For decades, investors climbed the 60/40 ladder with confidence. Now, every step feels less steady. High inflation that refuses to budge, interest rates that won’t come down anytime soon, and the growing correlation between stocks and bonds are forcing investors to rethink how they build portfolios using alternatives.

And here’s where, and why, the conversation starts shifting—toward private credit. Not just as a way to hunt for yield, but as a tool to help manage risk, sidestep duration drag, and prepare for the next market surprise—whenever and however it shows up.

Ash Lawrence, Head of AGF Capital Partners, and Ryan Dunfield, CEO at SAF Group break down why private credit isn’t just timely—it might be essential.

Why the Old Portfolio Formula Is Breaking Down

The wake-up call came in 2022. As Lawrence puts it, “When interest
rates and inflation are moving in the same direction upwards, that causes stocks and bonds to operate in a more correlated fashion... I think that reinforces this conversation people are having, to rethink the 60/40 portfolio.”

Bond Markets Are Out of Sync with Reality

Dunfield gets right to the point. “Bond pricing mechanisms have
become almost broken,” he said, referring to how disjointed spot rates, long-term yields, and models have become.

Spreads on investment-grade bonds are sitting at “late 90's levels,” which, given current macro conditions, makes little sense. And the supposed bond-stock hedge? “They didn't hedge inflation as they were supposed to,” Dunfield says. “From Spring 2025 to Spring 2024, Bond-equity correlations went from 0.6 to negative 0.2, then back to 0.6—all in 12 months.” That kind of volatility makes traditional diversification look unreliable.

His point: the relationship between stocks and bonds is not what it used to be, with correlations swinging wildly—sometimes bonds cushioned losses, other times they made them worse. That kind of volatility is making traditional diversification look less reliable.

Ash Lawrence on the nature of the 60/40 portfolio model.

How do floating rate coupons work?

Floating Rate Private Credit: Income That Rises with Rates

Floating rate private credit, on the other hand, plays by a different set of rules.

Dunfield lays it out simply: “You receive as the investor a spread on top of risk-free rate. So if risk-free rate starts to increase, you're earning a higher total coupon payment.”

That’s exactly the behaviour clients used to expect from bonds—and the kind of outcome that makes sense to them. “It’s that simple,” he says.

Lawrence adds that the SAF Group approach focuses on senior, secured private debt. “From my perspective, I view it as complementary to both equities and [traditional] fixed income strategies.”

Unlike fixed-rate bonds, floating loans reset in real-time. You’re not stuck holding yesterday’s rate. And when loans roll over? They reset at today’s rate. That keeps portfolios current—and income flowing.

The truth is, the 60/40 mix wasn’t designed for today’s world. It
thrived in a long stretch of falling rates and low inflation. That’s
over. Now, it’s time to ask: what else belongs in the mix?

Lawrence makes the case: when major indices like the S&P 500 has
“pretty big concentration” with just ten stocks making up roughly 40% of the index, and traditional bonds are struggling with rate volatility, diversification isn’t what it used to be.

Adding uncorrelated strategies—like private credit—can help restore balance.

Avoiding Duration Traps and Reinvestment Headaches

Traditional bonds lock you into yesterday’s pricing. And when they mature? You’re left reinvesting at whatever the market gives you—often less.

As Dunfield explains, “If you had picked up a series of investment grade bonds two years ago, when spreads were 175 bps...today it's 85 bps [of spread], and guess what? They're about to reverse. So you're reluctantly buying 85 bps knowing that it’s probably going to revert to mean and you're going to lose your price.”

Private credit flips that equation. You get tighter structures, stronger covenants, and floating-rate exposure. Plus, loans often come with floors—so even if rates fall, you won’t drop below a set minimum.

“We try aggressively to put those floors in place when rates are high,” says Dunfield. “And luckily in Canada... we're not competing against the CLO and rate funded markets, so we can negotiate floors that are fairly tight to spot.”

