New $2 billion vehicle lends to niche Canadian borrowers at higher-yield private credit spreads
Borrowers in Canada’s private credit market can pay 100 to 200 basis points more than comparable US deals, and a Calgary manager now has up to $2.5bn in fresh insurance-backed capital to target that spread, according to Bloomberg.
SAF Group has set up a reinsurance vehicle that gives it control of about $2bn to $2.5bn, with the option to expand, funded by roughly $250m in regulatory capital.
The Calgary-based firm, led by Ryan Dunfield, created the structure with American Life & Security Corp., a Nebraska life annuity provider, and the private capital solutions unit of GQG Partners, a US$172bn global investment manager.
“It gives you the closest thing to permanent capital,” Dunfield said in an interview.
According to Bloomberg, SAF will invest the assets in partnership with Antarctica Investment Advisors, a firm associated with American Life.
The capital will support loans ranging from $15m to $250m to borrowers that rarely have access to flexible financing, including evergreen private equity funds, mortgage investment corporations, real estate mortgage pools, auto-loan portfolios and other private-credit managers, he said.
Dunfield said the new capital increases the firm’s capacity but does not change its strategy, which remains focused on the Canadian middle market.
Insurance capital has become one of the most important funding sources for private credit globally, according to Bloomberg.
Apollo Global Management helped pioneer the model more than a decade ago by using annuity provider Athene as a base of long-term assets that could be invested in private loans, and Brookfield is now using a similar approach, with CEO Bruce Flatt telling shareholders the company is evolving into an investment-led insurer.
SAF is the first mid-sized Canadian credit manager to use a reinsurance structure of this kind, following similar steps by firms such as Crestline Investors in the US.
“It gives us the same kind of tools the larger US firms use, but focused on Canadian borrowers,” Dunfield said.
The initiative comes as parts of the Canadian private credit and equity market face liquidity pressures. Several funds, including those run by Kensington Capital Partners and Trez Capital, have recently restricted investor withdrawals because of liquidity constraints.
Dunfield said part of SAF’s business involves lending to some of the funds that face those constraints, according to Bloomberg.
He described the firm’s exposure as limited to senior‑secured loans backed by large, diversified pools of capital, including mortgages or loans, often at loan‑to‑value ratios below 10 percent.
GQG Private Capital Solutions said in an e-mailed statement that, “We partnered with SAF because we believe they are uniquely organized and staffed to capitalize on opportunities in Canadian credit markets, where borrowers face limited options outside of banks.”
The Canadian market remains attractive relative to the US, with private-credit deals generally yielding 100 to 200 basis points more than comparable transactions south of the border, Dunfield said.
He linked that gap to a less crowded lender universe and to Canadian companies’ typically more conservative leverage levels in a market that relies more heavily on traditional bank funding, Bloomberg reported.
SAF, founded in 2014, has generated structured returns above 16 percent annually and employs about 40 people across offices in Calgary, Toronto and Vancouver.
“We want companies across the country to know: if you need capital, we’re here,” Dunfield said.
