The Securities Commission has granted an exemption to an alternative mutual fund managed by Penderfund Capital Management Ltd. from certain restrictions on short selling and cash borrowing as stipulated in National Instrument 81-102 Investment Funds (NI 81-102). The exemption allows the fund to engage in short selling and cash borrowing up to a combined limit of 100% of the fund’s net asset value (NAV), surpassing the standard 50% limit.
The decision is based on the fund’s investment strategy, which includes the use of short selling and cash borrowing beyond the standard limits to achieve its objective of maximizing absolute returns with low volatility. The fund is permitted to invest in various asset classes and can leverage up to 300% of its NAV.
The exemption is conditional upon the fund’s adherence to the investment objectives and strategies, compliance with the leverage limit, and the inclusion of specific disclosures in the fund’s prospectus regarding its ability to engage in short selling and cash borrowing beyond the standard limits.
The decision is supported by the fund’s risk management policies and procedures, which address the risks associated with short selling and cash borrowing. The fund must also maintain proper books and records for these transactions.
The British Columbia Securities Commission is the principal regulator for this application, and the decision also applies to Ontario. The exemption is evidence of the decision of the securities regulatory authority in Ontario.