The Securities Commission has granted CIBC Asset Management Inc. an exemption from the concentration restriction in subsections 2.1(1) and 2.1(1.1) of National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows fixed income funds managed by CIBC Asset Management or its affiliates to invest more than the usual 10% (for mutual funds) or 20% (for alternative mutual funds and non-redeemable investment funds) of their net asset value in debt securities issued or guaranteed by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
The decision is based on the recognition that Fannie Mae and Freddie Mac securities are implicitly guaranteed by the U.S. government, play a significant role in the U.S. mortgage industry, and have a U.S. government equivalent credit rating. The exemption is subject to conditions, including that the securities maintain a U.S. Government Equivalent Rating and a rating not less than the Minimum Rating, and that the funds’ prospectuses disclose the permission to exceed the concentration limits and the associated risks.
The exemption is also conditional upon the funds taking action to comply with the standard concentration limits if the credit ratings of Fannie Mae or Freddie Mac securities fall below the required thresholds or if the U.S. Congress proposes or enacts legislation that changes or removes the implied government guarantee.
The decision was made under section 19.1 of NI 81-102, which allows for exemptions from the requirements of the Instrument, and is based on the application and representations made by CIBC Asset Management Inc.