Fund managers interested in launching retail funds that hold illiquid, longer-term assets — such as venture capital, private equity, private debt and infrastructure — are being invited by the Ontario Securities Commission (OSC) to participate in a sandbox-type project to enable these vehicles.
Last year, the OSC carried out a consultation on the prospect of creating a new category of investment funds to provide a structure for long-term asset funds aimed at retail investors.
While investor advocates sharply criticized the project, the industry was generally supportive of the idea of facilitating retail access to alternative investments. However, the industry also expressed caution about aspects of the proposed approach, warning they were too restrictive and would discourage firms from launching these sorts of products.
Now, the OSC is embarking on a project that aims to facilitate the launch of these kinds of funds by offering novel relief from certain regulatory requirements.
To that end, it’s calling on industry firms interested in launching long-term asset funds to contact it and outline the sort of relief that would be needed to make the prospect of launching these funds appealing.
“The investment landscape is shifting, and retail investors are increasingly looking to diversify their portfolios. The LaunchPad project is supporting new and innovative financial products that can enhance market efficiency and provide new opportunities for investors,” said Grant Vingoe, CEO of the OSC, in a release.
Alongside regulatory relief, the OSC indicated it will also consider attaching “bespoke” investor protections to these funds, depending on the specific details of each fund.
The regulator said it will also use the project — a joint effort of the OSC’s Investment Management Division and its Office of Economic Growth and Innovation, known as the OSC LaunchPad Long-Term Asset Fund Project — to collect data and feedback that will inform future reforms to create a new fund category.
“This data will provide insight into issues such as market demand and the investor experience across different fund structures and different long-term assets,” it said. “We will also closely monitor the developments, including products launched, in other jurisdictions that have adopted, or propose to adopt, regulatory frameworks that facilitate long-term asset investment opportunities for retail investors through investment fund structures.”