CI Investments Inc. and its Affiliates

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from paragraphs 2.2(1)(a), 2.5(2)(a), (a.1) and (c) of National Instrument 81-102 Investment Funds to revoke and replace a previous decision to allow an investment fund subject to NI 81-102 to invest up to 10% of net asset value in U.S. Underlying ETFs subject to either the United Statements Securities Act of 1933, as amended or the United States Investment Company Act of 1940, as amended, subject to conditions.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 2.2(1)(a), 2.5(2)(a), (a.1) and (c), 19.1.

July 23, 2025

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF CI INVESTMENTS INC. (CI) AND ITS AFFILIATES (collectively, the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer, in respect of each of the existing funds and future investment funds that are managed or may be managed by the Filer now or in the future (collectively, the Funds, and each, a Fund), for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation):

(a) revoking and replacing the Previous Decision (as defined below); and

(b) exempting each Fund from the following provisions of National Instrument 81-102 Investment Funds (NI 81-102) in order to permit the Funds to invest in securities of existing and future exchange-traded funds (ETFs) that are not index participation units (IPUs) and whose securities are, or will be, listed for trading on a stock exchange in the United States (the Underlying ETFs):

(i) paragraph 2.2(1)(a) (the Control Restriction) to permit each Fund to purchase securities of an Underlying ETF even though, immediately after the purchase, the Fund would hold securities representing more than 10% of: (i) the votes attaching to the outstanding voting securities of the Underlying ETF, or (ii) the outstanding equity securities of the Underlying ETF (the Control Relief);

(ii) paragraphs 2.5(2)(a) and (a.1) to permit each Fund to purchase and/or hold securities of an Underlying ETF even though the Underlying ETF is not subject to NI 81-102; and

(iii) paragraph 2.5(2)(c) to permit each Fund to purchase and/or hold securities of an Underlying ETF even though the Underlying ETF is not a reporting issuer in any province or territory of Canada.

(collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (together with Ontario, the Canadian Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 81-102 have the same meanings if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

CI

1. CI is a corporation amalgamated under the laws of the Province of Ontario. The Filer's head office is located in Toronto, Ontario.

2. CI is registered as follows:

(a) under the securities legislation of each of the Canadian Jurisdictions as a portfolio manager and an exempt market dealer;

(b) under the securities legislation of Ontario, Québec, and Newfoundland and Labrador as an investment fund manager; and

(c) under the Commodity Futures Act (Ontario) as a commodity trading counsel and a commodity trading manager.

3. The Filer is, or will be, the investment fund manager of the Funds.

4. CI is not in default of securities legislation in any of the Canadian Jurisdictions.

The Previous Decision

5. In a previous decision granted to CI dated March 6, 2023 (the Previous Decision), the Filer was granted relief from paragraph 2.2(1)(a), paragraph 2.5(2)(a), paragraph 2.5(2)(a.1) and paragraph 2.5(2)(c) of NI 81-102 to permit the Funds to invest in securities of ETFs that are not IPUs, including U.S. underlying ETFs. The Filer is requesting that the Previous Decision be revoked and replaced with this decision for the following reasons:

(a) the Previous Decision granted relief from paragraph 2.5(2)(a) and (a.1) of NI 81-102 to permit the Funds that are or will be mutual funds, alternative mutual funds or non-redeemable investment funds to invest in Underlying ETFs that are registered under the United States Investment Company Act of 1940, as amended (the '40 Act), even though the Underlying ETF is not subject to NI 81-102. However, it did not extend relief to Underlying ETFs that are registered under the United States Securities Act of 1933, as amended (the '33 Act);

(b) the Previous Decision granted relief from paragraph 2.5(2)(c) of NI 81-102 to permit the Funds to invest in securities of an Underlying ETF even though the Underlying ETF is not a reporting issuer in any Canadian Jurisdiction; and

(c) since the Previous Decision's reference to Underlying ETFs did not include ETFs that are registered under the '33 Act, which are generally ETFs that invest in commodities, currencies, and digital assets (similar to certain alternative mutual funds subject to NI 81-102), the Filer is seeking a decision that expands upon the Previous Decision and requests that the Previous Decision be revoked and replaced with this decision in respect of the Exemption Sought, to clarify that the Underlying ETFs, in which the Funds may invest include those subject to either the '33 Act or the '40 Act, and that operate in a manner that is substantially similar to an ETF under Canadian securities legislation.

