The Securities Commission granted an exemption to a mutual fund (the Fund) from the control restrictions under section 2.2(1) of National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows the Fund to invest more than 10% of its equity in non-reporting, related private credit funds managed by Northleaf Capital Partners (Northleaf Private Credit Funds), which are not subject to NI 81-102 and are not considered investment funds under securities legislation.
The Fund, managed by IG Investment Management, Ltd. (IGIM), aims to provide interest income primarily through bonds and debentures and sought to increase its exposure to private credit. The Fund’s assets exceeded $6.9 billion, and it had already committed capital to the Northleaf Private Credit Funds close to the 10% threshold. IGIM argued that a larger allocation to private credit would benefit the Fund’s performance and provide unique diversification opportunities.
The exemption was granted subject to several conditions, including that the Fund’s holdings in any Northleaf Private Credit Fund do not exceed 20% of the outstanding equity or voting securities, and that investments in these funds are within the 10% illiquidity limit of the Fund’s net asset value. Additionally, the Fund cannot pay sales or redemption fees for these investments, duplicate management or incentive fees, and must disclose investments in the Northleaf Private Credit Funds to investors through various reports and documents. The Fund’s manager must also comply with conflict of interest requirements under NI 81-107.
The decision was made by the Manitoba Securities Commission, acting as the principal regulator, and was also recognized by the securities regulatory authority in Ontario. The decision was based on the belief that the exemption is in the best interests of the Fund and its investors, allowing for a more flexible and potentially beneficial investment strategy.