OSC plots new rules to widen ownership of private assets

financialpost.com:

Canada’s top securities regulator is exploring adding a fund type that would let ordinary Canadians invest in infrastructure projects and private assets.

The Ontario Securities Commission published a consultation paper that proposes a new investment fund category — the Ontario Long-Term Asset Fund. It would allow residents of the Canadian province to invest in assets typically available only to pension funds, professional asset managers and wealthy individuals, such as private debt and equity and private infrastructure.

“Long-term assets provide a unique opportunity for investors to diversify their portfolios and potentially achieve higher returns over an extended period,” Raymond Chan, the regulator’s senior vice-president of investment management, said in a news release.

The move may make it easier for businesses to lower their funding costs and raise the capital necessary for growth, the paper said.

Canadian investors have exposure to private markets, but often only through their pension plans. The new fund category would give them access to “a public investment fund vehicle that will require co-investment by institutional investors,” the paper said.

The OSC proposed that long-term funds be semi-liquid, meaning they would be redeemable at least annually, and at most monthly.

Canada already allows retail investors to access illiquid investments through a mutual fund structure, but restricts how large they can be as a percentage of the total fund. Funds operating under this proposed new structure would be required to invest between half and 90 per cent of their net asset value in long-term assets.

Similar long-term vehicles, such as interval funds, are available in the U.S., U.K. and Europe.

The OSC is accepting