Mackenzie Financial Corporation
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from paragraphs 2.5(2)(a), 2.5(2)(b) and 2.5(2)(c) of NI 81-102 to permit investment funds that are reporting issuers to invest a portion of their assets in underlying investment funds that are not reporting issuers and that may hold more than 10% of their net asset value in securities of other related investment funds -- Relief subject to certain conditions.
Applicable Legislative Provisions
National Instrument 81-102 Investment Funds, ss. 2.5(2)(a), 2.5(2)(b), 2.5(2)(c) and 19.1.
June 24, 2025
IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
MACKENZIE FINANCIAL CORPORATION
(Mackenzie)
DECISION
I. BACKGROUND
The principal regulator in the Jurisdiction has received an application from Mackenzie on behalf of Symmetry Fixed Income Portfolio, Symmetry Conservative Income Portfolio, Symmetry Conservative Portfolio, Symmetry Balanced Portfolio, Symmetry Moderate Growth Portfolio, Symmetry Growth Portfolio, Symmetry Equity Portfolio, Mackenzie FuturePath Canadian Fixed Income Portfolio, Mackenzie FuturePath Global Fixed Income Balanced Portfolio, Mackenzie FuturePath Global Neutral Balanced Portfolio, Mackenzie FuturePath Global Equity Balanced Portfolio, Mackenzie FuturePath Global Equity Portfolio (the Initial Top Funds) and any additional existing mutual funds and mutual funds established in the future of which Mackenzie, or an affiliate of Mackenzie, is the manager (the Additional Top Funds and together with the Initial Top Funds, the Top Funds and individually a Top Fund) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from:
1. Paragraph 2.5(2)(a) of National Instrument 81-102 Investment Funds (NI 81-102) to permit each Top Fund to purchase or hold securities of Northleaf Global Private Markets Fund (the Initial Underlying Northleaf Fund) and/or of any other future investment fund that is, or will be, managed by Northleaf (as defined herein) and that is not subject to NI 81-102 (the Future Underlying Northleaf Funds, and together with the Initial Underlying Northleaf Fund, the Underlying Northleaf Funds and individually an Underlying Northleaf Fund);
2. Paragraph 2.5(2)(b) of NI 81-102 to permit each Top Fund to purchase or hold securities of an Underlying Northleaf Fund which in turn may hold more than 10% of its net asset value (NAV) in securities of one or more investment funds; and
3. Paragraph 2.5(2)(c) of NI 81-102 to permit each Top Fund to purchase or hold securities of an Underlying Northleaf Fund which will not be a reporting issuer in any jurisdiction,
(together, 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) Mackenzie has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Québec, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut (together with Ontario, the Jurisdictions).
II. INTERPRETATION
Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 81-102 have the same meaning if used in this decision, unless otherwise defined.
III. REPRESENTATIONS
This decision is based on the following facts represented by Mackenzie:
Mackenzie
1. Mackenzie is a corporation formed under the laws of Ontario. It is the trustee, manager and portfolio advisor of each Top Fund. Mackenzie's head office is in Toronto, Ontario.
2. Mackenzie is registered as an investment fund manager, portfolio manager, exempt market dealer and commodity trading manager in Ontario. Mackenzie is also registered as a portfolio manager and exempt market dealer in all other Canadian provinces and territories and as an investment fund manager in the Provinces of Newfoundland and Labrador and Québec.
3. Mackenzie and the mutual funds it manages or advises are not in default of any of the requirements of securities legislation of any of the Jurisdictions.
The Top Funds
4. The Top Funds are, or will be, mutual funds subject to NI 81-102, organized and governed by the laws of a jurisdiction of Canada.
5. The securities of each Top Fund are, or will be, distributed to investors pursuant to a prospectus prepared in accordance with National Instrument 41-101 General Prospectus Requirements or National Instrument 81-101 Mutual Fund Prospectus Disclosure, as applicable.
