AIMA CANADA Handbook Including an Introduction to the Canadian Fund Industry, Securities Regulation, the Investor Environment and Member Directory DISCLAIMER

Material contained in this publication is a summary only, and is based on information believed to be reliable from sources within the market. The opinions contained in this publication are and must be construed solely as statements of opinion, and not statements of fact or recommendations to purchase, sell or hold any securities. It is not the intention of the Canada National Group of the Alternative Management Association (“AIMA Canada”), that this publication be used as the primary source of readers’ information, but as an adjunct to their own resources and training.

No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication. AIMA Canada will not be liable to the reader in contract or tort (including for negligence), or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

This publication has been prepared for general information without regard to any particular person’s investment objective, !nancial situation or needs. Accordingly, no recommendation (express or implied) or other information should be acted on without obtaining speci!c advice from an authorised representative. Any !gures are purely estimates and may vary with changing circumstances. Also, past performance is not indicative of future performance.

TO OUR AIMA CANADA HANDBOOK SPONSORS:

Thank you to the many individuals that made this publication possible. To our committee members: Paul Patterson, Chris Pitts, James Burron, Gary Ostoich and Michael Burns.

To our article contributors: Gary Ostoich, Eamonn McConnell, James Burron, Paul Patterson, Les Marton, Alfredo D’Onofrio, Chris Pitts, Darin Renton, Michael Burns, Manjit Singh, Vinod Ramnarine, Jennifer Wainwright, Ron Kosonic, Peter Hayes, James Loewen, Claude Robillard, Cathy Singer, Barry Segal, Michael Bunn and Katrina Rempel.

To our sponsors: Horizons ETFs, Norton Rose Canada LLP, Investment Administration Solution, SW8 Asset Management Inc., CommonWealth Fund Services, Ernst & Young LLP, PricewaterhouseCoopers LLC, JC Clark Ltd., Niagara Capital Partners, HR Stratégies Inc., Montréal Exchange, Davies Ward Phillips & Vineberg LLP, CIBC Prime Services Group, The Investment Partners Fund and BMO Capital Markets.

To our designer: Heather Martinez–for making the Handbook look as good as it does.

To our AIMA Canada interns from University of Waterloo who worked on the idea generation, logistics and many emails required to get it to press: Jovine Chan and Fernando Kou. Table of Contents

5 Introduction

6 Overview of Canada’s Industry

8 About AIMA Canada

9 CAIA: Education in Alternatives

11 About Canada

13 Canadian Financial Centres: Toronto, Montréal, Vancouver, Calgary

20 Canadian Banks: Prime Examples of Stability

24 Fund Administration for the Global Hedge Fund Industry

26 Regulation, Compliance & Structuring

28 Securities Registration and Compliance

32 Marketing & Sale of Foreign Domiciled Investment Funds in Canada

38 Tax Considerations for Foreign Funds

42 Commodities Futures and Derivatives

46 Structuring a Canadian Hedge Fund

53 Raising Capital

54 The Rise of Alternative in Canada: The Case for Emerging Managers

58 Foreign Investors in Canadian Hedge Funds

62 The Canadian Asset Raising Landscape

66 Thank You to Our AIMA Canada Handbook Sponsors

83 Member Directory: Hedge Fund and FoHF Managers

97 Member Directory: Service Providers

Introduction OVERVIEW OF CANADA’S HEDGE FUND INDUSTRY

Gary Ostoich Chair, AIMA Canada President, Spartan Fund Management

The Canadian hedge fund industry has come a long way from its inception in the late 80s/early 90s. AUM continues to grow rapidly, reflecting the quality of managers, which has never been higher, the confidence of institutional investors, and the respect that the Canadian financial industry has earned in the international arena. The establishment of the Canada However, there were a number of National Group of AIMA in 2003 was strategies and managers that did an important event for the industry in very well and provided outstanding terms of bringing Canadian alternative benefits to their investors in the most investment managers, service providers challenging of times. Although some and investors together to represent managers closed down, the industry has the industry with a common voice. emerged stronger than ever. AIMA Canada’s mandate includes Today, Canadian hedge fund managers policy development, promoting sound continue to perform very well practices, investor education and liaising compared to equity markets and the with regulatory bodies. majority of funds have exceeded pre- What happened in Canada in 2008, 2008 high-water marks. was for the most part, a microcosm of KCS Fund Management and Simon what happened globally – a number of Fraser University in British Columbia funds in the Canadian market were hit published a paper in 2009 entitled hard and especially highly levered funds “Risk and Return in the Canadian or those focused exclusively on long- Hedge Fund Industry” (an AIMA biased equity strategies. Canada-Hillsdale Research Award

6 | INTRODUCTION winner) about the benefits of investing Another positive sign for the industry is with Canadian hedge fund managers. increasing allocations from institutional The paper examined a broad range investors inside and outside Canada of strategies and compared Canadian who are attracted to the performance performance with hedge funds located and institutionalization of Canadian in other jurisdictions – concluding fund managers and who wish to access that Canadian hedge fund managers Canadian funds, whether through provide very attractive opportunities to Canadian based or Canadian and non-Canadian investors. accessing Canadian managers directly. From a regulatory perspective, Canada There is no doubt that the shape of the has had a comprehensive framework Canadian industry has changed over for money managers, including hedge the years, and will continue to change. High-caliber managers continue to and additional registration requirements enter the industry – typically from have been implemented; however, large financial institutions – creating while the additional regulatory burden additional choice and opportunity for continues to be a challenge for new Canadian and international investors. managers, it has not hampered growth in As well, we have seen the number of our business. On the positive side, there strategies being traded within Canada is a better understanding by Canadian expand and some Canadian-based regulators about hedge funds and their managers focused on international markets. This has resulted in a dramatic which is a good thing for the industry. shift and growth in the AUM of the industry, which is estimated, to have In recent years, there has been grown from $12 billion five years significant progress in terms of the ago to over $30 billion today. It is institutionalization of Canadian hedge interesting to note a record number of fund managers. Better businesses are Canadian based hedge funds have “hard being built – focusing on operations, closed” over the past 12 months. governance, risk management, separation of duties and transparency. All of these factors bode very well As a result, a number of Canadian for the future of the Canadian hedge managers are ranked on a global basis fund industry. as top quality managers – from both an infrastructure point of view and a return/risk point of view.

2012 AIMA CANADA HANDBOOK | 7 ABOUT AIMA CANADA

Eamonn McConnell Deputy Chair, AIMA Canada Portfolio Manager, Kensington Capital Partners

AIMA Canada, a National Group of the Management Association (AIMA), was formed in March 2003 to act as the voice of the alternative investment industry in Canada.

AIMA was established in 1990 as a pre-eminent voice; to develop sound direct result of the growing importance practices, enhance industry transparency of alternative investments in global and education; and to liaise with the investment management. AIMA is a not-for-profit international educational investors, the media, regulators, and research body that represents governments and other policy makers. practitioners in hedge fund, futures In addition to working with regulators, fund and currency fund management – holding luncheons and information whether managing money or providing sessions, AIMA Canada has developed a service such as , several publications focused on Canadian administration, legal or accounting. hedge funds. My fellow AIMA Canada AIMA’s global membership comprises executives include: over 1,300 corporate members, in over 40 countries and AIMA Canada Chairman – Gary Ostoich, President now has over 80 corporate members of Spartan Fund Management including approximately 48 hedge fund Secretary – Andrew Doman, COO of and FoHF managers. Man Investments Canada Corp. The objectives of AIMA and AIMA Treasurer – Christopher Pitts, Partner Canada are to provide an interactive and at PricewaterhouseCoopers LLP professional forum for our membership Legal Counsel – Michael Burns, and act as a catalyst for the industry’s Partner at McMillan LLP future development; to provide leadership to the industry and be its COO – James Burron, AIMA Canada

8 | INTRODUCTION CAIA: EDUCATION IN ALTERNATIVES

James Burron, CAIA Chief Operating Officer AIMA Canada

The progeny of AIMA and the Center for International Securities and Derivatives Management (CISDM) - represented by Florence Lombard and Thomas Schneeweis, respectively - the Chartered Alternative Investment Analyst (CAIA) designation has become the global mark of alternative investment accreditation.

