For decades, public market equity and fixed income assets dominated most investment portfolios, but for reasons that we describe below, core private market investments now represent a meaningful component of the policy asset mix of many institutional investors. Among other things, core private market investments offer the following features:
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Private market asset classes such as real estate, infrastructure, and commercial mortgages offer a diverse range of domestic and international investment opportunities, with varying return and risk characteristics. By focusing on high-quality investment opportunities available within these asset classes, our flagship private market strategies are designed to provide investors with the building blocks to establish a long-term foundation for their investment portfolios, alongside traditional fixed income and equity investments. The following core principles guide our investment philosophy:
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2025 outlook
After several years of low transaction volume across the Canadian commercial real estate market, sentiment appears to be improving in response to rate cuts by the Bank of Canada, which began earlier this year and are expected to continue into 2025. Despite aggressive Bank of Canada activity, Government of Canada (GoC) bond rates have remained volatile, driven most recently by U.S. trade uncertainty. Stabilization in GoC interest rates should help stimulate real estate market activity as leverage would become supportive and act as a tailwind for activity moving forward. This improved sentiment has already resulted in several notable office transactions recently, and we expect commercial mortgage origination activity will continue to increase from here.
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Our approach
RBC GAM commercial mortgage platform
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* Please refer the ESG disclaimer at the end of the document.
The team focuses on investing in loans that offer attractive reward-for-risk, and benefits from strong access across the mortgage through our national origination network, as our platform and partnerships enable us to see almost every major debt opportunity in the Canadian commercial mortgage market. To support our clients’ investment objectives, our platform offers access across the commercial mortgage risk and return spectrum from conventional to high yield, including strategies that comprise U.S. commercial mortgage-backed securities (CMBS).
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The team typically reviews over $15 billion of mortgage opportunities and invests in $1–1.5 billion annually. Our platform provides access to opportunities, information, and enhanced visibility on risk in a private market where access to information is closely held. The team has a strong market position that benefits from real-time market information sourced from our existing $7 billion portfolio comprised of over 450 loans.1 We employ a disciplined approach to underwriting and continue to target quality properties, borrowers, and sponsors when originating new loans.
1 As at December 31,2024
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2025 outlook
As we look ahead to 2025, the divergence between positive underlying property operating performance and softer capital markets sentiment
that emerged in 2024 has created favourable investment conditions for
well-capitalized investors. Market support is expected to come from further potential cuts to the Bank of Canada’s policy rate, and declining new construction activity; these factors are expected to increase market tightness and support occupancy levels across all sectors.
While population growth is expected to slow in the near-term, we expect the more sustainable long-term rate of growth to remain robust and supportive of the asset class. Meanwhile, key risks to monitor include slowing economic growth and labour market headwinds. In addition, certain investors remain challenged in accessing equity to either fund development commitments or lower leverage levels, reinforcing the value of a low leverage, diverse core asset/core market strategy.
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Our approach
Our core Canadian real estate strategy provides investors with access to a high-quality portfolio of assets diversified by geography, property type, and tenancy. Through its adherence to quality and diversification, the strategy seeks to provide a predictable and growing source of income, and stable total returns over the long term. The strategy is an open-ended investment trust with a quarterly subscription and redemption schedule.
Underpinning the design of our strategy is the belief that an allocation to core Canadian real estate – core assets in core markets with core tenants – can be a foundational element of an investor’s portfolio, working alongside traditional fixed income and equities. The strategy gives investors exposure to the asset class in the most efficient structure possible, eliminating foreign tax, transaction costs, and currency drag, while positioning investors to integrate global exposure through other more liquid asset classes.
The strategy was created through a distinctive partnership with British Columbia Investment Management Corporation (BCI), a leading Canadian pension plan manager in one of Canada’s largest diversified core commercial real estate portfolios. Investors benefit from the collective oversight of two independent professional investment firms in a unique partnership model whereby both firms are economically and reputationally aligned to deliver long-term investment performance.
The strategy’s investment thesis is focused and consistent: hold a diverse portfolio of quality real assets in core locations that will benefit from positive demand and supply characteristics over time; invest in each asset’s modernization; maintain a strong and liquid balance sheet; and commit to high environmental, social, and governance standards.
Unprecedented alignment
A partnership that represents complete economic and reputational alignment between two of Canada’s most respected fiduciaries, RBC Global Asset Management and BCI/QuadReal.
Investment discipline
Aligned investment and asset management decision-making provides discipline, focus, and access to off-market opportunities.
Fully diversified
Access to an established portfolio of signature properties across Canada’s largest cities, diversified by asset class, geography, and tenancy.
