The Securities Commission has granted an exemption to top funds managed by RBC Global Asset Management Inc. from the control restriction in section 2.2(1) of National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows these funds to invest in and hold more than 10% of the equity securities of related underlying private funds, which offer exposure to private alternative investment strategies.
The underlying private funds are not considered investment funds under securities legislation and are not reporting issuers. The exemption is conditional on several factors, including that the top funds will not actively participate in the business or operations of the private funds, will be treated as arm’s-length investors, and will not hold more than 20% of the equity or voting securities of any private fund. Additionally, investments in the private funds are considered illiquid and cannot exceed 10% of the net asset value of the top fund.
The exemption is also subject to the condition that no duplicate fees are paid by the top funds for services provided to the private funds, and that the investments are disclosed to investors in financial statements and fund facts documents. The manager of the top funds must comply with conflict of interest requirements as per NI 81-107, and the prospectus of each top fund must disclose the potential for investment in the private funds.
This decision is based on the belief that such investments provide unique diversification opportunities and the potential to improve risk-adjusted returns for the top funds. The exemption is granted under the securities legislation of Ontario and relies on Multilateral Instrument 11-102 Passport System for application in other Canadian provinces and territories.