March 2026
Over the past several years, capital has poured into private equity and debt funds as investors sought diversification from their public holdings and the chance to capture outsized returns in the process. Unlike public securities, which are priced every day in the open market, the assets underlying private vehicles are valued relatively infrequently. Institutional investors were attracted to this characteristic because it allowed them to show a stable return profile to their constituents and individuals liked it because it provided the appearance of immunity to market plunges like the covid crisis or the bear market of 2022.
Just as global conflict, soaring government debt, and other worries have increased investor desire for liquidity, however, the private equity and debt space finds itself challenged to provide it. As shown in the chart below, the inventory of unsold businesses within US private equity funds is at a record high, right when investor interest in flexibility is climbing. In Canada, significant capital has been gathered by real estate funds targeting office, industrial, and multi-family residential property, but cash flows from these assets are unfortunately now rolling over (Vancouver rents, for example, recently fell to a 43-month low). These conditions have caused funds which had previously displayed uncanny steadiness to now implement significant asset writedowns, while simultaneously “gating” themselves to investor withdrawals. And, while regulatory changes following the Subprime Crisis of 2007/08 forced many types of risky lending to leave banks, this void has been filled by private lending. Like their equity cousins, however, these funds are now under stress, with risk premia rising and questions being raised about the robustness of underwriting.
Though private investments can account for a useful component in a diversified portfolio, the risk and potential illiquidity they impart mean that allocations should be minimal. Regrettably, it seems that many institutions and individuals may have devoted more capital than they should have to these investments and are now grappling with the other side of illiquidity.
Portfolio Activity
In February, we seized on market volatility to execute several rebalancing trades across DM equity mandates. As well, we opened a new position in Cadence Design Systems in DM US Equity.
Feature Stock
Netflix Inc. (NFLX)
We first added NFLX to DM US Equity with multiple buys in 2022 when the stock had fallen by as much as 70%. At the time, the company had posted a rare drop in subscriber count and investors were worried that emergent competition from Disney, Paramount, Amazon, and others would undermine its dominance. As it turned out, however, the upstart providers struggled and NFLX shares rose more than 7-fold to mid 2025. Speaking of Paramount, NFLX recently found itself embroiled in a bidding war with the media giant for storied movie studio, Warner Bros. Though NFLX saw the potential purchase as a chance to bolster its library and enhance its production capability, investors didn’t like the deal and felt it represented a step back for the streaming innovator. To the relief of many, Paramount “won” the contest, paying $111bn for a company that was worth just $20bn a year ago and which had posted revenue declines over both the most recent quarter and full year. After having chopped 40% from NFLX shares since last summer, investors cheered the news, sending the stock up by 30%. In February, we added to our NFLX position.