Canada’s investment funds industry isn’t wasting any time launching products based on the Canadian Securities Administrators’ (CSA) “alternative funds” proposal.
Last week, the CSA announced amendments to National Instrument 81-102 Investment Funds that will make it easier for retail investors to get access to alternative mutual funds, which employ strategies such as short selling and derivatives trading.
Dynamic Funds, a division of Toronto-based 1832 Asset Management LP, announced Tuesday it is launching a pair of “liquid alternative” funds, based on the CSA’s amendments.
The new funds — Dynamic Alpha Performance II Fund and Dynamic Premium Yield PLUS Fund — will provide investors with the prospect of greater diversification, lower volatility, and higher risk-adjusted returns, Dynamic says in a news release.
“With the use of alternatives, we want to help advisors evolve their approach to portfolio construction for a market environment that continues to change,” says Glen Gowland, president and CEO of Dynamic Funds, in a statement.
Dynamic Alpha Performance II Fund aims to provide investors with returns that are not correlated to major equity indices by taking both long and short positions. The fund is managed by Noah Blackstein.
Dynamic Premium Yield PLUS Fund will use options trading on U.S. stocks to generate excess yield. It is managed by Damian Hoang.
Also Tuesday, the Canadian chapter of the Alternative Investment Management Association (AIMA) said Tuesday it welcomes the CSA’s amendments.
“Canadian retail investors will benefit from greater access to these alternative investment strategies, which can diversify their portfolios and protect against downside risk while providing non-correlated returns, especially as the end of the current economic cycle draws closer,” says Claire Van Wyk-Allan, AIMA’s Head of Canada, in a statement.
AIMA expects the big banks to start distributing alternative funds, in response to investor demand, but firms may initially be hesitant to embrace alternatives, it says.
“At the outset, retail distribution may treat all alternative mutual funds as high-risk, which is counter-intuitive given the asset allocation benefits these products will bring,” Van Wyk-Allan says.
Given that concern, AIMA has developed educational resources for advisors “to help them navigate the influx of expected product.”