Governance & sustainability
Combined oversight provides exceptional governance and consistent industry-leading ESG results.*
Core portfolio
Core portfolio
Aperçu des marchés 2024
Les investissements dans les infrastructures privées se sont avérés relativement modestes pendant la majeure partie de 2024, et les exigences en matière de rendement des capitaux ont semblé augmenter légèrement au cours de l’année. La diminution des activités de placement et l’augmentation des exigences en matière de rendement sont attribuables à de nombreux facteurs, dont les suivants : une hausse du coût du capital, une accentuation des exigences en matière de dépenses en immobilisations du fait de l’inflation, un resserrement des marchés du travail, des problèmes résiduels dans les chaînes logistiques et une incertitude accrue quant aux revenus prévus, étant donné le risque élevé de ralentissement économique.
La pénurie de capitaux qui en est résultée a procuré des occasions aux investisseurs disposant de capital à investir. Le petit nombre de collectes de fonds permettant d’amasser des montants substantiels pour certains gestionnaires de fonds a engendré une vive concurrence pour les opérations visant les très grandes infrastructures, mais moindre pour le segment des infrastructures à moyenne capitalisation. Nous avons donc constaté une augmentation du profil de risque et de rendement prévu pour certaines occasions à moyenne capitalisation.
Nous avons également observé que plusieurs grands investisseurs institutionnels sont à la recherche de partenaires chevronnés partageant les mêmes objectifs pour soutenir la future croissance de leurs placements dans les infrastructures privées, étant donné l’approche des limites de concentration internes de leurs portefeuilles. Cette situation a rendu disponibles un ensemble d’occasions de placement de grande qualité sur le marché ainsi que d’éventuels partenaires de coinvestissement bien établis.
Chacun de ces facteurs a contribué à ce qui s’annonce, de l’avis de beaucoup, comme une bonne année pour les acheteurs de sociétés d’infrastructures privées.
Investissements dans les infrastructures, soutenus par de solides données fondamentales
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2025 outlook
Lower lending rates in response to easing inflation have led to the expectation of increased transaction flow in the year ahead, as investors see the opportunity to use financial leverage to fund transactions. While increased appetite for leverage should act as a tailwind for investment activity going forward, investments with more defensive profiles – including strong financial quality (relatively low amounts of predominantly fixed rate debt) and inflation-protected yield – will continue to present the most compelling opportunities, in our view.
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Our approach
Our global infrastructure strategy aims to provide investors with attractive risk-adjusted returns comprised of income and capital appreciation. The strategy invests in a portfolio of core and core+ private infrastructure assets diversified by sector and geography, with a focus on developed market countries included in the Organization for Economic Co-operation and Development (OECD).
A focus on developed markets provides benefits of stable economic growth, positive demographic trends, yields underpinned by contractual income, and inflation sensitivity. The strategy can also offer exposure to positive environmental, social, and governance themes (infrastructure 2.0), as we seek investments that support economic development, enable higher standards of living, and drive the transition to a more sustainable future.
The strategy is open ended to align investor capital with the long asset lives of private infrastructure assets. The strategy is actively managed by the RBG GAM Private Markets Global Infrastructure Investment team and leverages the internal support of RBC GAM’s investment and operational platform as well as the external support of experienced and aligned co-investment partners and advisors.
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The strategy benefits from proprietary (and often non-competitive) access to a broad range of unique and high-quality investment opportunities. This access is attributable to:
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This broad range of high-quality deal flow gives the team a wide opportunity set to select from, and allows them to capitalize on situations where there may be gaps in the supply and demand for capital in certain segments of the infrastructure market.
La stratégie vise à créer un portefeuille diversifié à l’échelle mondiale, constitué d’actifs d’infrastructure privée de base et de base plus de grande qualité, en partenariat avec des coinvestisseurs chevronnés ayant les mêmes objectifs. Compte tenu du faible endettement et de la multitude d’engagements en matière de placements, nous amorçons l’année 2025 en position de force pour déployer du capital dans un contexte où les fonds propres sont restreints. Nous examinons activement un vaste ensemble d’opérations potentielles ayant un échéancier d’exécution à court terme et nous continuons d’observer, chaque trimestre, de nouveaux flux d’opérations provenant de partenaires de coinvestissement actuels et nouveaux. En ce qui concerne la constitution et la diversification du portefeuille au sein de la stratégie, l’ajout de deux nouveaux investissements en 2024 a offert des avantages intéressants sur le plan de la diversification par secteur, par région, par facteur de valeur et par partenariat de coinvestissement. À l’avenir, nous accorderons la priorité à d’autres secteurs et facteurs de valeur afin d’accroître la diversification de la stratégie.
Thank you for your interest in our perspectives. We hope this document serves as a useful reference, and your portfolio managers welcome the opportunity of further discussion with you.