Long-Term Asset Fund Project

The Ontario Securities Commission’s (OSC) Investment Management Division and Office of Economic Growth and Innovation (the Innovation Office) are working together on the Long-Term Asset Fund Project through OSC LaunchPad. The Long-Term Asset Fund Project will support new and innovative investment fund products that provide investors with access to long-term asset investments while having appropriate investor protections, and support capital formation in Ontario in the areas of venture capital, private equity, private debt, real estate, infrastructure and natural resources.

The Long-Term Asset Fund Project is an opportunity for the OSC to work with stakeholders interested in submitting novel exemptive relief applications that propose an investment fund solution that will provide retail investors with exposure to these long-term assets. The OSC will provide expanded support for novel exemptive relief applications, including by facilitating confidential pre-file discussions where firms can discuss bespoke investor protection controls and other key issues with staff that may assist them in developing a product.   

A key objective of the Long-Term Asset Fund Project is to examine market demand and the investor experience across different fund structures and different types of long-term assets. We will be collecting data, feedback, and perspectives from stakeholders, including investors, investment fund managers, portfolio managers and dealers , on various topics related to retail investor access to long-term assets through investment fund structures. We will also be studying developments, including products launched, in other jurisdictions that have adopted, or propose to adopt, regulatory frameworks that facilitate long-term asset funds. This data, together with the exemptive relief decisions granted under the project, will inform next steps, including potential rulemaking initiatives.

If you are interested in learning more about the Long-Term Asset Fund Project or discussing potential exemptive relief that may be necessary to facilitate a product launch, please contact us:

Michael Tang
Senior Legal Counsel, Investment Management Division
[email protected]  

Amanda Ramkissoon
Senior Regulatory Advisor, Legal, Office of Economic Growth and Innovation
[email protected]     
 

Background on OSC Consultation on a proposed framework for an Ontario Long-Term Fund

On October 10, 2024, the OSC published OSC Consultation Paper 81-737 Opportunity to Improve Retail Access to Long-Term Assets through Investment Fund Structures,which sets out a proposed framework for a new type of investment fund product structure (an Ontario Long-Term Fund or OLTF) to facilitate long-term asset investment opportunities for retail investors (the Proposal).

The Proposal described several threshold structural and investor protection elements and sought stakeholder feedback regarding these elements. The OSC received approximately 40 comment letters from various stakeholders, which included mixed views on the Proposal.

While several stakeholders commented that the Proposal has the potential to provide investors with valuable opportunities to diversify their portfolios with exposure to long-term assets and provide businesses and infrastructure projects with new sources of capital, a number of concerns with the Proposal were also noted, including that:

  • the structural elements of the Proposal might be too restrictive, which could have an adverse impact on the potential market for OLTFs,
  • the compliance costs could be too high and potentially offset any illiquidity premiums,
  • there may not be sufficient evidence of retail investor demand or the investor benefit that might be derived from the opportunity to invest in long-term assets through an investment fund product structure, and
  • the investor protection elements outlined in the Proposal may not sufficiently address the risks of holding long-term assets, the complexity of an OLTF structure, the potential for conflicts, and the potential for higher regulatory costs.

The Long-Term Asset Fund Project is an opportunity for the OSC to continue to examine these issues, including by providing stakeholders with additional opportunities to provide feedback and by working with stakeholders to explore novel exemptive relief applications that propose an investment fund solution that will provide retail investors with exposure to long-term assets.

Frequently asked questions

Long-term assets fall within the definition of “illiquid assets” in section 1.1 of National Instrument 81-102 Investment Funds and are assets that cannot be readily disposed of, may be difficult to value, and generally have longer investment time horizons than other assets. They include venture capital, private equity, private debt, mortgages, real estate, infrastructure, and natural resource projects.

We encourage stakeholders to contact us regarding potential applications for novel exemptive relief, even if they are not yet prepared to submit an application. Staff from the Investment Management Division and the Innovation Office will be available for [confidential] pre-file discussions, including relating to threshold issues that may impact a stakeholder’s decision to submit an application for exemptive relief or launch a product.

Staff is taking a flexible approach and has not set any parameters for exemptive relief applications submitted as part of the Long-Term Asset Fund Project,  However, we expect stakeholders to consider the threshold structural and investor protection mechanisms set out in OSC Consultation Paper 81-737 Opportunity to Improve Retail Access to Long-Term Assets through Investment Fund Structures. Exemptive relief applications from applicants prepared to launch the investment fund product structure will be given priority.  

The Long-Term Asset Fund Project is focused on investment fund solutions that provide retail investors with access to long-term assets. If you have a proposal for a novel or innovative solution that is not an investment fund but that seeks to provide investors with access to long-term assets, you may still be eligible for the LaunchPad support program. Please submit a LaunchPad application here: https://oscinnovation.ca/rfs

The Long-Term Asset Fund Project is an OSC project; however, as part of the project, we will work closely with the Canadian Securities Administrators to consider multijurisdictional or nation-wide exemptive relief in appropriate circumstances.

We have not set an end date for the Long-Term Asset Fund Project. We expect that the exemptive relief decisions granted under the project will be subject to ongoing monitoring and review to identify, on a timely basis, any regulatory or business outcomes that will inform any appropriate next steps, including potential rulemaking. Exemptive relief decisions may also be subject to a sunset clause depending on the specific facts and circumstances. Staff will provide regular updates on this page as the project progresses.

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