Since the program was officially topics such as cat(astrophe) bonds and launched in 2002, over 5,400 people weather derivatives. It is assumed that worldwide have attained the CAIA candidates have a fairly broad and deep designation (including over 300 in knowledge of traditional investments Canada). CAIA Charterholders hold and a pre-test is recommended to membership in the CAIA Association, ensure the recommended base of which is run out of its world understanding is present. headquarters in Amherst, Massachusetts CAIA candidates gain in-depth with over a dozen chapters worldwide, knowledge on virtually every alternative including three active Canadian investment area of study from both sub-chapters in Toronto, Montréal academics and practitioners who lead and Vancouver. their respective spheres in experience The Curriculum and ability to make the subjects clear The curriculum, tested bi-annually with and relevant. a 2-level exam format, includes hedge Bene!t of Membership funds/funds of hedge funds and related As a founding association, all strategies, commodities, derivatives employees of members of AIMA (including options, futures and various (including those of AIMA Canada) are credit-linked instruments) topics as well eligible to receive a 25% discount on as private equity, public and private real first-time exam fees. (A savings of over estate investment (direct and indirect) USD 625 per employee.) and even newer (so-called “alt-alt”)

2012 AIMA CANADA HANDBOOK | 9

About Canada 12 | ABOUT CANADA TORONTO: CANADA’S BUSINESS AND FINANCIAL CAPITAL

With a population of close to 2.5 million, Toronto is the business and financial capital of Canada and represents the third-largest North American financial services centre after New York and Chicago. The bulk of Canadian hedge fund managers are situated here.

Situated only a travel distance banks, eighteen foreign bank subsidiaries, from the aforementioned cities – gate- twenty-one branches of foreign banks, to-gate flight time is approximately over a hundred and twenty securities 90 minutes from New York, an hour from Chicago – Toronto makes an ideal adjunct stop for international investors makes one of the largest contributions making their regular North America due to the local economy and sustains many diligence rounds. other related industries as a leading Toronto is home to well over 80 hedge consumer of resources, including law, fund managers and has spawned a accounting, information technology, growing and exceptionally dynamic education/training, and business hedge fund and alternative investment services. It also hosts a growing list of “ecosystem” with new players constantly entering the market as spinoffs from seven of the top ten hedge fund local trading desks, traditional investment managers and other hedge funds. located in Toronto. With an impressive international International investment managers reputation for safety, soundness and planning a visit would do well to know stability, Toronto is also recognized as a that Toronto has over thirty >$1 billion dollar pension plans – three of Toronto’s is home to the Toronto Stock Exchange public pension plans rank among the (the “TSX”) – the third largest exchange top sixty in the world – that manage an in North America and the seventh largest aggregate of close to US$500 billion. in the world by market capitalization Canadian pension plans are well-known – as well the vast majority of Canada’s for embracing alternative investments, including hedge funds (both managed including at last count, ten domestic domestically and by foreign managers).

2012 AIMA CANADA HANDBOOK | 13 14 | ABOUT CANADA MONTRÉAL: CANADA’S INTERNATIONAL FINANCIAL CENTRE

Montréal is Canada’s second largest city with a population of over 1.6 million and North America’s 7th largest, and has a long history of leadership in financial services and pension plan management as well as being home to the Montréal Exchange, the centre of derivatives trading in Canada. Five distinguished finance universities and over 2,000 CFA charterholders reside in and around the city.

Although just a short distance – less than Montréal – a local body formed by Québec provincial government in collaboration with the Montréal Toronto), what makes Montréal unique Exchange and the City of Montréal to is its bilingualism (French and English) promote Montréal as an international making it an ideal gateway between the economies of Europe and America. international transactions. Québec (the Canadian province where Several of Canada’s chartered banks have Montréal is situated), it has the ability to operate seamlessly in English and other the management of some of Canada’s largest public pension plans such as the residents are bilingual while another 18% Caisse de dépôt et placement du Québec are trilingual. (the Caisse), the Public Sector Pension This diversity has made Montréal an Investment Board and several large attractive place for international business. corporate plans. As witness, Montréal is home to more Indeed, the Caisse ranks among the than sixty international organizations, largest portfolio managers in North more than 1,250 foreign subsidiaries and America and is widely considered one corporations and has the highest number of the leading public fund managers of consulates in North America outside in Canada. It has furthermore been of New York. on the forefront internationally in the In addition, over one hundred Montréal- acceptance of alternative investments and, anchored by the Caisse’s tutelage awarded the International Financial Centre (“IFC”) accreditation by the its own hedge fund and alternative International Financial Centre of investment expertise.

2012 AIMA CANADA HANDBOOK | 15 16 | ABOUT CANADA VANCOUVER: CANADA’S GATEWAY TO THE PACIFIC

Vancouver repeatedly ranks as one of the world’s most livable cities. Featuring a dynamic internationally-focussed business community – many with strong ties to the rapidly-growing Asia-Pacific region – not to mention modern urban amenities situated just minutes away from world-class ski resorts, pristine beaches and spectacular old-growth forests.

Financial services employ more than home to one of the world’s largest and 55,000 people in the greater Vancouver vibrant Asian immigrant/expatriate area (which consists of over 1.2 million communities. people). And while Vancouver’s financial All five of Canada’s largest banks have services industry initially started significant operations in Vancouver to support the mining and forestry as well as several international banks, industries – for many years the key including the Canadian headquarters of drivers of the city phenomenal growth London’s HSBC – one of the world’s – now local financial services companies largest banks. operate in global markets, leveraging and facilitating Vancouver’s position as a In addition, the International Financial global commercial gateway. Activity Act (IFAA) promulgated by the province of British Columbia Shared language and customs and (or BC, the Canadian province proximity with the United States – where Vancouver is situated) allows Vancouver is only one hour from corporations carrying out specified Seattle, two hours from San Francisco international financial activities in and three hours from Los Angeles by British Columbia, where one part of air – are critical assets, as are strong the transaction is with a non-resident, cultural connections to emerging to recoup up to 100% of provincial Asian economies. Regarding the corporate income taxes. Thus, latter, Vancouver has in recent years Vancouver is developing an important successfully established itself as a niche in international treasury and prominent international centre for financial functions, including factoring, businesspeople and investors from the import/export financing, foreign Asia-Pacific region looking to establish exchange, and back-office support. a North American beachhead, and is

2012 AIMA CANADA HANDBOOK | 17 18 | ABOUT CANADA CALGARY: WESTERN CANADA’S FINANCIAL CENTRE

Calgary – a city of over 1 million people situated in the southern part of the province of Alberta – is Western Canada’s business centre and has more head offices per capita than any other Canadian city. While Toronto has traditionally been viewed as Canada’s financial centre, the growth in Calgary – largely but not exclusively due to its strength in the energy sector – means that the city has been gaining a reputation as a global financial centre.

Although the energy sector drives funds, many of which have leveraged Calgary – the province of Alberta their homegrown expertise in the produces about 70% of Canada’s crude energy markets. oil and 80% of its natural gas – the Given its strong entrepreneurial rapid growth of this sector has fuelled culture, Calgary is also the a whole host of ancillary industries headquarters for the TSX Venture catering not to just the financing Exchange, an exclusively micro- required by the energy industry but cap and small-cap stock exchange also to managing and diversifying (affiliated with Toronto’s TMX the great wealth created by it and its Group) that provides much-needed participants. Indeed, since the early access to capital for early-stage 1990s, Calgary’s financial services companies in all industry sectors sector has become a major contributor across Canada. to the strong economic growth in Alberta, which is considered among the fastest growing economies in North America. Calgary’s financial services sector includes all six of Canada’s major chartered banks, strong regional banks, international investment banks and numerous financial investment firms. This concentration of business and financial talent has spawned several strong Calgary-based hedge

2012 AIMA CANADA HANDBOOK | 19 CANADIAN BANKS: PRIME EXAMPLES OF STABILITY

Les Marton Head of Capital Introduction & Hedge Fund Alfredo D’Onofrio Consulting Services Director, Prime Services Scotiabank Scotiabank

Crises, what Crises? The credit crisis of 2008 and the near collapse of certain !nancial institutions previously thought “unassailable” has been well-reported, but little has been said of how Canadian banks remained solvent during the many recent global banking crises.

