I.G. Investment Management, Ltd.
National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from section 2.1(1) of National Instrument 81-102 -- Investment Funds to permit global fixed income funds to invest more than 10 percent of net assets in debt securities issued by a foreign government or supranational agency, subject to conditions.
Applicable Legislative Provisions
National Instrument 81-102 -- Investment Funds, ss. 2.1(1), 19.1.
Order No. 7510
March 25, 2020
IN THE MATTER OF THE SECURITIES LEGISLATION OF MANITOBA AND ONTARIO (the "Jurisdictions") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF I.G. INVESTMENT MANAGEMENT, LTD. (referred to as "IGIM" or the "Filer")
The securities regulatory authority or regulator in each of the Jurisdictions (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislations") for an exemption (the "Exemption Sought") pursuant to Section 19.1 of National instrument 81-102 Investment Funds ("NI 81-102") from subsection 2.1(1) of NI 81-102 (the "Concentration Restriction") to permit Mackenzie -- IG Global Bond Pool, Mackenzie -- IG Global Credit Opportunities Pool and iProfile Fixed Income Private Pool (the "Funds") to invest:
(a) Up to 35% of its net asset value immediately after the transaction in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments, other than the government of Canada, the government of a jurisdiction in Canada or the government of the United States of America, and are rated "AAA" by S&P Global Ratings Canada ("S&P") or its DRO affiliate (as defined in NI 81-102), or have an equivalent rating by one or more other designated rating organizations or their DRO affiliates; and
(b) Up to 20% of its net asset value immediately after the transaction in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments, other than the government of Canada, the government of a jurisdiction in Canada or the government of the United States of America, and are rated "AA" by S&P or its DRO affiliate, or have an equivalent rating by one or more other designated rating organizations or their DRO affiliates;
(such evidences of indebtedness are collectively referred to as "Foreign Government Securities")
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) The Manitoba Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that subparagraph 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Nunavut and the Northwest Territories; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless they are otherwise defined.
This decision is based on the following facts represented by the Filer:
1. IGIM is a corporation continued under the laws of Ontario. It is or will be the trustee, the portfolio advisor and the manager of the Funds. The head office of IGIM is in Winnipeg, Manitoba.
2. IGIM is registered as a Portfolio Manager and an Investment Fund Manager in Manitoba, Ontario, and Quebec and as an Investment Fund Manager in Newfoundland and Labrador.
3. IGIM and the mutual funds it manages or advises are not in default of any of the requirements of securities legislation of any of the provinces and territories of Canada.
4. The Funds are or will be mutual funds subject to NI 81-102. iProfile Fixed Income Private Pool distributes its securities under a simplified prospectus and annual information form prepared in accordance with National Instrument 81-101 -- Mutual Fund Prospectus Disclosure ("NI 81-101"). Mackenzie -- IG Global Bond Pool and Mackenzie -- IG Global Credit Opportunities Pool will file a simplified prospectus and annual information form prepared in accordance with NI 81-101 and will be distributed in accordance with National Instrument 45-106 -- Prospectus Exemptions for accredited investors. The Funds are or will be registered as a reporting issuer in each of the provinces and territories of Canada.
5. The investment objective of iProfile Fixed Income Private Pool is to provide interest income by investing primarily in bonds and debentures. To achieve its investment objective, the investments in the Fund are allocated in a fixed percentage to specific mandates, which include a Canadian Bond Mandate, a Canadian Short-Term Fixed Income Mandate, a Global Bond Mandate, a High Yield Bond Mandate and an Investors Real Property Fund Mandate.
6. The investment objective of Mackenzie -- IG Global Bond Pool will be to provide interest income and potential capital growth by investing primarily in bonds and debentures of non-Canadian issuers. To achieve its investment objective, the Fund will primarily invest in fixed income securities issued by: foreign government and their agencies, supranational organizations such as the World Bank and foreign companies.
7. The investment objective of Mackenzie -- IG Global Credit Opportunities Pool will be to provide a high level of current income and the potential for moderate long-term capital growth by investing primarily in high-yield investments from issuers anywhere in the world. To achieve its investment objective, the Fund will invest primarily in high-yield fixed income securities of non-Canadian issuers, including government bonds, corporate bonds (investment-grade and non-investment grade), preferred shares and loans.
8. The Funds may engage in securities lending, repurchase and reverse repurchase transactions, and use derivatives. These transactions and derivatives will be used in conjunction with the Fund's other investment strategies in a manner considered most appropriate to achieving the Fund's overall investment objectives and enhancing the Fund's returns as permitted by securities rules.
9. The Concentration Restriction prevents the Funds from purchasing a security of an issuer or entering into a specified derivatives transaction if, immediately after the transaction, more than 10 percent of the net assets of the Funds would be invested in securities of any issuer.
10. The Concentration Restriction does not apply to a purchase of a "government security", as defined under NI 81-102.
11. The Foreign Government Securities do not meet the definition of "government securities", as such term is defined in NI 81-102.
Reasons for the Exemption Sought
12. IGIM believes that the Exemption Sought will be in the best interests of the Funds as it would provide the Funds with more flexibility to achieve its investment objective that includes investing in bonds issued by foreign governments. The Requested Relief would also allow the Funds to hold highly rated short-term fixed income securities issued by foreign governments, which would enable the Funds to preserve capital by exposing the cash equivalent portion of its portfolio to foreign markets during adverse market conditions which is more consistent with its investment objective than holding its cash in short-term domestic securities. This increased flexibility to hold short-term foreign government fixed income securities as cash equivalents may also yield higher returns than Canadian or American short-term government fixed income alternatives.
13. In addition, higher concentration limits may allow the Funds to benefit from investment efficiencies as certain foreign government treasury offerings are more readily available for investment (because of large, regular treasury offerings that match the maturity dates the Funds seeks) and trades can be completed faster in certain markets that are more readily accessible to foreign investment.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation of the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:
1. Paragraphs (a) and (b) of the Exemption Sought cannot be combined for any one issuer;
2. The securities that are purchased pursuant to this Decision are traded on a mature and liquid market;
3. The acquisition of the securities purchased pursuant to this Decision is consistent with the fundamental investment objective of the Funds;
4. The relevant offering document of the Funds will disclose the additional risks associated with the concentration of the net assets of the Funds in securities of fewer issuers, such as the potential additional exposure to the risk of default of the issuer in which the Funds has so invested and the risks, including foreign exchange risks, of investing in the country in which that issuer is located; and
5. The relevant offering documents of the Funds will disclose the details of the Exemption Sought outlined in paragraphs (a) and (b) above along with the conditions imposed and the type of securities covered by this Decision.