6. Securities of each Top Fund are, or will be, qualified for distribution in the Jurisdictions.
7. The Top Funds are, or will be, reporting issuers in the Jurisdictions in which their securities are distributed.
8. The Initial Top Funds are not in default of securities legislation in any of the Jurisdictions.
9. The Initial Top Funds are diversified managed asset investment portfolios, each tailored to a specific risk tolerance and return objective.
10. Consistent with their multi-asset investment strategies, and within the limits of the illiquid asset restriction of section 2.4 of NI 81-102, each Top Fund may invest in private market assets. For this purpose, each Top Fund wishes to have the ability to purchase securities of the Underlying Northleaf Funds, each of which may hold more than 10% of its NAV in securities of one or more investment funds (the Third Tier Funds).
11. The prospectus of each Top Fund discloses, or will disclose, in its description of the Top Fund's investment strategies that the Top Fund may invest up to 10% of its NAV directly or indirectly in a diversified portfolio of privately held companies. This limit is consistent with the classification of the Underlying Northleaf Funds as illiquid assets for purposes of NI 81-102.
12. Each Top Fund is, or will be, subject to National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) and Mackenzie has established an independent review committee (IRC) to review conflict of interest matters pertaining to the Top Funds as required by NI 81-107.
Northleaf and the Underlying Northleaf Funds
13. Northleaf Capital Partners (Canada) Ltd. (together with its affiliates, Northleaf) is a global private markets investment firm with more than US$28 billion in private equity, private credit and infrastructure commitments under management on behalf of more than 300 public, corporate and multi-employer pension plans, endowments, foundations, financial institutions and family offices. Northleaf is led by an experienced group of professionals, who collectively have significant experience in structuring, investing and managing global private markets investments and in evaluating, negotiating, structuring and executing complex financial transactions.
14. On October 28, 2020 Mackenzie and Great-West Lifeco Inc. (Lifeco) entered into a strategic partnership with Northleaf whereby Mackenzie and Lifeco jointly acquired a 49.9% non-controlling voting interest and 70% economic interest in Northleaf.
15. The Initial Underlying Northleaf Fund will be a non-redeemable investment fund and it will seek to achieve long-term capital appreciation and income mainly through exposure to private investments in securities globally across private credit, private equity, and infrastructure. The Initial Underlying Northleaf Fund will seek to invest approximately 80-90% of its total assets in private equity, private credit, and private infrastructure (the Private Portfolio) and will seek to invest approximately 10-20% of its total assets in public investments (the Public Portfolio) which will include exchange-traded funds that provide exposure to floating rate loans and public equities. The Initial Underlying Northleaf Fund will get exposure to the Private Portfolio by investing in underlying private markets funds and directly in assets. The Private Portfolio is expected to be comprised, at least in part, of vehicles managed by Northleaf, expected to initially include Northleaf Senior Private Credit-L (NSPC-L), Northleaf Essential Infrastructure Fund (NEIF) and Northleaf Global Private Equity (NGPE) and in direct investments in private assets, including primary, secondary and direct investments across the private equity, private credit and infrastructure asset classes (each, a Private Portfolio Investment and collectively, the Private Portfolio Investments). The Initial Underlying Northleaf Fund will also hold the Public Portfolio, which will be sub-advised by Mackenzie, through investments in exchange-traded funds.
16. Each Underlying Northleaf Fund will be managed by Northleaf. Northleaf is registered as an Exempt Market Dealer in Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Ontario, Québec and Saskatchewan, as an Investment Fund Manager in Manitoba, Ontario and Québec and as a Portfolio Manager in Alberta, Manitoba and Ontario.
17. The Initial Underlying Northleaf Fund will seek to earn a long-term rate of return in excess of returns generally available through conventional investments exclusively in public equity markets. The Initial Underlying Northleaf Fund's strategy will be diversified across geographies, asset classes and industry sectors.