Why Canada’s Banks Survived the Crisis The Canadian Bankers Association points to four key factors for the success of the 1 a. The major investment banks are anchored by solid deposit-taking institutions c. Lending decisions are on a case-by-case basis, extending credit to borrowers that can repay their loans 2. Canada’s strong regulatory system: Financial Institutions (OSFI) for regulation and the Financial Consumer Agency of Canada (FCAC) for consumer affairs 3. Strong capitalization of the national banks: a. As some of the best capitalized in the world, Canadian banks greatly exceed the guidelines set by the Bank for International Settlements

1 March 2009 remarks by Nancy Hughes, President & CEO of the Canadian Bankers Association to the House of Commons Standing Committee on Finance http://www.cba.ca/contents/files/presentations/ pre_20090309_01_en.pdf

20 | ABOUT CANADA b. Strategically raising equity in the marketplace when appropriate 4. Prudent mortgage lending: a. The vast majority of mortgages are prime and only 20% are securitised b. Mortgages with less than 20% down must be insured c. Mortgage arrears are very low (0.33% for the seven largest Canadian banks) Impact of the Global Financial Crisis and Hedge Funds’ Response Canadian banks have capabilities that dovetail nicely with some of the post-2008 needs of hedge fund managers. Hedge funds by virtue of their strategies are poised to capitalize on the ensuing market opportunities. However these same developments have caused prudent fund managers Six key trends have emerged to help shape industry thinking: 1. Vastly different macro environments, both from an economic and regulatory relationships jurisdictionally. 2. Investors are demanding more transparency of a hedge fund’s infrastructure, counterparty relationships, portfolio structures and risk management. 3. Hedge funds require a greater legal understanding of asset segregation and re- hypothecation rules, and how they apply to their accounts. 4. The multiple-prime broker scenario has increasingly become the standard structure for all hedge funds with a critical asset base. 5. Hedge funds need advanced operations platforms to manage these multiple counterparty relationships. 6. Many large hedge funds have entered into multi-prime relationships in order to manage counterparty risk.

Multiple-Primes and the Case for Jurisdictional Diversi!cation hedge funds: Access to a larger pool of securities lending and hard to borrow securities Multiple capital introduction sources

2012 AIMA CANADA HANDBOOK | 21 Of course, simply having multiple prime brokers is not a panacea for all hedge fund prime arrangement, a thorough analysis of each counterparty is required. Having the right counterparties is clearly critical and encompasses other factors such as service The lessons of 2008 are all-too fresh and the strength of the prime broker and its bank parent need to be carefully considered. Fortunately for Canadian banks, they have and are extremely well-regarded internationally as the following chart from Standard & Poor’s indicates.

S&P Credit Ratings* Rank Name Today Dec, ‘07 Credit Watch 1 Bank of Nova Scoa AA- AA- Stable 2 Royal Bank of Canada AA- AA- Stable 3 Toronto-Dominion Bank AA- AA- Stable 4 BNP Paribas AA- AA+ Negave 5 Bank of Montreal A+ A+ Stable 6 CIBC A+ A+ Stable 7 Wells Fargo & Co. A+ AA+ Negave 8 Deutsche Bank A+ AA- Negave 9 US Bancorp A AA Stable 10 JPMorgan Chase A+ AA- Negave 11 Barclays Capital A+ AA- Negave 12 Credit Suisse Group A+ A+ Negave 13 Société Générale A AA- Stable 14 UBS A AA Negave 15 Goldman Sachs A- AA- Negave 16 Bank of America A- AA Negave 17 Cigroup A- AA Negave 18 Morgan Stanley A- AA- Negave

* Long Term Local debt rating as at February 3, 2012

22 | ABOUT CANADA The global economic landscape is, in some respects, as fluid as it has been in some time and concerns about counterparty risk are heightened. The implications of the 2011 U.S. downgrade and the ever-looming European debt crisis, combined with pending regulatory changes have been themes that put into question the strength of many of the world’s largest global investment banks. While continuing questions around Greek default or restructuring may not necessarily cause European banks to become insolvent (outside of Greece), contagion fears and risk aversion could no doubt lead to further downgrades of some banks. Basel III and the Dodd-Frank legislation are expected to exert additional pressure to banks’ business and services. According to a November 2010 McKinsey study, Basel III1 2019 the European banking industry will require approximately $1.1 trillion of additional Tier 1 capital, $1.3 trillion of short-term liquidity and $1.3 trillion of short-term funding. The capital need is roughly equivalent to almost 60% of European and U.S. Tier 1 capital outstanding. The Dodd-Frank legislation in the U.S. looks to force banks to reduce business activities deemed outside the scope of traditional banking norms. The long- term impact is difficult to assess, however U.S. banks are rethinking business models to accommodate the new regulations, including the winding down/ spinning out of desks.

The Road Ahead While the global economy had, until quite recently, rebounded from the tumult of late 2008, the path of recovery has shown itself to be uneven and fragile. Between the sovereign debt crisis in Europe, the introduction of new banking rules through Basel III and Dodd-Frank legislation and the continuing concern over rising debt levels, the challenges that face hedge funds have certainly grown in number and complexity. Within the global topography of the banking industry, there are few players that have proven themselves based on their ability to successfully navigate through the financial crisis – Canadian banks are among them.

1 Basel III: Now the hard part for European banks http://www.mckinseyquarterly.com/Basel_III_Now_the_ hard_part_for_European_banks_2704

2012 AIMA CANADA HANDBOOK | 23 FUND ADMINISTRATION FOR THE GLOBAL HEDGE FUND INDUSTRY

Chris Pitts Partner, Audit and Assurance Group PricewaterhouseCoopers LLP

The fund administration industry in Canada is a thriving part of the Canadian !nancial services economy, with participants across the spectrum from the Canadian boutique administrators to multi-faceted global service providers. In addition, Canadian administrators play a signi!cant role in the global hedge fund industry and Canada’s broad reach in this area has historically not been well-known or fully appreciated.

History of an Industry Time Zone/Location – an The fund administration industry in advantageous Eastern Time Zone and Canada first experienced substantial convenience of being only an hour or growth in the 1990s in lock-step with so away from New York and Boston; the growth of the largely U.S.-driven Qualified Personnel – Canada has hedge fund industry. At that time, established financial centres with an this level of growth, combined with abundance of qualified professionals increasing complexity of fund vehicles and support staff familiar with and investment strategies, as well as the capital markets. These human certain U.S. tax rules impacting offshore resources also have a similar training funds, resulted in many offshore centres and work ethic as found in most being constrained from an infrastructure U.S. cities, together with cost- and resource perspective. These effective wages compared to their factors were critical in driving fund U.S. counterparts; administrators to look to alternative locations for their operations around Communications – strong the world. Toronto thus emerged as telecommunications infrastructure at a key centre, with a number of global comparably cheaper costs to Europe administrators establishing operations to and the Caribbean; and, take advantage of some key attributes:

24 | ABOUT CANADA Tax considerations – free trade and tax regimes are also increasing the agreements, particularly with the complexity of information reporting U.S., as well as Canadian safe requirements, from anti-money harbour tax rules supporting the laundering regulatory requirements provision of administration services to the impact of the Dodd-Frank to offshore funds. reforms, the U.S. Foreign Account Tax Compliance Act (FATCA) and A Thriving Industry Europe’s Alternative Investment Fund In the last decade, the growth of the Manager Directive (AIFMD). The global fund administration industry move to outsourcing has never been in Canada has continued, driven by more compelling, and the strength of a variety of factors including a clear the infrastructure capabilities that are and distinct advantage over hurricane- available in Canada never better. prone offshore centres, the impact of increasing competition in the Members of AIMA Canada cover the administration industry that has led spectrum from the locally-focused organizations to set up key centres administrator to the global player with of excellence, focused tax incentives operations in numerous countries that by certain levels of government in service the entire gamut of the hedge different parts of the country, and fund industry, retail and/or listed vehicles the positive afterglow that Canada has through to privately offered funds. experienced in managing its financial system through the global economic crisis. As a result, while the most significant concentration of operations remains in Toronto, there are centres across the country in Halifax, Montréal and Vancouver, and the number of global administrators operating in the country has grown significantly. Going Forward In this current environment of additional regulation and increased pressure from investors for transparency and robust operational infrastructure, fund administrators continue to expand their service offerings to enable managers to outsource more processes than ever before. Changes in regulatory

