The Ontario Securities Commission granted Hamilton Capital Partners Inc. (the Filer) on behalf of Hamilton Enhanced Canadian Bank ETF (HCAL or the ETF) an exemption from the concentration restriction in National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows HCAL to invest more than 20% of its net asset value in securities of any single issuer, specifically targeting the six largest Canadian banks, following the Solactive Equal Weight Canada Banks Index (Equal Weight Index). The exemption is conditional upon HCAL adhering to its stated investment objectives and strategies, which include using leverage to replicate approximately 1.25 times the performance of the Equal Weight Index.
The Filer is a registered investment fund manager, exempt market dealer, and portfolio manager in Ontario, with additional registrations in Quebec and Newfoundland & Labrador. HCAL is an alternative mutual fund and a reporting issuer in multiple Canadian jurisdictions.
The decision was based on representations from the Filer that the ETF’s investment strategy is transparent, passive, and fully disclosed to investors. The ETF will maintain a fixed portfolio of the six largest Canadian banks, which are highly liquid securities. The exemption was deemed appropriate because the ETF operates similarly to a fixed portfolio investment fund, which is typically exempt from the concentration restriction.
The exemption is contingent on HCAL obtaining necessary approvals for its proposed investment objective change and implementing it. The ETF must disclose the exemption and associated concentration risks in its prospectus upon renewal. The decision was made under the securities legislation of Ontario, with the Ontario Securities Commission acting as the principal regulator, and is intended to be relied upon in other Canadian jurisdictions under Multilateral Instrument 11-102 Passport System.