Q: I have heard advisors say that private credit (MICs like maybe Capital Direct) can be considered as part of a portfolio’s fixed income allocation. Would the same thing apply to publicly traded MICs such as Atrium, Mcan etc) as the distributions they pay out are considered interest income.
5i Research Answer:
**edited for error.
We are quite cautious on (non public) private credit following the disasters of Bridging Finance and others. But MICs, focusing on mortages primarily and not private loans, are different. Most are small and that needs to be mentioned as a risk. Having 100% exposure to real estate and interest rates is another risk. They are still 'stocks' so we would not fully equate them to fixed income securities. But they offer high, decently-safe dividends (note some are taxed as interest, but FN dividends are eligible dividends) and their historical record has been generally good. Valuations are quite attractive. FN is the largest in Canada and also our favourite.