2012 AIMA CANADA HANDBOOK | 25

Regulation, Compliance & Structuring SECURITIES REGISTRATION AND COMPLIANCE

Darin R. Renton Partner Stikeman Elliott LLP

In Canada, securities regulation is a matter of provincial and territorial jurisdiction. Each of the thirteen jurisdictions has its own securities laws, policies and rules that are administered by a securities regulatory authority or regulator. However, the registration rules have been harmonized, streamlined and modernized, so that compliance with the harmonized national rules will generally result in compliance with the rules in all provinces and territories, with the largest jurisdiction, Ontario, typically acting as lead regulator.

Hedge fund managers in Canada, like they are in the business of trading, other asset managers, may be subject in the business of advising, holding to several types of registration. The themselves out as being in the business registration requirements and ongoing of trading or advising, or acting as an registrant obligations are stringent and investment fund manager. If a firm comprehensive, demanding that hedge engages in more than one of these fund managers focus on compliance. registerable activities, then (unless it is otherwise exempt) the firm must National Instrument 31-103 Registration register in all applicable categories. Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”) 1. Registration Requirements establishes registration requirements For hedge funds operating in Canada, and exemptions and generally regulates the dealer, adviser and investment registrants’ activities in all Canadian fund manager registration categories jurisdictions. Under Canadian securities are relevant: laws, firms generally must register if

28 | R EGULATION, COMPLIANCE & STRUCTURING (a) Dealer Registration an EMD, may trade in virtually any Persons who are in the “business of with any client (subject to trading” in securities are required to be “know your client” criteria and the registered as a dealer in each Canadian appropriateness of each trade). jurisdiction where purchasers reside. (b) Adviser Registration Hedge fund managers typically address Canadian securities laws require a the dealer registration requirement person or company providing portfolio by registering as an exempt market management services for a Canadian dealer (“EMD”) or retaining a third hedge fund to be registered as an party dealer to facilitate their offerings. adviser in the local jurisdiction where An EMD is permitted to trade in the hedge fund receives the advice the exempt market (a) in securities (typically, the jurisdiction in which the being distributed under a prospectus fund is managed). Adviser registration exemption or (b) with persons or exemptions are available to international companies to whom a security may advisers and, in certain jurisdictions, to be distributed under a prospectus non-resident sub-advisers. exemption (for example, trading with an accredited investor). “Trading” (c) Investment Fund Manager Registration is broadly defined under Canadian Canadian securities laws require a securities laws to include not only the person that directs the business, sale or disposition of a security for operations or affairs of an investment valuable consideration, but also any fund to be registered as an investment act, solicitation or conduct which is fund manager (“IFM”) in the province directly or indirectly in furtherance of or territory in which its head office the sale or disposition of a security. is located. A Canadian IFM is also Accordingly, a hedge fund manager required to register in other provinces that is not registered as a dealer is not or territories if the fund it manages has permitted to contact and deal directly security holders that are local residents with prospective clients. Any such and the IFM or the fund has “actively contact would generally be considered solicited” local residents to purchase an act in furtherance of a trade and securities of the fund. An exemption would accordingly trigger the dealer from the requirement for Canadian registration requirement. investment fund managers to register in jurisdictions other than the one in A second dealer category is that of which their head office is located has an investment dealer which, unlike been extended to September 28, 2012.

2012 AIMA CANADA HANDBOOK | 29 2. Ongoing Compliance Requirements reporting, filing, record-keeping, client identification and compliance (a) Registration regime requirements, as well as certain NI 31-103 regulates the registration of other monitoring requirements and restrictions on dealing with designated requirements for registration, including individuals and groups. Firms must comply with the monthly reporting requirements, as well as ongoing requirements under federal anti- compliance requirements for registrants. terrorist financing and UN sanction These include requirements with respect regulations. Generally, firms are required to complete a monthly suitability, client disclosure, safekeeping prescribed reporting form and submit of assets, recordkeeping, account activity the form to their principal regulator on reporting, complaint handling, soft- the fourteenth day of each month. and other compliance procedures. (d) Privacy Legislation Privacy legislation, enacted in Canada (b) Fees at both the federal and provincial Fees payable by registrants vary levels, applies to the collection, use and depending on the jurisdiction of disclosure of “personal information” registration. In some jurisdictions of an individual by an organization in fees are fixed for the firm and for the the course of commercial activities. individuals registered under the firm, As part of its obligations, a registered while in others fees are based on the firm is accountable for the information revenues earned by the firm in the it collects, may only collect personal jurisdiction. For example, in Ontario information that is necessary for the registered and exempt firms are purposes identified to the subject required to pay an annual capital market individual, and must obtain consent participation fee based on revenues of the individual to collect, store and earned in Ontario. disclose personal information. (c) Anti-Money Laundering and Anti- 3. Other Ongoing Filing Requirements Terrorist Financing Legislation Hedge funds that distribute their Firms are subject to Canadian anti- securities pursuant to certain private money laundering and anti-terrorist placement exemptions (including the financing legislation. Under this Minimum Amount and Accredited legislation, registrants face certain Investor exemptions as detailed in NI

30 | R EGULATION, COMPLIANCE & STRUCTURING 45-106) must file a report of exempt distribution is completed. distribution in the required form, Most hedge funds are also required together with the prescribed fees, with to file annual and semi-annual the securities regulatory authority in the financial statements with the securities province or territory in which the trade regulatory authorities. However, occurs. A hedge fund manager may elect a hedge fund is exempt from this to file such reports within ten calendar requirement if the applicable financial days of each trade (the usual deadline) statements are prepared and delivered or, for convenience, not later than 30 to its securityholders in accordance days after the financial year-end of the with applicable securities law and fund. Depending on the jurisdiction, certain other conditions are met. the filing fees are either fixed or equal to a percentage of the gross proceeds Conclusion realized from the sale of securities in As noted, Canada has a well-developed such jurisdiction. Such reports disclose system of fund manager registration personal information such as the and regulatory oversight over all asset purchaser’s name, address, telephone managers—both long-only and hedge number and the number and value of fund management companies. any securities purchased. AIMA Canada has an active dialogue There are generally no requirements with its members and regulatory to provide an offering memorandum bodies in order to maintain a soundly to investors and limited prescribed regulated and successful asset disclosure for an offering memorandum management industry built on the long- (unless the fund is being offered under standing foundations of registration, offering memorandum exemption). If compliance and operational controls. an offering memorandum is delivered in connection with a distribution of securities in reliance on certain private placement exemptions, it will typically need to be filed with the appropriate securities regulator. If the hedge fund is conducting multiple closings, the offering memorandum must be filed on or before the tenth day after the first closing, otherwise it must be filed on or before the tenth day after the

2012 AIMA CANADA HANDBOOK | 31 MARKETING & SALE OF FOREIGN DOMICILED INVESTMENT FUNDS IN CANADA

Michael Burns Partner McMillan LLP

This article provides an overview of the securities law requirements in Canada relating to the marketing and sale of foreign domiciled investment funds (“Foreign Funds”) on a private placement basis, with a specific focus on the registration, offering document and filing requirements which the manager of a Foreign Fund will need to consider.

