Investor advocates are raising alarms over the Ontario government’s initiative to expand public access to private equity and debt markets. This move, aimed at broadening investment opportunities for everyday Canadians, has sparked a heated debate about the potential risks involved.
Leadership Change at Telus Corp.
In a surprising turn of events, Telus Corp. has announced the appointment of Victor Dodig, the former chief executive of Canadian Imperial Bank of Commerce, as its new CEO, replacing long-serving leader Darren Entwistle. This decision took many by surprise, especially as Entwistle had assured institutional investors in December that he intended to remain in his role until 2027. The board’s sudden move has raised questions about the long-term succession planning within the company, a critical responsibility for any board of directors.
The Push for Private Market Access
Under the leadership of Premier Doug Ford, the Ontario government is advocating for the establishment of new mutual funds that would allow ordinary investors to participate in private market investments—typically reserved for affluent individuals and institutional investors. These funds would focus on investing in privately held companies and assets, including real estate and infrastructure projects, thus providing an alternative funding mechanism for smaller Canadian enterprises that lack access to public markets.
For the past five years, the Ontario Securities Commission (OSC) has permitted limited exceptions for financial firms to offer private market products to the general public. However, the current push from the provincial government represents a significant shift in policy, aiming to democratise financial opportunities that have historically been out of reach for most Canadians. Critics, however, caution that this move could expose unwary investors to substantial risks.
Risks of Private Market Investments
Advocates for investor protection warn that private asset mutual funds carry higher risks compared to traditional mutual funds. These funds often come with complex fee structures that may not be transparently communicated to investors. Furthermore, liquidity is a major concern; private funds are typically illiquid, making it difficult for investors to withdraw their funds when needed. In some cases, funds may suspend redemptions altogether if too many investors attempt to cash out simultaneously, which can lead to prolonged periods without access to invested capital.
The recent slowdown in Canada’s real estate market has already led some private funds to halt redemptions for institutional investors. While this has not yet affected retail investors, the potential for similar scenarios raises questions about the stability and reliability of private market investments.
Current Landscape of Private Market Offerings
Currently, a few options exist for ordinary Canadians looking to invest in private markets. The Mackenzie Northleaf Private Credit Interval Fund, for example, permits small investors to redeem up to 5 per cent of their investment every three months, having received regulatory approval from the OSC. Wealthsimple also offers private equity and credit funds, available to clients with managed accounts who meet specific criteria, including a minimum investment of £30,000 and a commitment to a longer investment horizon.
The OSC has reported interest from over 20 parties, including fund managers and industry associations, regarding the potential for new mutual funds. Rather than establishing a comprehensive regulatory framework, the OSC plans to assess applications on a case-by-case basis, granting exemptions to those that meet its criteria.
Why it Matters
The Ontario government’s drive to broaden access to private equity and debt markets is a double-edged sword. While it promises to open up new investment avenues for everyday Canadians, it also raises significant concerns about investor protection and financial stability. As the landscape of investment opportunities evolves, it becomes crucial for regulators and advocates alike to ensure that the move towards greater accessibility does not come at the expense of transparency and security for investors. With the potential for increased participation in private markets, the need for robust safeguards becomes ever more pressing.