Canada’s Edge: A Less Crowded, More Nimble Market

Dunfield highlights an overlooked edge: “The Canadian market is approximately one-40th the size on the private credit side as the U.S. market.”

That might sound limiting, but [in reality] it’s actually a huge benefit. Smaller may lead to less competition, better terms, and—most importantly—more time to structure deals. “We tend to have more favourable balance as the lender...and we get to take advantage of that balance.”

“We don’t often see large, highly sophisticated investors bleeding their way up from New York into Canada for opportunities,” he says. “And with less competition, we tend to have more favourable balance as the lender in the market... more pricing power, more covenants, and time to adjudicate risk.”

There’s also a small, specialized group of domestic private lenders, especially for Canadian SMEs, and very little pressure from syndicated or public loan markets. The result? A real, workable gap that private investors can step into—and some already are.

Banks Pull Back. Private Credit Steps In.

There’s been some hand-wringing about credit shifting away from banks. Dunfield tackles that head-on.

“Banks are very highly regulated entities that are very highly levered, funded by withdrawable deposits,” he says. This isn’t a “shadow banking” story—it’s an opening. With Basel III already biting and Basel IV expected by mid-2026, Canadian banks face tougher capital buffers and may need to shed up to $270B in assets, according to Scotiabank.¹ That makes mid-market lending less attractive [to them] than investment-grade credit, and is causing banks to step back.

Private credit managers, on the other hand, are generally less levered, more patient, and backed by locked-in capital. “It is moving credit into what I would call more stable hands,” he says. The result: a growing funding gap for SMEs. Private lenders are built to fill it—bringing patient capital, tighter structures, and speed where banks are constrained. For advisors and investors, this isn’t just defense against volatility; it’s a chance to participate in a structural shift in how capital gets deployed.

What to Look For in a Private Credit Manager

When it comes to picking a private credit manager, Lawrence offers three key high criteria:

1. Structuring Skill: “Credit is about mitigating downside risk... that feature is vitally important, and especially in private debt.”
2. Stress-Tested Track Record: “You always want [your manager] to have restructuring capabilities in their back pocket.”
3. Strategy Fit: “Match the investment outcomes that you're looking for with the skillset of that manager.”

He notes that AGF has been investing with SAF Group since 2014 across multiple vehicles, including the AGF SAF Private Credit Trust, which provides access to the potential benefits of private credit that may otherwise only be available to institutional investors.

Why Governance Matters in This Partnership

Most partnerships stop at distribution. AGF and SAF went further, building a true joint venture—and it shows where it counts: governance.

Advisors know the stakes. Weak oversight has burned investors before, which is why AGF’s compliance strength and SAF’s credit expertise make this framework stand out.

Two Ways to Access the Strategy

The partnership via AGF Capital Partners offers two ways to access private credit:

• AGF SAF Private Credit Limited Partnership (LP): a pure-play structure with 100% exposure to private debt, designed for institutions and sophisticated investors comfortable with illiquidity.
• AGF SAF Private Credit Trust: tailored for investors seeking the ballast of private credit but with a liquidity sleeve, and lower minimum investments. Holding 10–15% in liquid assets, it’s built for those who need flexibility.

“Both vehicles have the same underlying portfolio,” Lawrence clarifies. “It’s just a matter of deciding on fit.”

Where the Opportunities Are Right Now

Dunfield points to some of the near-term plays SAF is targeting for the AGF SAF Private Credit strategy: mining and metals, real estate lending pools (through non-bank intermediaries), NAV loans to financial institutions (these are loans made against the net asset value of a financial institution’s portfolio of investment assets), and ABF or asset-based financing (loans made against e.g. pools of mortgages, credit card receivables, equipment loans, corporate receivables, etc.).

These aren’t deals you find on the open market. They’re bespoke, negotiated, and structured in ways that can give investors a risk-adjusted edge.

