The Ontario Securities Commission granted an ETF managed by Hamilton Capital Partners Inc. an exemption from the concentration restriction in National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows the ETF to replicate the performance of the Solactive Equal Weight Canada Banks Index by investing more than 10% of its net asset value in each of the six largest Canadian banks, which would otherwise be prohibited.
The rationale for the exemption is that the ETF’s investment objective and strategies, along with associated risks, are clearly disclosed in its prospectus. The ETF operates similarly to a fixed portfolio investment fund, which is exempt from the concentration restriction, and the ETF’s investments are transparent and passive.
The exemption is conditional upon the ETF investing in the banks in accordance with its stated investment objectives and strategies, disclosing its rebalance frequency, and including specific disclosures and risk factors in its prospectus regarding the concentration of investments and associated risks.
The decision is based on the ETF’s commitment to transparency and the liquidity of the underlying bank securities, which are among the most traded on the Toronto Stock Exchange. The exemption is subject to the ETF maintaining its investment approach and providing appropriate disclosures to investors.