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Staying Liquid in Alternative Investments
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In recent months, investors in the Canadian alternative investment space have faced renewed volatility with a wave of funds placing restrictions on redemptions, reducing distributions or gating access to capital. This tension raises understandable concern among both advisors and investors and comes from the underlying nature of the asset class. Alternative assets often generate attractive returns, but they can be inherently illiquid. When markets shift or investor redemptions surge, that mismatch between asset liquidity and investor expectations can create pressure.
At Invico, we have built our investment philosophy from the ground up to alleviate this pressure. With Invico Diversified Income Fund (“IDIF” or “the Fund”), through disciplined portfolio construction, a risk-first approach to investments, and transparent redemption planning, we’re proud to have met redemption requests for over twelve years and never missed a monthly distribution.
So, the core question becomes, how have we achieved this?
Matching Redemptions to Asset Liquidity
Liquidity for our unitholders isn’t something we manage reactively. It is built into Invico’s overarching strategy.
Many funds promise monthly liquidity to attract investors, only to subsequently have to gate to protect the overall health of the fund. In contrast, IDIF’s redemptions are offered quarterly, intentionally aligning with the liquidity profile of our underlying assets.
Fundamentally, this approach helps to reduce pressure during volatile markets and allows us to balance investor flexibility with portfolio integrity. This ensures we can honour redemption requests without compromising long-term performance or asset quality for the long-term benefit of unitholders.
Building Liquidity into the Portfolio
Since its inception, the Fund has been underpinned by a diversified lending strategy that naturally produces liquidity through income-generating and cash-flow-positive assets. For context, as at June 30, 2025, IDIF maintained a trailing twelve-month cash distribution coverage ratio of 1.56x, which was supported by both completed transactions ($26.3 million) and repayments ($43.5 million) made during the quarter.
IDIF’s lending strategies, in particular, continue to improve the Fund’s diversification and liquidity profile. Broadly syndicated loans (“BSL”), for example, currently represent over 20% of the Fund’s portfolio (as at June 30, 2025). These loans are all fully tradable, with multiple third-party bids, and are issued to enterprises with average values of approximately US$2.2 billion. This strategic decision to expand the BSL portion of our portfolio has significantly enhanced its overall liquidity while also creating opportunities for additional returns through the prudent use of third-party credit support.
Gaining Institutional Support
Outside of our investment initiatives, during the second quarter of 2025, our long-standing partner, ATB Financial, renewed and upsized its lending facilities. Subsequently, we also received approval for a new warehouse-style facility from a leading Canadian chartered bank.
These facilities not only provide significant capacity for continued growth in the Fund, but they also represent institutional endorsement of the strength of our processes, our risk-first approach, and our diligent portfolio construction. When major institutions conduct their own exhaustive due diligence and choose to extend capital, it is a sign of confidence in Invico’s ability to remain liquid, disciplined, and aligned with investor interests.
Liquidity Management is Our Commitment
Liquidity in alternatives isn’t easy; the often high returns are typically generated by the illiquid nature of the investments. However, through aligning our redemption schedule with asset cash flows, maintaining our disciplined approach to risk, and earning the confidence of leading financial institutions, we have built a strategy designed to deliver fully supported monthly income for our unitholders.
If you would like to understand more about how IDIF has delivered consistent income through every market cycle over the past 12+ years, contact your wholesaler or complete the form below.
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