Registration Requirements beyond the scope of an entity’s Any person proposing to engage in registration (or exemption from the business of a dealer or investment registration) is a contravention of adviser in Canada or who acts as Canadian securities laws and may investment fund manager may be result in the assessment of sanctions required to register (the “Registration and penalties. Requirement”) with one or more What Triggers the Requirement to Register? provincial/territorial securities Generally speaking, entities will be regulatory authorities under the required to register if they are: (i) in aforementioned National Instrument the business of, or holding themselves 31-103. There are only a limited out as being in the business of, trading number of exemptions available from securities (the dealer category); (ii) in the Registration Requirement. Failing the business of, or holding themselves to properly register in an appropriate out as being in the business of, advising category (or take the necessary steps in respect of the buying and selling of in order to rely on an exemption from securities (the adviser category); or (iv) registration) or engaging in activities

32 | R EGULATION, COMPLIANCE & STRUCTURING acting as an investment fund manager. typically be required to engage in the marketing and sale of Foreign Funds Dealers and Advisers under NI 31-103 are as Investment In determining if registration as a Dealer, Exempt Market Dealer and dealer or adviser is required, Canadian Investment Fund Manager. regulators consider the type of activity and whether it is carried out for a Canadian securities regulatory business purpose. This “business authorities do not apply a “look purpose” criterion is referred to as through” test in relation to investment the “business trigger” for registration. funds as it relates to the adviser Canadian securities regulatory registration requirement. The authorities may consider a variety investment advice is considered to of factors in determining whether be provided to the investment fund the business trigger has been met itself rather than to “flow through” including but not limited to: (i) whether to the investors in that investment a specified activity is carried out with fund. While registration as an adviser repetition, regularity or continuity; (ii) is required for Canadian domiciled whether the activity includes promoting investment advisers or for the provision securities or offering advice to solicit of investment advice to investment securities transactions; (iii) whether a funds which are established under person acts as an intermediary between the laws of a jurisdiction of Canada, a seller and buyer of a security; and a foreign domiciled adviser would (iv) whether a person expects to be generally not be required to register compensated for the activity. as an adviser in Canada if its activities are restricted solely to providing Investment Fund Managers investment advice to Foreign Funds Investment fund managers are not (even if Canadian residents invest in subject to a business trigger test under such Foreign Funds). NI 31-103. This generally means that if a firm carries on the activities of an Each category of registration under investment fund manager (i.e., managing NI 31-103 contains a detailed set the day to day business and affairs of an of proficiency, minimum capital, investment fund), it must register. , record keeping, financial reporting, conflict of interest, Categories of Registration annual fee and other compliance As detailed in the preceding article requirements. These requirements must Securities Regulation and Compliance, be met in order to obtain and maintain the registration categories that would

2012 AIMA CANADA HANDBOOK | 33 registration as a dealer, adviser or the dealer is registered under investment fund manager. Registration the securities legislation of the in more than one category and foreign jurisdiction in which its province/territory may be necessary, head office or principal place of depending on the scope of activities business is located in a category of being conducted in Canada. registration that permits it to carry on the activities in that jurisdiction Exemptions From the Dealer that registration as a dealer would and Investment Fund Manager permit it to carry on in the local Registration Requirement jurisdiction; International Dealer Exemption the dealer engages in the business of The international dealer exemption a dealer in the foreign jurisdiction allows non-Canadian dealers who in which its head office or principal are registered to deal in securities in place of business is located; the jurisdiction where their principal place of business is located to provide the dealer is acting as principal restricted services to permitted clients or as agent for the issuer of the without having to register under NI 31- securities, for a permitted client, or 103. Generally speaking, this exemption for a person or company that is not restricts the international dealer’s a resident of Canada; activities to contracting only with the dealer has submitted to the 1 permitted clients in relation to trades in securities regulatory authority 2 foreign securities . a completed Form 31-103F2 An international dealer must satisfy Submission to Jurisdiction and each of the following conditions in Appointment of Agent for Service; order to rely on the international dealer and exemption: the dealer complies with the annual the head office or principal place of filing/fee requirements as long as it business of the dealer is in a foreign continues to rely on the exemption. jurisdiction;

1 Generally speaking, for the purposes of the international dealer exemption the permitted client category includes large institutional investors such as banks, pension funds, trust companies, registered advisers and dealers and very high net worth (over $5,000,000) individuals.

2 For the purposes of the international dealer exemption, foreign securities include securities issued by an issuer formed under the laws of a foreign (non-Canadian) jurisdiction or issued by a foreign government

34 | R EGULATION, COMPLIANCE & STRUCTURING In addition, in order to rely on the 2012. The exemption is expected to be international dealer exemption in repealed once multilateral instrument respect of a trade with a permitted 32-102 – Registration Exemptions client the international dealer must for Non-Resident Investment Fund provide the client with prescribed Managers and multilateral policy, disclosure relating to the dealer’s non- 31-202 – Registration Requirement for resident status, unless the client is a Investment Fund Managers detailing person registered under the applicable the circumstances under which a Canadian securities legislation. foreign domiciled manager would have to register as an investment fund The international dealer exemption may manager are adopted (following a be of assistance to foreign managers period of public consultation) by the wishing to market Foreign Funds in securities regulatory authorities in Canada. However, if the manager is not the applicable provinces and territories able to rely on the exemption or if it of Canada. wishes to market the Foreign Fund to a broader group of potential investors in If Multilateral Instrument 32-102, Canada, it may be necessary to engage Registration Exemptions for Non- either an entity which is able to rely Resident Investment Fund Managers is on the international dealer exemption brought into force in its current form, (in respect of trades with permitted foreign domiciled investment fund clients) or a locally registered dealer managers may be required to register to intermediate the investment by in the Province of Ontario, Québec, Canadian residents in the Foreign Fund. New Brunswick or Newfoundland and Labrador if the manager has engaged Temporary exemption for foreign Investment in active solicitation of investors in Fund Managers such jurisdiction, subject to certain Under the current provisions of NI limited exemptions. 31-103, the investment fund manager registration requirement does not apply If Multilateral Policy 31-202, to a person or company that is acting as Registration Requirement for an investment fund manager if its head Investment Fund Managers is office is not in a jurisdiction of Canada. brought into force in its current However, this temporary exemption is form, foreign domiciled investment currently set to expire on September 28, fund managers would be required to

2012 AIMA CANADA HANDBOOK | 35 register in the remaining jurisdictions Canadian securities laws. in Canada (British Columbia, Alberta, Securities legislation in several Saskatchewan, Manitoba, Prince Edward provinces and territories of Canada Island or Nova Scotia, Nunavut, the provide for statutory rights of action Yukon Territory or the Northwest for purchasers to sue for damages or Territories) if the manager (i) carries rescission in the event that an offering on the functions and activities of memorandum is found to contain a an investment fund manager in that misrepresentation.3 A description of jurisdiction; or (ii) has its head office these statutory rights is required to be or principal place of business in the included in any offering memorandum jurisdiction or conducts the activities provided to potential purchasers. In of an investment fund manager addition, there may be Canadian- from a physical place of business in specific disclosure (e.g., additional such jurisdiction. Canadian specific risk factors or Use of O"ering Documents tax considerations) in relation to an The distribution of materials to investment in a Foreign Fund which prospective purchasers in Canada may need to be included in a offering describing the business of the Foreign memorandum for a Foreign Fund Fund in the context of an offering of in order to prevent that document securities of the Foreign Fund which from containing a misrepresentation are designed to assist the prospective for Canadian purposes. As a result, purchaser make an investment it is advisable for managers of decision in relation to the securities Foreign Funds to prepare a Canadian of the Foreign Fund may result in “wrapper” for the offering documents such materials being considered as of the Foreign Fund which contains an “offering memorandum” under Canadian specific disclosure. applicable Canadian securities legislation. The subscription materials for an Care should be exercised in relation to investment in a Foreign Fund will also marketing materials which are provided need to be customized (usually through to potential purchasers in Canada to the use of a schedule or addendum to ensure that they would not be considered be completed by Canadian purchasers) to be an offering memorandum under to ensure that the distribution of the

3 A “misrepresentation” is generally defined as (i) an untrue statement of a material fact, or (ii) an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it is made.