Private Credit Managers Are Worriers (And That’s a Good Thing)

When asked why now is the time to prepare for what's ahead in markets rather than predicting it, Dunfield puts it simply: "It’s not about guessing whether the ladder will hold up in the mid- to long-term period ahead—it’s about reinforcing the rungs today, so the climb stays steady no matter what.”

Ash Lawrence on the high criteria that defines manager selection, like SAF Group.

Ash Lawrence on the AGF SAF Group Partnership, and Governance..

Ash Lawrence on how and where the strategy fits in portfolios.

What is the difference between private credit and traditional bonds?

What does the public bond market look like right now?

How do you think about risk management?

Lawrence adds, “If you want to be prepared, it does feel like we're in a time period to start to rethink the portfolio and ensure proper diversification.”

The truth is, the 60/40 mix wasn’t designed for today’s world. It thrived in a long stretch of falling rates and low inflation. That’s over. Now, it’s time to ask: what else belongs in the mix?

Lawrence makes the case: when major indices like the S&P 500 have “pretty big concentration” with just ten stocks making up 40% of the index, and traditional bonds are struggling with rate volatility, diversification isn’t what it used to be.

Adding uncorrelated strategies—like private credit—can help restore balance.

Private credit flips that equation. You get tighter structures, stronger covenants, and floating-rate exposure. Plus, loans often come with floors—so even if rates fall, you won’t drop below a set minimum.

“We try aggressively to put those floors in place when rates are high,” says Dunfield. “And luckily in Canada... we're not competing against the CLO market, so we can negotiate floors that are fairly tight to spot.”

It’s built to avoid conflicts and improve decision-making.

In practice:

• Loan approvals come from a joint investment committee with both firms at the table.
• Valuations are handled independently with a third party, away from the deal team who originated the loans.
• Final valuation sign-offs sit with a committee consisting of AGF compliance, risk, and credit specialists—again, separate from the SAF loan origination team.

This separation keeps judgment objective. For advisors, it means a strong governance model for Canadian retail private credit—and a built-in safety net for clients.

“I’m a credit guy, so I’ll bring an umbrella when there’s not a cloud in the sky," he adds. "I’m worried about stagflation. I’m worried about rates plotting eerily close to the seventies and eighties,  and that we're about to have another inflation period, when combining early rate cuts with tariffs. The IPO market in Canada is weak. The banks are getting more regulated. The consumer today is extremely fragile.”

Key Takeaways

As markets evolve, so too must the tools and strategies advisors use to guide their clients. Here are the key takeaways from the conversation:

1. The 60/40 Portfolio Needs Reinforcement: The old mix worked in a low-rate era. With stocks and bonds now moving together, adding private credit can potentially restore balance.
2. Bonds and Private Credit in Balance: Bonds remain central to portfolios, but pairing them with private credit—offering shorter duration, stronger covenants, rate floors, and competitive yields—is complementary, and may add resilience in a higher-for-longer environment.
3. Canada’s Underrated Advantage: A smaller, less crowded market typically means better pricing, stronger terms, and more time to structure deals.
4. Manager Quality Matters: Governance and skill take priority over performance track record when it comes to selection. AGF Capital Partners believes that structuring, crisis-tested experience, and alignment with investor goals separate the best from the rest.

Footnotes:

1 Scotiabank  "Does the Federal Government Really Want Banks to Lend Less?" May 24,. 2025.

Navigating Volatility:
The Case for Tactical Alpha

by AdvisorAnalyst.com in partnership with AGF Capital Partners

In an era of economic flux and market volatility, alternative investments have emerged as a cornerstone of portfolio construction, offering the potential for diversification, resilience, and enhanced returns. Yet, navigating this terrain requires expertise and a nuanced understanding of its complexities. Ash Lawrence, Head of AGF Capital Partners, and Scott Radke, CEO and Co-CIO at New Holland Capital, share their thoughts on the landscape, the recent launch of AGF NHC Tactical Alpha Fund and how to navigate alternatives strategies.

