The Ontario Securities Commission granted AGF Investments Inc. (the Filer) an exemption from certain short selling restrictions in National Instrument 81-102 (NI 81-102) for its AGF Alternative Income Credit Fund and future similar funds. The exemption allows these funds to short sell government securities up to 300% of their net asset value (NAV), surpassing the standard 50% limit. This decision supports the funds’ hedging strategies, which involve short selling government bonds to mitigate interest rate risks associated with long positions in corporate bonds. The ruling is based on the view that short selling government securities is less complex, less expensive, and less risky compared to using derivatives. The funds must comply with specific conditions, including maintaining internal controls and proper documentation, and ensuring their prospectuses disclose the short selling activities and the terms of the exemption. Relevant legislative provisions include sections 2.6.1, 2.6.2, and 19.1 of NI 81-102.
