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Davies partners recently presented on fund formation, fundraising, M&A and secondaries going into 2026 for the Canadian Venture Capital and Private Equity Association (CVCA).
Here are seven of their key takeaways:
Fund Formation and Fundraising: fundraising remains challenging. Canadian fundraising remains challenging and prolonged (18 to 24 month fundraising periods are common), with more traction for top-quartile performers and growing interest by sponsors for retail and insurance capital as sponsors look beyond traditional institutional investors. Macroeconomic uncertainty persists, but there is a renewed policy focus on Canadian investments in certain sectors (infrastructure, critical minerals).
M&A: bridging the bid-ask and prioritizing certainty. Earn-outs and other structured solutions continue to close valuation gaps. Private credit is playing a bigger role in acquisition financing, giving buyers flexible structures. Buyers and Sellers are prioritizing certainty in deal structures and agreements. As valuation expectations normalize, rates stabilize and macro uncertainty lessens, activity is expected to continue to improve into 2026.
Secondaries: mainstream liquidity and portfolio tools. Global secondary volume hit a record in 2025 reflecting weak traditional exits and more dedicated secondary capital; we observe similar dynamics, at smaller scale, in Canada. LP trades are increasingly used for liquidity, portfolio construction, rebalancing and over allocation management, supported by improved pricing and a broader buyer pool seeking mature assets and shorter paths to liquidity – notwithstanding the complex coordination required. On the GP-led side, continuation solutions are now a core tool to deliver liquidity, extend holds for top assets and raise follow on capital, with streamlined roll mechanics, full carry roll alignment and expanding use beyond PE into growth VC, infrastructure and real estate.
Co-Investments: a competitive advantage. LP demand remains high, and in a competitive fundraising environment, a GP's ability to offer a reliable flow of co-investment opportunities is a key differentiator and may anchor commitments to flagship funds. Clear allocation policies and ability of both GPs and LPs to move fast (or syndicate) are key.
Fund Finance: flexible liquidity across the lifecycle. Sponsors are largely using capital call facilities to smooth capital-call timing, but NAV based lending is being considered to support later-life portfolio needs and deliver liquidity – with a growing mix of banks and specialist credit funds supplying the market; investor views remain purpose and parameter-dependent, with certain investors remaining sceptical of the use of NAV facilities.
Retailization of Private Funds: accessing new investors. Sponsors are increasingly focused on expanding their fundraising into high-net-worth and retail channels via mutual fund trusts, access funds and other structures. A challenge remains in educating dealers, advisers and investors of these opportunities, as there often is a significant knowledge gap as to how these structures operate and the available opportunities.
End-of-Life Issues: tail-end funds and managing out residual assets. A significant number of funds are well past their 10-year terms with no clear path to dissolution. Many of these "tail-end funds" are holding assets that are difficult to sell or are reserving cash for potential liabilities arising from indemnities and earn-outs. We are seeing GPs take more creative approaches to achieving dissolution, including the use of end-of-life insurance. These challenges underscore the importance of negotiating indemnities and earn-outs with a view to the timeline for winding up the fund.
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