18. The Future Underlying Northleaf Funds will provide exposure to investments in one or a combination of alternative or private market asset classes, including private equity, private credit, private infrastructure, private real estate, and other alternative investments.
19. Each Underlying Northleaf Fund is, or will be, an "investment fund" as defined under the Legislation.
20. No Underlying Northleaf Fund will be subject to NI 81-102 or be a reporting issuer in any of the Jurisdictions.
21. The Top Funds will qualify to invest in the Underlying Northleaf Funds pursuant to an exemption from the prospectus requirement under applicable Canadian securities laws.
22. Northleaf is not in default of the securities legislation of any of the Jurisdictions.
23. The Initial Underlying Northleaf Fund is not in default of the securities legislation of any of the Jurisdictions.
24. Units of the Initial Underlying Northleaf Fund acquired by the Top Funds may be subject to a hold period of three (3) years from the date of purchase, whereby the Top Funds will generally be prohibited from redeeming the Units during this time (the Lock-Up Period). Following the Lock-Up Period, redemptions will be permitted by the Underlying Northleaf Fund on a quarterly basis, as of the last business day of March, June, September and December of each year and as of such other date(s) as Northleaf may permit in its sole discretion (each, a Redemption Date). If, in respect of any Redemption Date, Northleaf has received requests to redeem Units representing 5% or more of the NAV of the Initial Underlying Northleaf Fund, redemption requests in excess of such amount may be deferred by Northleaf pro rata amongst all unitholders seeking to redeem Units on the applicable Redemption Date until the Redemption Date next following such Redemption Date. As such, the Top Funds will not be able to readily dispose of their interests in the Initial Underlying Northleaf Fund and any interest that the Top Funds hold in the Initial Underlying Northleaf Fund will be considered an "illiquid asset" under NI 81-102.
25. Future Underlying Northleaf Funds may be potentially subject to redemption limitations, such as lock-up periods, early redemption penalties and/or other restrictions on redemptions in a given period of time (each, a Redemption Limitation).
26. As part of its investment objective and strategies, each Underlying Northleaf Fund may invest in securities of Third Tier Funds. Each Third Tier Fund may be an "investment fund" as defined under the Legislation.
27. Paragraph 2.5(2)(b) of NI 81-102 prohibits an investment fund from investing in another investment fund if, at the time of purchase, the other investment fund has more than 10% of its net assets invested in securities of other investment funds (the Multi-Tier Prohibition).
28. Since an Underlying Northleaf Fund's investment in securities of the Third Tier Funds may, from time to time, exceed 10% of the NAV of the Underlying Northleaf Fund, the Multi-Tier Prohibition will prohibit a Top Fund from investing in an Underlying Northleaf Fund.
29. An investment by a Top Fund in an Underlying Northleaf Fund would not qualify for the exemptions in paragraph 2.5(4) of NI 81-102 from the Multi-Tier Prohibition because the Underlying Northleaf Funds do not issue index participation units and are not clone funds or money market funds.
30. No Underlying Northleaf Fund will sell short securities of a Third Tier Fund, excluding index participation units.
31. The Third Tier Funds may be managed by Northleaf or its affiliates. It is expected that the Third Tier Funds will invest in and hold private assets, including primary, secondary and direct investments across the private equity, private credit and infrastructure asset classes.
32. The NAV of each Underlying Northleaf Fund will be calculated monthly by an independent third-party fund administrator.
33. Private Portfolio Investments of the Initial Underlying Northleaf Fund in related party private credit, private equity and infrastructure funds (NSPC-L, NGPE and NEIF) will be valued based on underlying assets that are independently valued (as further described in paragraph 34 below), further supported by quarterly partner capital accounts statements. For the portion of the Initial Underlying Northleaf Funds' assets that are not invested in underlying funds/vehicles (i.e. direct investments), assets will be valued either by Northleaf or a firm independent of Northleaf and based on the most recent financial information received in respect of each investment. Finally, investments in the Public Portfolio will be valued based on publicly available closing prices on the applicable valuation date.