"We might see a different return
environment for public equities,"
Lawrence observes.

The State of the Market: A Catalyst for Change

“We might see a different return environment for public equities,” Lawrence observes, pointing to post-GFC monetary stimulus as a bygone era. The days of easy gains and low volatility are over. With public equity returns concentrated in a few high-performing sectors, diversification is critical.

The challenge lies in reallocating portfolios to capture these opportunities while mitigating risk. “How do I reallocate for the future?” Lawrence asks rhetorically. The answer lies in alternatives, which offer a way to diversify and buffer against public market downturns.

"We might see a different return
environment for public equities,"
Lawrence observes.

Diversification is critical–but what kind?

Ash Lawrence talks about the kind of diversification needed in the current investment environment, and how investors can begin to think about how to thoughtfully diversify and buffer investment portfolios.

Radke echoes this sentiment but highlights a silver lining: “It’s a particularly fertile time for hedge fund strategies.” Increased volatility across rate, equity, and credit markets provides “the fuel that helps with alpha generation.” Strategies like merger arbitrage, event-driven plays, and commodity-relative value trading are poised to thrive as corporate activity accelerates and historical market relationships are disrupted.

A fertile time for alpha strategies–Why?

Scott Radke shares his insight on why the pickup in volatility and uncertainty provides fertile conditions for hedge fund strategies (alpha-generating strategies).

The Tactical Alpha Edge

At the heart of the conversation was the launch of AGF NHC Tactical Alpha Fund, a multi-strategy approach designed to blend return generation with diversification. Radke emphasizes the importance of assembling a portfolio of strategies that not only deliver returns but also mitigate downside risk in adverse markets.

This fund, described by Radke as a “utility player in baseball,” offers a unique combination of attributes. Its ability to capture upside potential while buffering against downside risk makes it a powerful tool for advisors seeking to stabilize portfolios amidst uncertainty.

“The launch of the fund is also the next step in our partnership with NHC as we continue to build and grow our alternatives business and diversify our capabilities. It is exciting to bring to Canada a product that gives accredited investors access to NHC’s institutional caliber and extensive expertise in absolute return investing,” adds Lawrence.

“It’s not just about generating returns; it’s about doing so in a way that aligns with overarching risk objectives,” Radke explains.

Introducing the AGF NHC Tactical Alpha Strategy

Ash Lawrence describes how the tactical alpha strategy is complementary to traditional portfolio asset allocations in both calm, or stressed, market conditions.

The Blueprint for Success: Multi-Strategy Mastery

Both Lawrence and Radke stress the critical role of manager selection in building resilient portfolios. 

Radke’s approach to manager selection blends quantitative rigor with qualitative judgment. “We’re looking for experienced portfolio managers who align philosophically around risk and have a track record of generating exceptional returns,” he says. Beyond the numbers, it’s about identifying partners who demonstrate resilience during challenging market conditions.

“It’s a people business,” Radke notes. “Judging how someone will behave when the chips are down is a different matter entirely.”

What's another way of describing tactical alpha?

Scott Radke eloquently explains 'tactical alpha' in the context what it does for a portfolio.

Radke’s focus on niche, less trafficked strategies has been a hallmark of New Holland Capital’s success. “Crowdedness tends to be a bad characteristic when markets go south,” he explains. By concentrating on a variety of less-crowded esoteric opportunities, Radke’s team has carved out a unique space in the alternatives landscape, enabling their tactical alpha strategy to stand apart from the competition.

How does New Holland Capital stand apart from its competition?

Scott Radke discusses his team's unique approach and the unique space have carved out in the alternatives landscape.

Lawrence echoes this commitment to specialization, pointing to AGF Capital Partners’ multi-boutique structure as a model for fostering independence while ensuring alignment. “Specialists typically outperform generalists when it comes to alpha generation,” he says. This structure allows AGF Capital Partners to provide its affiliate managers with critical resources—whether distribution networks or quantitative analytics—without compromising their independence.

