OSC seeks feedback on a new fund structure to allow retail investors access to illiquid assets
The Ontario Securities Commission (OSC) has released a consultation paper proposing a new framework to improve retail investor access to illiquid investments.
This framework introduces a new investment fund category, the Ontario Long-Term Asset Fund (OLTF), which would allow Ontarians to invest in venture capital, private debt and equity, infrastructure, and natural resource projects. These are assets to which retail investors typically have little access.
OLTFs aim to provide opportunities for retail investors to participate in capital-intensive projects, allowing businesses to raise essential capital at lower costs. Investors would have the ability to diversify their portfolios, not only across asset classes but also across various businesses and projects.
While some investment vehicles currently provide access to these assets, they are often 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.
The consultation seeks to identify ways to broaden investor access while managing the risks associated with illiquid assets.
Illiquid assets, which cannot be easily sold and are harder to value, typically require longer investment timeframes.
The new framework would give retail investors exposure to these assets through a professionally managed investment fund, overseen by a registered investment fund manager and portfolio manager.
A prospectus-qualified product’ would ensure that suitability, ‘know-your-client’ (KYC), and ‘know-your-produci’ (KYP) requirements are in place. The consultation also invites feedback on whether OLTFs should be accessible through order-execution-only or ‘DIY’ dealers.
Chan emphasized that the goal of the proposal is to create a framework that protects investors while encouraging innovation and capital formation. Feedback from this consultation will inform the next phase, which will include proposed rule amendments and policy changes.
Comments on the proposal are due by February 7, 2025. The OSC’s mandate is to protect investors from unfair practices, support fair and competitive markets, foster capital formation, and contribute to financial system stability while reducing systemic risk.
Investors are encouraged to verify the registration of any individuals or companies offering investment opportunities and review OSC materials at its website.