34. At least 85% of the aggregate asset value of an Underlying Northleaf Fund will be invested in (i) underlying third party private funds that are valued by a firm that is independent of Mackenzie and Northleaf, (ii) underlying related party private funds supported by independent valuation, (iii) direct investments valued by a firm that is independent of Mackenzie and Northleaf and (iv) liquid investments in related party exchange-traded funds.
35. On an annual basis, the financial statements of an Underlying Northleaf Fund will be audited by Northleaf's external auditors, currently Ernst & Young LLP (Canada) (E&Y), where E&Y independently audits the fair value of the investments in an Underlying Northleaf Fund. E&Y also audits the controls and processes in place to ensure Private Portfolio Investments are accurately valued in accordance with Northleaf's valuation policy.
36. Northleaf's private equity, private credit and private infrastructure valuation policies, as they apply to an Underlying Northleaf Fund, are consistent with the International Private Equity and Venture Capital Valuation Guidelines.
Investments by Top Funds in the Underlying Northleaf Funds
37. An investment by a Top Fund in an Underlying Northleaf Fund will only be made if the investment is, or will be, compatible with the investment objectives of the Top Fund.
38. An investment by a Top Fund in an Underlying Northleaf Fund will only be made if such investment represents the business judgment of a responsible person uninfluenced by considerations other than the best interests of that Top Fund.
39. The investments in the Underlying Northleaf Funds will be included as part of the calculation for the purposes of the illiquid asset restriction in section 2.4 of NI 81-102 for each Top Fund.
40. Mackenzie believes that a meaningful allocation to private assets provides Top Funds' investors with unique diversification opportunities and represents an appropriate investment tool for the Top Funds that has not been widely available in the past. Private equity, private credit and private infrastructure investments have historically performed well in down markets; Mackenzie believes that permitting the Top Funds to invest in these private assets through the Underlying Northleaf Funds offers the potential to improve the Top Funds' risk adjusted returns and reduce volatility.
41. An investment in an Underlying Northleaf Fund by a Top Fund is an efficient and cost-effective way for the Top Fund to implement a private investment strategy that includes private equity, private credit and private infrastructure asset classes. Mackenzie believes it is in the best interests of the Top Funds to make use of Northleaf's experience and expertise as a private asset investor to achieve a Top Fund's desired exposure to a diversified portfolio of private assets. An investment in an Underlying Northleaf Fund will provide a Top Fund with exposure to top-tier private equity, private credit and infrastructure assets and funds the Top Funds would otherwise be unable to access. Without established relationships and internal private asset expertise, which Northleaf possesses but Mackenzie does not, it is extremely difficult to invest alongside private asset managers. A Top Fund's investment in an Underlying Northleaf Fund will provide access to Northleaf's well-established deal sourcing channels that provide investors access to differentiated investment opportunities.
42. Further, Northleaf provides an active and purposeful approach to private equity, credit and infrastructure portfolio construction, risk management and diversification that Mackenzie does not have the expertise to replicate. Northleaf engages in extensive due diligence of each investment opportunity to ensure that the investment meets the expected risk/return profile for the applicable Underlying Northleaf Fund participating in the investment. In summary, investing in an Underlying Northleaf Fund will provide the Top Funds with access to investments in hard-to-access private assets that the Top Funds would not otherwise have exposure to, constructed by Northleaf's experienced private asset professionals.
43. Investments by a Top Fund in an Underlying Northleaf Fund will be effected at an objective price, which for this purpose will be: a) in respect of an Underlying Northleaf Fund that is open-ended, the NAV per security of the applicable class or series of the Underlying Northleaf Fund; and b) in respect of an Underlying Northleaf Fund that is closed-ended, a fixed price at the time of investment or acquisition.
