The Securities Commission has granted an exchange-traded fund (ETF), managed by BlackRock Asset Management Canada Limited, an exemption from the concentration restrictions outlined in subsection 2.1(1) of National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows the ETF to invest more than 10% of its net asset value (NAV) in securities of a single Canadian bank or life insurance company, subject to certain conditions.
The ETF aims to provide a diversified, equal-weighted investment in the largest Canadian banks and life insurance companies. It operates under a passive equal weighting approach and rebalances its portfolio quarterly. The ETF’s securities are listed on the Toronto Stock Exchange.
The exemption is conditional upon the ETF’s investments being made in accordance with its stated investment objectives and strategies, as disclosed in its prospectus. Additionally, the ETF is not permitted to invest more than 15% of its NAV in securities of any single Canadian bank or life insurance company. The ETF must also include specific disclosures in its prospectus regarding the granted exemption and associated risks of concentration in its portfolio.
The decision is based on the rationale that the common shares of the large Canadian banks and life insurance companies held by the ETF are among the most liquid equity securities in Canada, reducing liquidity concerns. The exemption is expected to enhance the ETF’s ability to achieve its investment objective in a cost-effective manner and provide greater flexibility in implementing its investment strategies.