36 | R EGULATION, COMPLIANCE & STRUCTURING securities of the Foreign Fund may occur in Canada on a basis which is exempt from the requirement for the Foreign Fund to file and clear a prospectus in Canada. Filing Requirements As mentioned in the previous article, Securities Regulation and Compliance, the distribution of securities of a Foreign Fund in Canada in reliance on an exemption from the prospectus requirement will necessitate the filing of a prescribed form of report of the exempt distribution with the securities regulatory authority in each province or territory where purchasers of securities are located. In addition, a copy of any offering memorandum (and any amendment thereto) used in connection with the distribution of securities may be required to be filed with the securities regulatory authority in the jurisdictions where purchasers of securities of the Foreign Fund are located. Conclusion Canada features a comprehensive securities regulatory system to maintain integrity in its capital markets. Managers of Foreign Funds should consult with Canadian legal counsel prior to engaging in any marketing activities in relation to Foreign Funds in Canada.

2012 AIMA CANADA HANDBOOK | 37 TAX CONSIDERATIONS FOR FOREIGN FUNDS

Vinod Ramnarine Manjit Singh Manager, Financial Services Associate Corporate Tax Group Wilson & Partners LLP* PricewaterhouseCoopers LLP

Opportunities & Tax Considerations There are extensive opportunities in Canada for foreign hedge funds. Canada offers opportunities not only for investment, but also for raising capital and engaging Canadian service providers in Canada’s vast talent pool that supports the fund industry’s outsourcing needs.

Tax considerations often influence Foreign Hedge Funds Engaging how these opportunities are pursued. Canadian Service Providers From this perspective, foreign fund No matter what opportunity a foreign managers should be focused on how fund may pursue in Canada, it is to structure Canadian investments to prudent for the fund to do so without minimize Canadian withholding and risking carrying on business in Canada. income tax on investment returns as If a foreign fund was considered to well as structuring funds, including carry on business in Canada, profits feeder funds, in a tax-efficient manner from that business (including interest, to raise capital from Canadian taxable dividends, fees, and trading gains) would be subject to Canadian income and non-taxable investors. In addition, tax. The phrase “carrying on business” an offshore foreign fund that engages in Canada is broadly defined and Canadian service providers will need to the concern is that foreign funds comply with the Canadian safe harbour risk carrying on business in Canada rules in order to minimize the fund’s by virtue of receiving services from Canadian tax exposure. Canadian-resident service providers

*a law firm affiliated with PricewaterhouseCoopers LLP

38 | R EGULATION, COMPLIANCE & STRUCTURING (such as investment advisors, managers, Although the term “qualified dealers) or exerting influence over such investments” is quite broad and Canadian-resident service providers. includes most types of investments, Fortunately, the Canadian safe harbour such as, debt securities, annuities, rules specifically address this tax risk. commodities, currencies, options and other types of , there is one Safe Harbour Rules important limitation in respect of The Canadian safe harbour tax rules equity securities. An equity security apply to foreign funds structured as of an entity (i.e., a corporation, corporations or trusts, and to foreign partnership, trust, entity, fund or partners of funds structured as organization) that derives more than partnerships. The safe harbour rules half its value from Canadian real and are particularly beneficial for funds resource properties will generally resident in countries with which Canada not be a “qualified investment” if does not have a tax treaty. If all of the either (a) the security is not listed necessary requirements are met, the on a stock exchange, or (b) if it is safe harbour rules will deem a foreign listed, the foreign fund, either alone fund, (or, in the case of a partnership, or together with non-arm’s length the foreign partner) not to carry on persons, owns greater than 25% of business in Canada solely by virtue of equity securities (of any class) of the engaging Canadian service providers. entity. Consequently, a foreign fund Safe Harbour Requirements that is intending to invest in securities of Canadian real property or resource Specifically, the Canadian safe harbour companies will need to undertake rules apply to “designated investment additional tax planning to mitigate services” provided to a foreign fund in their tax risks associated with engaging respect of the fund’s investments. The Canadian service providers. term “designated investment services” generally includes the provision of To be eligible for the protection investment management and advice, offered by the safe harbour rules, a brokerage services, investment foreign fund must satisfy a number administration services, back-office of other conditions. These conditions functions, custodian services and generally impose some restrictions on marketing services in respect of the a foreign fund’s ability to own equity marketing of fund units to non-resident interests in a Canadian service provider investors. However, in some cases, and, perhaps more importantly, a the services to which the safe harbour foreign fund’s ability to raise capital rules apply must be in respect of only from Canadian investors. If a foreign “qualified investments.” fund is intending to raise capital from

2012 AIMA CANADA HANDBOOK | 39 Canadian investors, additional planning fulfilled in order to facilitate Canadian involving the use of feeder funds or tax compliance by Canadian investors. partnerships can be undertaken to In addition and as discussed above, ensure the safe harbour rules still apply. foreign hedge funds that engage Canadian service providers face Foreign Hedge Funds Raising restrictions under the safe harbour Capital from Canadian Investors rules which effectively restrict their To raise capital from Canadian ability to raise capital directly from investors, a foreign fund manager Canadian investors unless the fund is may consider establishing a Canadian structured as a partnership. domiciled fund either to serve as a feeder fund to an offshore master fund, Foreign Hedge Funds Investing or as a fund that parallels a foreign in Canada fund. In Canada, a number of different Foreign hedge funds wishing to pursue investment vehicles may be used, investment opportunities in Canada including trusts, limited partnerships will be interested in minimizing and corporations. The relevant tax withholding tax levied on Canadian considerations in respect of each such sources of income earned either by type of vehicle are reviewed in the the fund directly or, if the fund is following article entitled Structuring a a flow-through entity, by its non- Canadian Hedge Fund. Canadian investors. There are some tax risks associated with Canadian income tax rules generally foreign hedge funds permitting direct require that withholding tax at a rate investment by Canadians. Regardless of 25% be withheld from certain of whether the safe harbour rules types of income paid to non-residents. are a relevant consideration or not, Generally, corporate dividends and foreign hedge funds that permit direct income distributions from a trust are investment into their funds by Canadian subject to withholding tax; however, investors should be aware that taxable residents of countries with which Canadian investors will need to consider Canada has a tax treaty may be entitled whether the “offshore investment to a reduced rate of withholding tax property” and “non-resident trust” as provided for in the treaty. Canadian rules in the Income Tax Act (Canada) income tax rules have eliminated are applicable to them, given their withholding tax on certain interest particular facts and circumstances. If payments paid to arm’s length parties, these rules are applicable to a Canadian and thus non-resident investors investor, a foreign hedge fund may have generally no longer need to rely on to deal with additional information a tax treaty to obtain a favourable requirements that will need to be withholding tax rate on interest.

40 | R EGULATION, COMPLIANCE & STRUCTURING Where a foreign hedge fund is resident on business in Canada. in a country with which Canada has a In addition, consideration needs to tax treaty, the legal status of the foreign be given to corporate governance hedge fund in the country of formation of entities within the foreign hedge may be an important consideration for fund structure. In particular, where an determining whether the fund itself entity within the foreign hedge fund would be eligible for treaty benefits in structure has a board of directors or respect of Canadian source income. trustees that includes some Canadian- Generally, Canada seeks to tax gains based directors or trustees, care must arising on the disposition of “taxable be taken to ensure that such entity is Canadian property” (TCP), subject not, inadvertently, considered to be to any relief that may be available resident in Canada by virtue of having to a non-resident investor through a its “central management and control” tax treaty. Recent amendments to the located in Canada. Generally, the definition of TCP have significantly “central management and control” of an narrowed the types of securities that entity resides in the jurisdiction where are TCP. Publicly listed shares and units the effective decision-making relating to of a mutual fund trust generally would high-level matters of the entity occurs. not qualify as TCP unless the non- A certain degree of care and diligence resident along with non-arm’s length is necessary to ensure that an offshore person holds a significant holding in the entity with Canadian based directors corporation or trust and greater than 50 and/or trustees establishes, documents per cent of the fair market value of the and continuously maintains an effective shares or units is derived from Canadian decision making process to ensure real property or resource property. that the central mind and management of the entity is located in the desired Canadian Hedge Fund Managers jurisdiction at all relevant times. Establishing a Foreign Hedge Fund A Canadian hedge fund manager that is Conclusion considering establishing a foreign hedge There has been increased interest fund to raise capital from non-Canadian in Canada recently by foreign investors must also consider the tax hedge funds, particularly in light issues outlined above. In particular, a of the perceived strength of its foreign fund managed by a Canadian financial system and its resource-rich manager will need to satisfy the safe economy. Whether looking to invest, harbour rules to ensure that the foreign raise capital or take advantage of fund is not, by virtue of receiving the country’s burgeoning hedge fund investment advice from the Canadian service industry, foreign hedge funds fund manager, considered to be carrying can do this in a tax efficient manner.