44. A Top Fund will not invest in an Underlying Northleaf Fund unless the portfolio manager of the Top Fund believes that the liquidity of the Top Fund's portfolio is adequately managed through other strategies.
45. Mackenzie does not anticipate that any sales fees or redemption fees would be incurred, directly or indirectly, by a Top Fund with respect to an investment in an Underlying Northleaf Fund and between the Underlying Northleaf Funds and the Third Tier Funds if such Third Tier Funds are managed by Northleaf that, to a reasonable person, would duplicate a fee payable by the Top Fund or its investors to Mackenzie, unless the Top Fund redeems its securities of the Underlying Northleaf Fund during a Redemption Limitation, in which case a fee may be payable by the Top Fund.
46. In respect of an investment by a Top Fund in an Underlying Northleaf Fund and in respect of an investment by an Underlying Northleaf Fund in a Third Tier Fund, no management fees or incentive fees will be payable by a Top Fund or an Underlying Northleaf Fund, respectively, that, to a reasonable person, would duplicate a fee payable by an Underlying Northleaf Fund or a Third Tier Fund, respectively, for the same service.
General
47. Absent the Exemption Sought, a Top Fund would be prohibited by paragraphs 2.5(2)(a), 2.5(2)(b) and 2.5(2)(c) of NI 81-102 from purchasing or holding securities of an Underlying Northleaf Fund because the Underlying Northleaf Funds (i) are not subject to NI 81-102; (ii) may hold more than 10% of their respective NAV in securities of other investment funds; and (iii) are not reporting issuers in the Jurisdictions.
48. Mackenzie considers that investments in securities of Underlying Northleaf Funds by the Top Funds raise "conflict of interest matters" within the meaning of NI 81-107 and therefore if the Exemption Sought is granted, Mackenzie will request approvals of the IRC for the proposed investments of the Top Funds in the Underlying Northleaf Funds including by way of standing instructions. No such investments will be made until the IRC provides its approvals under section 5.2 of NI 81-107.
49. Aside from the sections covered by the Exemption Sought, the Top Funds will otherwise comply with section 2.5 of NI 81-102 with respect to any investment in an Underlying Northleaf Fund.
50. Investments in the Underlying Northleaf Funds are considered illiquid investments under NI 81-102 and therefore are not permitted to exceed 10% of the NAV of a Top Fund.
51. As with any other illiquid investment, the portfolio managers of a Top Fund will carefully monitor the portfolio holdings and the liquidity needs of the Top Fund. Further, while the Top Funds may invest up to 10% in illiquid assets in accordance with NI 81-102, Mackenzie intends to keep the percentage of a Top Fund that is invested in illiquid assets at a moderately lower percentage to allow for fluctuations in the size of the Top Fund in order to manage compliance with the 10% restriction.
52. Mackenzie expects that one source of liquidity for a Top Fund's interest in the Underlying Northleaf Funds would be for the Top Fund to turn to the secondary market where a Top Fund could seek out other institutional investors who, subject to Northleaf's approval, could purchase a Top Fund's interest in the Underlying Northleaf Fund in a secondary transaction.
53. Mackenzie has its own liquidity risk management policy and manages each Top Fund's liquidity prudently under the policy. Given the readily available liquidity of the remainder of a Top Fund's investment portfolio, Mackenzie believes that the risk of the Top Fund needing to liquidate its investments in the Underlying Northleaf Fund when markets are under stress or in other environments where liquidity may be reduced is remote.
54. The prospectus of the Top Funds discloses or will disclose in the next regularly scheduled renewal, or amendment if earlier, that the Top Funds invest in securities of the Underlying Northleaf Funds, and that each Underlying Northleaf Fund may invest more than 10% of its NAV, on an aggregate basis, in securities of other investment funds, including Third Tier Funds.