The Funds

6. Each Fund is, or will be, an investment fund organized and governed by the laws of Canada or a Canadian Jurisdiction.

7. Each Fund is, or will be, governed by the applicable provisions of NI 81-102, subject to any exemptions therefrom that have been, or may in the future be, granted by the securities regulatory authorities.

8. Each Fund is, or will be, a reporting issuer in one or more Canadian Jurisdictions.

9. Each Fund is, or will be, subject to National Instrument 81-107 Independent Review Committee for Investment Funds.

10. The Funds may, from time to time, wish to invest in Underlying ETFs. The Funds currently invest in Underlying ETFs that are subject to the '40 Act, as permitted by the Previous Decision or NI 81-102, as applicable, and intend to invest in certain Underlying ETFs registered under the '33 Act. These Underlying ETFs may be preferred from time to time for their larger size, potentially improved liquidity, and/or lower overall cost relative to similar Canadian mutual funds or ETFs.

11. None of the existing Funds is in default of applicable securities legislation in any Canadian Jurisdiction.

The Underlying ETFs

12. The securities of an Underlying ETF will not meet the definition of IPU in NI 81-102 because the purpose of the Underlying ETF will not be to:

(a) hold the securities that are included in a specified widely quoted market index in substantially the same proportion as those securities are reflected in that index; or

(b) invest in a manner that causes the Underlying ETF to replicate the performance of that index.

13. An Underlying ETF's investment objectives and strategies will be consistent with the investment restrictions in NI 81-102 and, as such, a Fund's investment in securities of an Underlying ETF will not cause the Fund to indirectly invest in assets or have access to investment strategies that it would not be permitted to have directly.

14. Each Underlying ETF will be an "investment company" subject to the '40 Act or regulated by the SEC as a reporting issuer under the '33 Act. Shares of an Underlying ETF will be registered with the SEC under the '40 Act or the '33 Act and will be offered in the primary market in a manner similar to the Funds pursuant to a prospectus filed with the SEC which discloses a description of the Underlying ETF's properties and business, a description of the securities being offered for sale, information about the management of the Underlying ETF and financial statements certified by independent accountants, in a manner that is similar to the disclosure requirements under NI 41-101 and Form 41-101F2.

15. Each Underlying ETF will prepare key investor information documents which provide disclosure that is substantially similar to the disclosure required to be included in the ETF facts document required by Form 41-101F4 -- Information Required in an ETF Facts Document.

16. Each Underlying ETF will be subject to continuous disclosure obligations which are substantially similar to the disclosure obligations under National Instrument 81-106 -- Investment Fund Continuous Disclosure. An Underlying ETF will be required to update information of material significance in its prospectus, to prepare management reports and an unaudited set of financial statements at least quarterly, and to prepare management reports and an audited set of financial statements annually.

17. Each Underlying ETF is, or will be, an "investment fund" within the meaning of applicable Canadian securities legislation.

18. The securities of an Underlying ETF are, or will be, listed on a recognized exchange in the United States, and the market for them is, or will be, liquid because it is, or will be, supported by designated brokers. As a result, the Filer expects a Fund to be able to dispose of such securities through market facilities in order to raise cash, including to fund the redemption requests of its securityholders.

19. An Underlying ETF may be managed by the Filer or an associate of the Filer, or by a third-party investment fund manager.