2012 AIMA CANADA HANDBOOK | 41 COMMODITIES FUTURES AND DERIVATIVES

Jennifer Wainwright Partner Aird Berlis LLP

Background of Derivatives Regulation in Canada Hedge funds whose investment strategies utilize derivatives will be subject to securities, commodities futures and/or derivatives legislation in Canada. The legislation applicable to hedge funds and their managers generally regulates dealing in and advising with respect to derivatives. While securities legislation has been streamlined across the Canadian provinces, commodities futures and derivatives legislation has not. As a consequence, such legislation differs between the provinces and territories of Canada. The province or territory in which the hedge fund is formed and in which the hedge fund manager operates will dictate which provincial legislation is applicable.

Canadian legislation has historically Three general approaches to the distinguished between exchange traded regulation of derivatives have derivatives, which are traded through developed in Canada. exchanges based on standardized Exchange Traded Derivatives – exchange contracts, and which settle Securities Regulation with the exchange as counterparty, and In the first approach, exchanged over-the-counter or OTC derivatives. traded derivatives are regulated under OTC derivatives are privately negotiated securities legislation. In the provinces contracts between two parties, often who have adopted the first approach, using standardized documentation such securities legislation extends to cover as those developed by the International “exchange contracts”. “Exchange Swaps and Derivatives Association, Inc. contracts” are futures contracts

42 | R EGULATION, COMPLIANCE & STRUCTURING or options whose performance is contracts and commodity futures guaranteed by a clearing agency and options where the contract is entered which are traded on an exchange into on a commodity futures exchange pursuant to standardized terms and pursuant to standardized terms and conditions set out in that exchange’s conditions must be registered under by-laws, rules or regulatory instruments, commodities futures legislation. at a price agreed on when the futures In these Canadian provinces, a contract or option is entered into on commodity futures contract or option the exchange. that is not traded on a commodity In these Canadian provinces, the futures exchange registered with or definition of security in securities recognized by the applicable securities legislation includes OTC derivatives, regulator or the form of which is and as a consequence, OTC derivatives not accepted under the applicable technically are governed by securities legislation, such as an OTC derivative, legislation. However, securities is considered to be a security. Dealing regulators in these jurisdictions have and advising in these instruments exempted the application of their is regulated by securities legislation. securities legislation to some OTC Historically, there has been some derivatives but not others, to capture uncertainty about the application only the OTC derivatives they wish to of securities legislation to OTC regulate (generally those involving the derivatives, depending on whether they retail market). are cash settled or physically settled. Exchange Traded Derivatives – In one of the Canadian provinces Commodities Futures Legislation which has adopted this approach, the In the second approach, exchange provincial legislative body recently traded derivatives are regulated by amended their securities legislation commodities futures legislation to contemplate the regulation of which stands separate and apart from derivatives, although the legislation securities legislation. In the provinces is not yet in force. Derivatives are which have adopted the second defined to include options, swaps, approach, any person or company futures contracts, forward contracts or engaging in or holding himself, herself other financial or commodity contracts or itself out as engaging in the business or instruments whose market price, of advising others, including a hedge value, delivery obligations, payment fund, as to trading in commodity futures obligations or settlement obligations

2012 AIMA CANADA HANDBOOK | 43 are derived from, referenced to or and advisers; however, the securities based on an underlying interest regulator in this province has exempted (including a value, price, rate, variable, the application of the legislation where index, event, probability or thing), “accredited counter-parties” are involved. but do not include commodity futures All three legislative approaches impose contracts, commodity futures options, capital, insurance and/or proficiency and specific contracts or instruments prerequisites to registration as a dealer that are designated as not being or adviser and an ongoing compliance derivatives. The legislation is platform regime. The ongoing requirements legislation, meaning that the details are not dissimilar to the ongoing of the legislation, including categories requirements imposed under securities of registration, requirements for legislation as outlined in other articles registration and ongoing compliance in this section (especially Securities requirements will be contained in Regulation and Compliance). instruments enacted by the security regulator pursuant to its rule making Conclusion authority in securities legislation. Exchange traded derivatives in Canada The platform derivatives legislation may fall under securities legislation or contemplates registration as a dealer commodities futures legislation and, or adviser for entities which deal in or in some cases (particularly concerning advise with respect to derivatives. It is the counter-parties involved in a expected that detailed instruments will trade) both exchange traded and be published for comment in the future OTC derivatives may be eligible for by the securities regulator outlining the exemptive relief. It is prudent to material requirements related to market receive advice related to any derivatives participants involved in derivative trade with a Canadian counter-party transactions in the subject province. to ensure compliance with legislation and, as appropriate, correct filing for Exchange Traded and OTC Derivatives exemptions that might apply. – Derivatives Legislation In the third approach, derivatives legislation was enacted that applies to both exchange traded derivatives and OTC derivatives. The legislation imposes requirements on intermediaries of exchange traded derivatives as well as registration requirements on dealers

44 | R EGULATION, COMPLIANCE & STRUCTURING 2012 AIMA CANADA HANDBOOK | 45 STRUCTURING A CANADIAN HEDGE FUND

Ronald M. Kosonic Partner Borden Ladner Gervais LLP

Peter Hayes James Loewen Partner, National Director, Partner, National Director, Alternative Investments Asset Management KPMG LLP KPMG LLP

The legal structure and terms of offering of a Canadian hedge fund are driven by many factors. Target market, investment strategy, investment risk, manager compensation, fairness and investor liability, liquidity and transparency must be considered in the context of Canadian tax, securities and commercial laws.

Hedge fund products are designed for income tax is imposed at the corporate accredited investors and other exempt level and therefore, depending on the purchasers, as publicly offered mutual type of income or capital gains earned funds are precluded from using many by the fund, a corporation can be less hedge fund strategies. Attempts to tax efficient than other structures access the broader retail market, for that are able to flow profits and/or example by wrapping hedge fund losses through to investors. There are, strategies in a bank note product, have however, advantages to the corporate met with mixed results over the years. structure including investor familiarity, certainty of limited liability, and certain Legal Structure - Corporation tax advantages for funds that qualify as Hedge funds are not typically structured ‘mutual fund corporations’ or are set as corporations in Canada. Federal up as ‘switch corporations’.

