The Ontario Securities Commission (OSC) today published a consultation paper aimed at improving retail investor access to illiquid investments through a framework proposal for a long-term asset investment fund product structure.
The consultation proposes the creation of a new investment fund category, the Ontario Long-Term Asset Fund (OLTF), which would allow Ontarians to invest in assets they may not traditionally have exposure to. These assets include venture capital, private debt and equity, and infrastructure and natural resource projects. OLTFs could offer opportunities for more retail investors to participate in capital-intensive projects, while enabling businesses to lower funding costs and raise the capital necessary for growth.
Investors would have an opportunity to diversify their portfolio across assets, but also across different types of businesses or projects. There are existing investment vehicles that would allow access to these assets, but many are privately funded and unavailable to retail investors.
“Long-term assets provide a unique opportunity for investors to diversify their portfolios and potentially achieve higher returns over an extended period,” said Raymond Chan, Senior Vice President, Investment Management. “Through this consultation, we hope to identify how to broaden investor access to these benefits while also mitigating the risks inherent in illiquid assets.”
Long-term assets are illiquid assets that cannot be readily disposed of, may be difficult to value, and generally have longer investment time horizons than other assets. An investment fund would provide retail investors with an investment vehicle whose regulatory framework is more specifically tailored to their needs.
The proposed new framework would allow retail investors to gain exposure to these long-term assets through the professional management of a registered investment fund manager and registered portfolio manager. Distribution through a prospectus-qualified investment fund product would mean that suitability, “know-your-client” (KYC) and “know-your-product" (KYP) requirements would generally apply. The consultation also seeks feedback on investor access to OLTFs through order-execution-only, or “DIY” dealers.
“The long-term asset fund proposal aims to create a framework that protects investors while fostering innovation and capital formation,” continued Chan.
The feedback received will guide the next phase of the proposal, which is anticipated to be the publication for comment of proposed rule amendments and policy changes.
Please submit comments in writing on or before February 7, 2025.
The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair, efficient and competitive capital markets and confidence in the capital markets, to foster capital formation, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.ca.
