The Ontario Securities Commission granted an exemption to an alternative mutual fund, allowing it to borrow cash up to 100% of its net asset value (NAV), exceeding the usual 50% limit set by National Instrument 81-102 Investment Funds (NI 81-102). This decision was based on the application by 1832 Asset Management L.P. on behalf of Dynamic Premium Yield Plus Fund, which sought increased borrowing flexibility to enhance investment strategies and potentially reduce costs compared to using derivatives.
The exemption is subject to conditions ensuring that the fund’s aggregate exposure to short selling, cash borrowing, and specified derivatives does not surpass the regulatory leverage limit of 300% of the fund’s NAV. Additionally, the fund must comply with all other cash borrowing requirements under NI 81-102 and ensure that the borrowing aligns with the fund’s investment objectives and strategies. The fund’s prospectus must disclose the increased borrowing capacity and associated risks.
The decision was made under the securities legislation of Ontario and relies on the Multilateral Instrument 11-202 Passport System for application in other Canadian jurisdictions. The exemption was granted on the basis that it would enable more effective portfolio management without increasing investor risk, and that it would not constitute a fundamental or material change to the fund’s operations.