Investors in Northwood Investments Corp., the Ontario government-backed fund that is betting on Ontario’s economic recovery, have said they are too bullish.
The fund, which has raised $4.6-billion in debt financing, is expected to report results in the second quarter of next year.
Investors are more than willing to take on debt for their investments, said David P. Purdy, who runs the Northwood Capital Group, a private-equity firm that specializes in buying companies that are undervalued.
“They’re more willing to go out and take on new debt when they’re confident they’ll be able to recoup their investment in a reasonable period of time,” he said.
“The investors are still looking at the potential upside to the province’s recovery.”
The province is now forecasting a 5.3 per cent annual growth rate in the economy in 2019-20, down from 5.9 per cent in 2018-19.
Mr. Murchie, the investment manager, said he believes the province is getting a fair amount of credit for its recovery, and the government’s handling of its financial problems. “
I can’t give you a single answer to that, but we’re looking at it from a broad view and not just focusing on just the private-sector.”
Mr. Murchie, the investment manager, said he believes the province is getting a fair amount of credit for its recovery, and the government’s handling of its financial problems.
But, he said, there are some risks that could be coming to bear as investors get more comfortable with the economy and job prospects.
“We are going to see more and more debt defaults, more and less debt forgiveness, so I don’t think that’s a great thing,” he told the Financial Post.
“If you have a government that’s not working and you don’t have a healthy economy, that’s going to have consequences on investors.”
Investors are less optimistic about the province being able to repay its debt, and they believe the provincial government will eventually have to find a way to cut back on borrowing.
While investors expect the provincial debt to grow at a reasonable rate, they also see the provincial governments ability to balance the books as a key factor in their investments.
Mr. Stokes, a Northwood investor, said the government has done a good job balancing the books.
“People who buy bonds are looking for growth, not for stability,” he added.
“It’s the government that needs to make some changes in order to get the economy moving.”