The Ontario Securities Commission (OSC) has introduced a consultation paper proposing a new investment framework to give retail investors greater access to illiquid assets.
The proposal suggested creating the Ontario Long-Term Asset Fund (OLTF), a new category allowing more Ontarians to invest in assets typically inaccessible to individual investors, such as venture capital, private debt and equity, infrastructure, and natural resource projects.
The OSC's initiative aims to diversify investment opportunities for retail investors by providing a regulated vehicle that enables them to participate in capital-intensive projects. According to the commission, these funds could potentially offer higher returns over extended periods while enabling businesses to raise essential capital more efficiently.
“Long-term assets provide a unique opportunity for investors to diversify their portfolios and potentially achieve higher returns over an extended period,” said Raymond Chan, senior vice president of investment management at the OSC. “Through this consultation, we hope to identify how to broaden investor access to these benefits while also mitigating the risks inherent in illiquid assets.”
Long-term assets, by their nature, cannot be quickly or easily liquidated and often require longer holding periods. These types of assets are typically valued infrequently, adding to their illiquidity. The proposed OLTF structure would allow investors to access such assets through professional management by registered investment fund managers and portfolio managers, who would handle the complexities associated with these investments.
The OSC is focusing on a prospectus-qualified investment fund product that meets suitability, "know-your-client" (KYC), and "know-your-product" (KYP) requirements. The proposal also seeks feedback on whether OLTFs should be available through direct, do-it-yourself (DIY) investment channels, known as order-execution-only dealers, allowing more flexibility for experienced retail investors.
Chan emphasized that the framework aims to balance investor protection with promoting innovation and capital growth. “The long-term asset fund proposal aims to create a framework that protects investors while fostering innovation and capital formation,” Chan said.
The OSC is inviting written comments from stakeholders until February 7, 2025, to help refine and guide the next phase of the proposal. The feedback will be used to shape the final publication of proposed rule amendments and policy changes.