TD Asset Management Inc. has received an exemption from the mutual fund conflict of interest investment restrictions and reporting requirements that will allow it to launch a mutual fund comprised of hedge funds.

According to the exemption decision, the TD Waterhouse Alternative Investment Fund (in both US and Canadian dollar versions) will aim to achieve long-term capital appreciation, and to generate consistently positive returns irrespective of stock market volatility or direction, while focusing on preservation of capital.

The funds will invest primarily in units of hedge funds or units of funds that invest primarily in hedge funds. Initially, the portfolios of the funds will consist primarily of securities of the Tremont Opportunity Fund Ltd.

The exemption decision notes that without the requested relief, TDAM would be required to file a report for every transaction by a fund involving units of the Tremont Fund or an underlying fund and every transaction in which, by arrangement, any of the new funds, the Tremont Fund or the underlying funds are acting as joint participants.

The regulators granted the relief provided that the annual report and annual financial statements of each fund disclose: the intent of the fund to invest in underlying funds; the manager of the underlying funds; the name of the underlying funds; and, the investment objectives, investments strategies, risks and restrictions of the underlying funds. Also, the funds should be arranged to avoid duplication of management fees or incentive fees; TDAM cannot vote on securities of any underlying funds that it also manages; and, unitholders of the fund must receive appropriate summary disclosure.