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Evolve Funds Group Inc,

2021-04-27 | Decision | 81-102 | Investment funds and structured products | https://www.osc.ca/en/securities-law/orders-rulings-decisions/evolve-funds-group-inc-3

National Instrument 81-102 Investment Funds, ss. 2.1(1) and 19.1.


The Securities Commission has granted an exemption to the Evolve FANGMA Index ETF from the concentration restriction in National Instrument 81-102 Investment Funds (NI 81-102), which limits investment funds from holding more than 10% of their net asset value in securities of any single issuer. This exemption allows the fund to invest more than 10% of its assets in the shares of each of the six NASDAQ-listed companies that comprise the Solactive FANGMA Equal Weight Index Canadian Dollar Hedged, which the fund aims to replicate.

The decision was made under the securities legislation of Ontario, with the Ontario Securities Commission acting as the principal regulator, and the exemption applies across all Canadian provinces and territories. The Evolve FANGMA Index ETF is managed by Evolve Funds Group Inc., which is responsible for the fund’s promotion, trusteeship, and management.

The rationale for granting the exemption is based on the fund’s transparent, passive investment strategy, which is fully disclosed to investors. The fund’s objective is to track the index, which is composed of equal weights of shares from Alphabet Inc., Amazon Inc., Apple Inc., Facebook Inc., Netflix Inc., and Microsoft Corp. The fund’s portfolio is rebalanced quarterly to maintain these equal weights.

The exemption is conditional upon the fund adhering to its investment objectives and strategies, disclosing its rebalancing approach, and including specific risk disclosures related to the concentration of investments in the final prospectus. The commission determined that the exemption meets the necessary legislative tests and is satisfied with the fund’s liquidity and the large market capitalization of the companies in which it invests.