The Securities Commission has granted Northwest & Ethical Investments L.P. (the Filer) on behalf of NEI Long Short Equity Fund and any future alternative mutual funds (the Funds) an exemption from certain restrictions under National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows the Funds to engage in short selling and cash borrowing up to a combined aggregate total of 100% of the Fund’s net asset value (NAV), exceeding the standard 50% limit.
The exemption also permits the Funds to exceed the usual 10% NAV limit for short selling securities of a single issuer when dealing with index participation units (IPUs) of IPU Issuers, allowing short sales up to a maximum of 100% of a Fund’s NAV.
The decision is based on the rationale that the Funds’ investment strategies may necessitate market-neutral strategies or additional leverage beyond the standard limits. These strategies aim to provide positive returns regardless of market movements and can offer cost savings compared to using derivatives for the same exposure. The exemption will enable the Filer to manage the Funds more effectively and potentially reduce expenses, without increasing overall risk.
The Commission’s decision is contingent upon the Funds adhering to certain conditions, including compliance with the overall 300% aggregate gross exposure limit to cash borrowing, short selling, and specified derivatives, as well as maintaining risk management policies and procedures. The Funds must also provide full disclosure of their short selling and cash borrowing activities in their Prospectus, fund facts, and ETF facts documents.
The exemption is granted with the understanding that it aligns with the Funds’ investment objectives and strategies, and that it will not compromise investor interests. The decision underscores the flexibility required by alternative mutual funds to implement their investment strategies within the regulatory framework.