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February 2025 Advocacy Newsletter
Summary:
It’s been a busy start to 2025 for the CAC. Since January, we’ve submitted eight comment letters to three different regulatory bodies—including our response to the OSC’s proposal to create a new class of investment fund through which retail investors in Ontario could gain exposure to illiquid assets like infrastructure projects, venture capital, and private debt and equity.
In theory, we can see the attraction of giving retail investors access to a broader array of asset classes, especially if it also reinforces broader government priorities around economic growth. But the OSC’s proposal didn’t come with analysis suggesting top-tier investment opportunities in the targeted asset classes are having trouble meeting their capital needs through institutional investment. Nor did the OSC address the resulting possibility of adverse selection—that the investment opportunities promoted to retail investors under this new structure will tend to be lower-quality ones that more sophisticated investors have already passed on. Given the wide dispersion of fund and manager returns in the targeted asset classes, this risk seems worth engaging with.
Nor are we convinced that the OSC’s proposal that these funds be required to attract an institution as a cornerstone investor to share in retail investors’ risks and returns fully addresses our concerns. We’d like to know more about the potential for conflicts of interest between the cornerstone investor and retail investors and how the OSC proposes to deal with this.
In brief, before the OSC moves further on this, we hope it provides a stronger policy case that addresses our concerns.