Wealthsimple private credit

Apologies! I actually didn't even notice your question was based on their private credit and not their private equity!

This is actually something that is relatively new with Wealthsimple. With private equity, you are taking an equity stake in these companies, whereas with private credit, you are just loaning them money.

Ultimately, private credit is going to be more conservative in the fact that you are more so worried about protecting your initial capital and earning interest on the loan. You're never going to get game changing returns, whereas in private equity, you are investing in these companies with the hopes of significant upside from the capital investment.

Private credit, you can expect (although far from guaranteed) to earn a rate of interest on your capital and get your initial capital back. With equity, you could realistically end up with nothing.

Think of these investments like high-risk loans that will, in turn, give you a higher rate of interest.

It's not something I'd ever dip into, but I can see it from the perspective of someone who wants to earn a higher rate on their money than a fixed income investment. I'd just make it a very small portion of my portfolio if I ever did dabble in it.

Obviously, private credit brings with it a plethora of risks that are often coupled with higher returns.

A lot of it has to do with the fact that private assets are not publicly traded. This makes the assets and the returns from private equity hard to value, and thus the returns hard to measure.

One book I would suggest you have a read of in terms of private equity, and this was actually mentioned to me by Simon on the Canadian Investor Podcast, is The Myth of Private Equity: An Inside Look at Wall Street's Transformative Investments.

I think the simple week or two of reading this book will give you a very good indicator as to whether or not the private equity space is for you.