20. An investment in an Underlying ETF by a Fund will otherwise comply with section 2.5 of NI 81-102, including that:

(a) no Underlying ETF will hold more than 10% of its net asset value (NAV) in securities of another investment fund unless the Underlying ETF (a) is a clone fund, as defined in NI 81-102, or (b) in accordance with NI 81-102, purchases or holds securities (i) of a money market fund, as defined in NI 81-102, or (ii) that are IPUs issued by an investment fund; and

(b) no Fund will pay management or incentive fees which to a reasonable person would duplicate a fee payable by an Underlying ETF for the same service.

21. Absent the Exemption Sought, an investment by a Fund in an Underlying ETF would:

(a) be prohibited by paragraphs 2.5(2)(a) or (a.1) of NI 81-102, as applicable, because such Underlying ETF may not be subject to NI 81-102;

(b) be prohibited by paragraph 2.5(2)(c) of NI 81-102 because such Underlying ETF may not be a reporting issuer in any Canadian Jurisdiction; and

(c) not qualify for the exception in paragraph 2.5(3)(a) of NI 81-102 because the securities of the Underlying ETF are not IPUs.

22. The key benefits of a Fund investing in the Underlying ETFs are greater choices, lower fees and expenses, improved portfolio diversification and liquidity, and potentially enhanced returns. For example:

(a) an investment in an Underlying ETF may lead to efficiencies that result from lower operating expenses and overall management fees than investing directly or through other ETFs;

(b) an investment in the Underlying ETFs will provide the Funds with access to specialized knowledge, expertise and/or analytical resources of the investment adviser to the Underlying ETFs;

(c) the Underlying ETFs provide a potentially better risk profile, diversification and/or improved liquidity/tradability compared to direct holdings of asset classes to which the Underlying ETFs provide exposure or to other ETFs; and

(d) the investment strategies of the Underlying ETFs offer significantly broader exposure to asset classes, sectors, and markets than those available in the existing Canadian market.

23. The Filer submits that having the option to allocate a portion of a Fund's assets to one or more Underlying ETFs will increase diversification opportunities and may improve the Fund's overall risk/reward profile.

24. An investment in an Underlying ETF by a Fund is an efficient and cost-effective alternative to obtaining exposure to securities held by or to strategies of the Underlying ETF rather than the Fund purchasing those securities directly or investing in other ETFs.

25. An investment in an Underlying ETF by a Fund should pose limited investment risk to the Fund because each Underlying ETF will be a reporting issuer in the United States and as such subject to applicable laws.

26. Due to the potential size disparity between a Fund and an Underlying ETF, it is possible that a relatively small investment, on a percentage of NAV basis, by a relatively larger Fund in securities of an Underlying ETF could result in such Fund holding securities representing more than 10% of: (i) the votes attaching to the outstanding voting securities of the Underlying ETF, or (ii) the outstanding equity securities of that Underlying ETF, contrary to the Control Restriction.

27. Absent the Control Relief, an investment by a Fund in securities of an Underlying ETF will not qualify for the exemption set out in paragraph 2.2(1.1)(b) of NI 81-102 in respect of the Control Restriction because securities of the Underlying ETFs are not IPUs.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) the investment by a Fund in securities of an Underlying ETF is in accordance with the investment objectives of the Fund;

(b) a Fund does not purchase securities of an Underlying ETF if, immediately after the purchase, more than 10% of the NAV of the Fund, in aggregate, taken at market value at the time of the purchase, would consist of securities of Underlying ETFs;

(c) securities of each Underlying ETF are listed on a recognized exchange in the United States;

(d) each Underlying ETF is, immediately before the purchase by a Fund of securities of that Underlying ETF:

(i) an "investment company" subject to the '40 Act and in good standing with the SEC; or

(ii) regulated by the SEC as a reporting issuer under the '33 Act and in good standing with the SEC; and

(e) the prospectus of each Fund discloses, or will disclose in the next renewal of its prospectus following the date of this decision, in the investment strategy section, the fact that the Fund has obtained the Exemption Sought to permit investments in Underlying ETFs on the terms described in this decision.

"Darren McKall" 
Associate Vice President 
Investment Management Division 
Ontario Securities Commission

Application File #: 2025/0315

SEDAR+ File #: 6283375