from BMO Global Asset Management, this article explores how alternatives shape robust portfolios, spotlighting the nuances, benefits, and potential pitfalls of private markets for discerning investors.
Alternatives, broadly defined, span a spectrum: private equity, infrastructure, real estate, private credit, and select structured opportunities. “Alternatives act as a diversifier. They can enhance returns, produce income, and complement public holdings,” notes Singh. For investors searching for stability amid economic cycles and public market volatility, alternatives can reduce portfolio correlations, which may smooth out turbulent market swings, and offer new avenues for growth.
Recent market history underscores their appeal. Bob Sewell observes, “Our focus in portfolio construction is really around strategies that generate income, capital appreciation, and inflation protection. That leads us to areas like private credit, global private equity, real estate, and infrastructure—investments that effectively diversify for our clients.”
Canadian investors have traditionally allocated heavily to domestic public equities and fixed income, but today’s landscape calls for a broader view. “Eighty percent of the investable economy consists of private companies,” Singh points out. “If investors aren’t going into privates, they’re missing a large part of the investable landscape.”
Alternative investments allow investors to “turn the dials of risk and return,” as Sewell frames it—dialling up private market exposure when public valuations seem stretched, or dialling down when appropriate, blending public and private markets in a way that aligns with a client’s goals and risk tolerance.
Whether it’s across asset class, geographic region, manager selection, or vintage year, diversification has proven itself to be a tool if the aim is to “smooth out” volatility over the long term and risk management. Alternatives can help enhance those features.
Private equity enables access to businesses outside public exchanges, often in sectors driving innovation and growth. Private credit, meanwhile, offers returns linked to lending strategies outside conventional banking, often benefiting from illiquidity premiums and floating rates that move with interest cycles.
“Generally, if you’re investing in illiquid securities, you expect an illiquidity premium,” Sewell explains. “In private credit, niche, cashflow-based lending opportunities generate higher potential income because there’s less competition, and floating rates can benefit investors in rising rate environments.”
In both sectors, due diligence is paramount. “We look for managers with institutional execution, strong risk controls, and, ideally, their own cash on the line,” says Sewell. Alignment between investment manager and investor interests is especially critical.
Long-life assets like real estate and infrastructure provide both inflation protection and predictability. Rental income and contracts [are] often [indexed] to inflation, providing a buffer in high-cost environments. Infrastructure—from pipelines to data centres—features long-term contracts with embedded escalators, reinforcing steady cash flows through various market conditions.
The world of private securities is vast: “There are 14,000 private equity funds, 10,000 hedge funds. Bringing that down to something digestible is critical,” warns Singh.
Performance dispersion is stark. Quoting McKinsey data, Singh notes that top-quartile private equity managers can deliver significantly higher returns than bottom-quartile peers—from what we’ve found, that differential averages around 18.4% in median IRR and percentile spread. Picking the right manager and vintage is therefore pivotal, and diversified, multi-manager strategies help mitigate concentration risk.
Diversification extends across managers and vintages to “achieve smoother long-term performance,” Singh adds, “avoiding overconcentration in a particular manager or vintage.”
Alternatives often introduce restrictions on access to capital—what industry calls “lockups.” In recognition of how this can create an illiquid portfolio segment, Bellwether’s approach blends substantial public holdings with private markets, using pooled funds to aggregate client assets and create institutional buying power.
Sewell explains, “We maintain a liquidity sleeve—public market securities—allowing clients liquidity as needed while still funding underlying managers efficiently.”
This arrangement appears central to the relationship between clients, firms, and managers, as Sewell notes that “Structure is such an important part. You want to have this diversification within the investment, within the fund, so that you can create ongoing liquidity. And for us, we much rather have our focus on the liquidity ourselves. We’ll let our managers focus on what they’re there to do, which is invest the dollars.”
Growing popularity can attract lower-quality managers or compromise deal standards. “As strategies become more popular, you see more capital chase them. Sometimes managers start to compromise on covenants—critical to our risk controls,” Sewell cautions.
The panel highlighted the importance of manager “skin in the game,” alignment through performance or management fees, and thorough stress-testing of fund structures—especially essential with evergreen offerings. “Education,” Singh emphasizes, “is a key risk mitigant. Clients need to understand that alternatives are long-term by nature, not designed for market timing or next-day liquidity.”
Canadian investors tend to concentrate wealth domestically, but the investable global economy beckons. “We think investors should be investing globally,” Singh argues, “and the strategies we bring allow them to.”
Bellwether’s approach integrates global diversification, giving clients exposure to opportunities abroad, while managing currency and market risks with prudence.
Ultimately, alternative investments are more than portfolio components and can serve as strategic levers for pursuing the lifestyles and legacies desired by high-net-worth families. “Through diversification across multiple managers and strategies, we reduce portfolio volatility, enhance returns, and protect against inflation,” Sewell affirms. “We think in combination, private markets and public markets, that our clients’ ride is much easier and allows them to take that journey, to follow that path towards the life that they so desire and the legacy they wish to leave behind,” he continues.
The alternative investments environment in Canada is evolving rapidly. Institutional-grade due diligence, disciplined manager selection, and flexible structures are vital to success, particularly for high-net-worth investors seeking resilience, opportunity, and stewardship. Risks exist and require active management, but with a thoughtful approach, alternatives become pillars of lasting wealth.
As interest in alternatives grows, so too does the need for clear, transparent education and advice. “Reducing drawdowns and exposure, and enabling smoother long-term performance—these are the outcomes the data supports,” Singh concludes. For sophisticated investors, alternatives may just be the missing pieces in a diversified, future-ready portfolio.
For families and individuals ready to explore the full spectrum of wealth strategies, accessing trusted advice on private markets is essential for achieving the life and legacy they envision.
© Bellwether Investment Management Inc. 2025. This blog is intended for residents of the provinces in which we are registered and is not a solicitation to individuals outside those jurisdictions. Bellwether Investment Management Inc. and Bellwether Family Wealth do not provide tax advice; we recommend consulting a qualified tax advisor for guidance. The content of this blog is for general informational purposes only and should not be construed as investment advice. Any views or opinions expressed by Alex Singh are his own and do not necessarily reflect those of Bellwether Investment Management Inc. or Bellwether Family Wealth.