IV. 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:
1. except for Mackenzie's sub-advisory role in respect of allocating Public Portfolio investments in exchange-traded funds for an Underlying Northleaf Fund, no Top Fund is actively participating or will actively participate in the business or operations of the Underlying Northleaf Funds;
2. each Top Fund is treated as if it were an arm's length investor in an Underlying Northleaf Fund, with each investment by a Top Fund in a class of units of an Underlying Northleaf Fund made at a price and other terms no less favourable for the Top Fund as for all arm's length investors in the same class of units of that Underlying Northleaf Fund;
3. the investment by a Top Fund in securities of an Underlying Northleaf Fund is compatible with the investment objectives and strategies of the Top Fund and included as part of the calculation for the purposes of the illiquid asset restriction in section 2.4 of NI 81-102;
4. the IRC of a Top Fund will review and provide its approval, including by way of standing instructions, prior to the purchase of securities of an Underlying Northleaf Fund, directly or indirectly, by the Top Fund, in accordance with subsection 5.2(2) of NI 81-107;
5. Mackenzie will comply with section 5.1 of NI 81-107, and Mackenzie and the IRC of the Top Fund will comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with an investment by a Top Fund in an Underlying Northleaf Fund;
6. a Top Fund will invest in, and redeem, each Underlying Northleaf Fund at an objective price, which for this purpose will be: a) in respect of an Underlying Northleaf Fund that is open-ended, the NAV per security of the applicable class or series of the Underlying Northleaf Fund; and b) in respect of an Underlying Northleaf Fund that is closed-ended, a fixed price at the time of investment or acquisition;
7. at least 85% of the aggregate asset value of an Underlying Northleaf Fund will be invested in (i) underlying third party private funds that are valued by a firm that is independent of Mackenzie and Northleaf, (ii) underlying related party private funds supported by independent valuation, (iii) direct investments in private assets valued by a firm that is independent of Mackenzie and Northleaf and (iv) liquid investments in related party exchange-traded funds;
8. the prospectus of a Top Fund relying on this decision discloses, or will disclose, in the next renewal or amendment thereto following the date of this decision, the fact that the Top Fund may invest a portion of its assets in securities of the Underlying Northleaf Funds, and that each Underlying Northleaf Fund may invest more than 10% of its NAV, on an aggregate basis, in securities of other investment funds, including Third Tier Funds;
9. the Top Fund's investment in securities of each Underlying Northleaf Fund and each Underlying Northleaf Fund's investment in each Third Tier Fund is otherwise made in compliance with all other requirements of section 2.5 of NI 81-102 (except to the extent that discretionary relief has been granted from any such requirement), including, for greater certainty that:
a. no management fees or incentive fees will be payable by a Top Fund or an Underlying Northleaf Fund, respectively, that, to a reasonable person, would duplicate a fee payable by an Underlying Northleaf Fund or a Third Tier Fund, respectively, for the same service;
b. no sales fees or redemption fees will be payable by a Top Fund or an Underlying Northleaf Fund, respectively, in relation to its purchases or redemptions of the securities of an Underlying Northleaf Fund or a Third Tier Fund that is managed by Northleaf, respectively, unless the Top Fund redeems its securities of the Underlying Northleaf Fund during a Redemption Limitation, in which case a fee may be payable by the Top Fund; and
c. Mackenzie will not cause the securities of an Underlying Northleaf Fund held by a Top Fund to be voted at any meeting of the holders of such securities, except that Mackenzie may arrange for the securities the Top Fund holds of an Underlying Northleaf Fund to be voted by the beneficial owners of the securities of the Top Fund who are not Mackenzie or an officer, director or substantial securityholder of Mackenzie.
10. where applicable, a Top Fund's investment in the Underlying Northleaf Fund is or will be disclosed to investors in the Top Fund's quarterly portfolio holding reports, financial statements and/or fund facts documents.
"Darren McKall"
AVP, Investment Management Division
Ontario Securities Commission
Application File #: 2025/0209
SEDAR+ File #: 6269121