Education and the Long Game

For Lawrence, educating advisors about the intricacies of alternatives is crucial. “We take a bottoms-up approach, meeting advisors where they are in their knowledge base,” he says. Lawrence acknowledges that there is a wide range of knowledge levels across the advisory landscape. Whether through portfolio modeling or in-depth strategy explanations, AGF Capital Partners’ approach is designed to empower advisors to confidently integrate alternatives into their client portfolios. This involves not only explaining strategies but also modeling their impact on portfolios during both bull and bear markets.

Radke, meanwhile, cautions against the temptation to chase recent performance, urging advisors to differentiate between luck and skill. “The tendency to make trading decisions based on recent returns is the bane of every investor’s existence,” he warns.

How AGF Capital Partners empowers and educates advisors

Ash Lawrence explains how his team works with advisors to empower them to confidently integrate alts in their client portfolios.

The Liquidity Puzzle

The illiquidity premium—often a cornerstone of alternative investing—is another key theme. Lawrence notes that determining the appropriate illiquidity bucket in a portfolio is critical. “You need to decide well in advance how much capital you’re willing to set aside for up to 10 years,” he advises. Radke added that the AGF NHC Tactical Alpha Fund’s focus on public markets allows it to offer some liquidity without sacrificing return potential. “Our structure works in both sunny and rainy markets,” he explains.

How does the AGF NHC Tactical Alpha strategy offer investors the 'best of both worlds' in terms of liquidity?

Scott Radke details how NHC is able to offer investors some liquidity without sacrificing the "illiquidity premium" of their tactical alpha strategy.

Takeaways

As markets evolve, so too must the tools and strategies advisors use to guide their clients. Here are the key takeaways from the conversation:

1. Adapt to New Realities: The post-GFC era of easy equity returns is over. Advisors need to think creatively about diversification and risk management.
2. Focus on Manager Selection: Success in alternatives hinges on finding the right people. Look for managers who excel in niche areas and exhibit resilience under pressure.
3. Balance Liquidity and Returns: Illiquid investments can provide stability and higher returns, but determining the appropriate allocation is crucial.
4. Prioritize Education: Understanding the complexities of alternative strategies is a long-term process. Advisors should leverage the expertise and resources from firms like AGF Capital Partners' to enhance their knowledge.
5. Embrace Diversification: Strategies like the AGF NHC Tactical Alpha Fund demonstrate the power of combining return generation with risk mitigation.

Conclusion

In a world of heightened volatility and shifting return dynamics, alternatives are no longer optional—they’re essential. As Lawrence aptly puts it, “We’re here to be your partner in your learning experience.” For advisors willing to invest the time and effort to master these tools, the rewards—both for their clients and their practices—can be substantial.

About AGF Capital Partners

AGF Capital Partners is AGF’s multi-boutique alternatives business with diverse capabilities across both private assets and alternative strategies. Clients benefit from the specialized investment expertise of Affiliate Managers combined with the organizational support and breadth of resources of AGF Management Limited (AGF). 

The Affiliate Managers include SAF Group, Kensington Capital Partners and New Holland Capital which collectively manage approximately CAD$13.7 billion in assets across private equity, private credit, venture capital and absolute return strategies.

The views expressed in this article are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

This article is solely for information purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such.

Any securities referenced in this article will only be offered and sold pursuant to a confidential offering memorandum in such Canadian jurisdictions where they may be lawfully offered for sale to eligible investors who qualify as “accredited investors” under applicable Canadian securities laws. In addition, any offer or sale of, or advice related to, any securities referenced will be made only by a dealer registered in the appropriate category or relying on an exemption from registration. No Canadian securities regulatory authority has reviewed or in any way passed upon the information contained in this article or the merits of any securities referenced.

This document may contain forward-looking information that reflects our current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein.

^®/TM The “AGF” logo and all associated trademarks are registered trademarks of AGF Management Limited and used under licence.

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