AIMA Canada welcomes CSA's modernization of Investment Fund Product Regulation - Alternative Funds

Published: 23 September 2016

AIMA Canada, the National Group of the Alternative Investment Management Association, has welcomed the Canadian Securities Administrator’s (CSA’s) proposed amendments to National Instrument 81-102 and related National Instruments.

Once finalized, these amendments potentially will allow Canadian retail investors to add alternative strategies to their investment portfolios. Alternative investment fund strategies have historically been only available to high-net-worth individuals or institutions.

"Despite the strength and longevity of the alternative investment industry in Canada, it has remained relatively small compared to the U.S. and other regions globally, in part due to regulations that have made it difficult for investors to access them," said Michael Burns, Chair of AIMA Canada. "The proposed amendments will provide retail investors and advisors access to a myriad of alternative investment strategies which can be employed to help meet the investor’s objectives for their portfolio."

"Once these changes come into effect, investing in alternative funds may well be as simple as buying a mutual fund," noted AIMA Canada Chief Operating Officer James Burron. "But investors and their advisors will still need to consider the appropriateness and suitability of these types of products under the individual investor’s particular circumstances."

Some of the highlights of the proposed amendments related to the alternative investment industry include:

  • Alternative funds will generally be able to be offered in the same manner as mutual funds, with a simplified prospectus, annual information form and fund facts;
  • Alternative funds may be distributed through either IIROC securities dealers or MFDA representatives;
  • Conventional mutual funds will be permitted to invest up to 10% of their net asset value in alternative funds and non-redeemable investment funds, provided that such funds are subject to NI 81-012.

The proposed amendments are expected to widen the types of investment strategies available to retail investors and advisors.

AIMA Canada has formed a working group comprised of leading members from all sectors of the alternative investment fund industry to study the proposed amendments in detail and submit comments to the CSA. AIMA Canada also intends to meet with CSA representatives during the comment period to provide additional information and industry perspective and to assist in finalizing the amendments.

The CSA first published an outline for the proposed framework for alternative funds on March 27, 2013 and provided and update on February 12, 2015. The comment period on the proposed amendments will close December 22, 2016.