46 | R EGULATION, COMPLIANCE & STRUCTURING Legal Structure - Limited investments for registered retirement Partnership plans, a potentially significant source Hedge funds in Canada are often of investment capital. And foundations structured as limited partnerships. will not typically invest in a limited Limited partnerships are either partnership. Limited partnerships must ‘unitized’ (meaning that a limited allocate taxable income and gains to partner’s interest is described in terms investors, but typically do not distribute of a number of distinct units, which cash (rather, profits are reinvested). may be issued in different classes and Legal Structure – Trust series) or use more traditional capital accounting, depending on the number Another common form of hedge fund of investors, the terms of offering vehicle in Canada is the commercial and back-office systems. Either way, a investment trust (or unit trust). A limited partnership allows fees to be privately offered trust cannot offer the charged at the series or investor level, same degree of certainty of limited and allows income or losses to be liability for investors as a corporation allocated most fairly. or limited partnership - this issue is not settled at common law and must be A limited partnership is similar to a considered by hedge funds that employ corporation in that it can offer limited leverage, short sales or aggressive liability to passive investors, but it has investment techniques that increase the added advantage of being a pure the risk that the liabilities of the fund tax flow-through. Income and losses are could exceed its assets at a given time. allocated directly to individual investors, who can tax plan according to their To avoid taxation at the trust level (at own circumstances, subject to certain the top marginal rate for individuals), restrictions. a commercial trust must distribute taxable income and capital gains The limited partnership structure may to unitholders, to be taxed in their enable key individuals to participate hands. It is common practice for in revenues (both income and capital distributed income to be automatically gains) through ownership of the reinvested in the trust by the issuance general partner, rather than by earning of additional units. As with a limited a performance fee through a third- partnership, this could result in party investment manager. Both tax and investors being taxable on income or securities law considerations impact this capital gains without actually receiving type of revenue participation structure. a cash distribution. Unlike a limited There are some drawbacks. Limited partnership, a trust cannot flow losses partnerships are generally not eligible out to its unitholders (but can carry

2012 AIMA CANADA HANDBOOK | 47 them forward in accordance with the units (using ‘series accounting’) so that normal income tax rules). performance can be separately tracked for the purpose of calculating fees and The unit trust is the preferred structure fairly distributing income, gains and for hedge fund managers who wish losses. There are practical constraints to offer the fund to foundations, and potential tax consequences in pension plans, registered retirement Canada that warrant caution when savings plans and other non-taxable issuing hedge fund securities in investors. Trust units can be qualified classes and series, depending on the for investment by registered plans if legal structure of the fund, the fee they are redeemable on demand at calculation methodology used and the their net asset value and the fund is a desired tax consequences to investors. ‘mutual fund trust’ or the fund applies Equalization accounting presents under the Income Tax Act (Canada) to similar challenges in Canada. become a registered investment. The drawback of registering a fund as a Other Structuring Considerations registered investment is that the fund - Jurisdictional Considerations manager is then limited as to the types As mentioned earlier, Canada is made of instruments the fund may invest in, up of 10 provinces and 3 territories, and many popular hedging techniques each with their own securities and would not be permitted. A unit trust commercial legislation. Where the that can qualify as a mutual fund trust Fund is created and/or domiciled in (the trust must have more than 150 Canada can impact taxation, securities unitholders, each holding a block of law requirements (including the nature units having a net asset value of at least and extent of financial reporting) and $500) has the added advantage of being commercial business registrations. able to make an election that effectively treats certain income from Canadian- Other Structuring Considerations source investments as capital gains, a - Layering benefit for taxable investors. Layering of funds in one or more legal structures can help achieve multiple Other Structuring Considerations objectives. The advantages of a trust - Classes and Series (e.g., access to registered plan money) It is common practice for hedge funds can be grafted onto the advantages to issue units in separate classes and of a limited partnership (flexibility separate series that provide for different and certainty of limited liability) by fees, profit-sharing arrangements, creating a ‘top trust’ that invests in an lock-up periods and other redemption underlying limited partnership where terms. Separate series or sub-series the portfolio is managed. However, may be created with each new issue of

48 | R EGULATION, COMPLIANCE & STRUCTURING there are challenges and potential document contains a material drawbacks to such a structure. misrepresentation, which can include the omission of a material fact. Funds of funds are quite common in Certain provinces in Canada require Canada. Funds of funds that are subject these rights to be described in the to reporting requirements imposed by offering document. Canadian securities legislation typically require relief from strict compliance Redemption Terms because of mismatches in areas such as Hedge funds in Canada typically fiscal year ends and financial reporting offer monthly redemptions, with by underlying funds. notice periods ranging from a few Master-feeder funds within Canada are days to a few months, depending not typical, and the use of Canadian on the liquidity of the investment feeder funds to invest in an international portfolio. Funds that have less master fund structure is hampered liquidity or that wish to minimize by the size of the market and by portfolio disruption and cash-drag detrimental Canadian federal tax laws. may only offer quarterly or even yearly redemptions. Many funds Derivative instruments are sometimes give the fund manager broad powers used to give a Canadian fund exposure to suspend or delay redemptions to a reference fund’s returns without during market crises. Alternatively requiring a direct investment. they may impose redemption gates Offering Memorandum (e.g., no more than 10% of units will be redeemed in any month) in Canadian hedge funds sold to the order to protect investors who wish exempt market generally do not to stay in the Fund. Some funds, require the use of an offering typically those holding illiquid or memorandum, but most do use some restricted securities (e.g., securities form of marketing document, term of private companies), may impose sheet or information memorandum a holdback (e.g., 5% of redemption that would be treated by Canadian proceeds) pending completion of securities legislation as an ‘offering the year-end audit. Funds may also memorandum’. There is no mandated pass on to the redeeming investor content (except in very narrow the costs associated with the circumstances), but investors are redemption, including brokerage given statutory rights of action costs of liquidating positions, but or rescission if the offering

2012 AIMA CANADA HANDBOOK | 49 will typically cap the deduction at 2% in the fund. of proceeds. Side Letters and Investor Rights Management and Performance Fees Side letters have come under Fees charged to hedge funds in Canada considerable scrutiny by Canadian continue to follow the traditional regulators and are generally not “2+20” model: a management fee, considered in a positive light. The which is typically between 1% and potential conflicts of interest that they 2% per annum of the net asset value create can be a litigation minefield (NAV) of the fund, paid monthly; and for investment managers. Many of a performance fee of between 10% and the benefits sought by an investor 20% of the appreciation in the NAV of in a side letter can be given through the fund or the units of the fund held the issue of a separate class of fund by an investor, paid quarterly or yearly. securities, provided the constating Performance fees are usually subject documents provide the flexibility to to a “high water mark”, but it is less do so. Nonetheless, granting greater common in Canada to have a “hurdle transparency and greater liquidity rate” over which the fund or unit must to certain investors, however given, perform (above the high water mark) is discouraged, as those preferred before the performance fee is paid. investors could learn of a problem In a limited partnership structure, it and redeem out of the fund before is possible to have the general partner other investors might be offered the receive a share of revenues, rather than opportunity to redeem. pay a performance fee to the Side pockets fund manager, subject to tax and Side pockets are sometimes used in regulatory considerations. Canada as a useful tool for dealing Hedge fund managers may also charge with illiquid investments within a an early redemption fee of between 3% relatively liquid portfolio; however and 5% of the redeemed units’ NAV, Canadian taxation can make the use of which fees are typically payable if the separate classes or pools to side-pocket units are redeemed within the first the illiquid investments problematic. year of their issue (“early redemption” Funds may have to use other means to might be as short as 90 days or as long delay payment of the value of illiquid as three years). Some or all of early holdings, creating a legal grey area as redemption deductions may be retained regards the rights of investors after

50 | R EGULATION, COMPLIANCE & STRUCTURING redemption of all their units. 1, 2014. Current Canadian GAAP for investment funds is similar in Accounting and Reporting principle to IFRS, with some potential Private investment funds in Canada differences related to investee must prepare financial statements in consolidation, presentation of investor accordance with Canadian Generally equity and various disclosures. Acceptable Accounting Principles (GAAP). In addition, national securities Conclusion regulation requires additional financial Canadian securities laws and practices statement disclosures for most private offer many options for structuring investment funds domiciled in Ontario funds in accordance with manager (being those subject to National requirements and investor interests. Instrument 81-106). These requirements include: Annual audited financial statements must be provided to investors and securities regulators within 90 days of year-end (although an exemption from filing with the regulators is available). Semi-annual unaudited financial statements must be provided to investors within 60 days of the semi- annual period-end. Financial statements must include a statement of investment portfolio for the current period and statements of net assets, operations and changes in equity for the current and comparative periods, as well as notes. Investment funds will likely be required to switch to International Financial Reporting Standards (IFRS) from Canadian GAAP effective January

2012 AIMA CANADA HANDBOOK | 51

Raising Capital THE RISE OF ALTERNATIVE INVESTMENTS IN CANADA: THE CASE FOR EMERGING MANAGERS

Claude Robillard Executive Director CIBC Prime Services Group

2nd Mover Advantage: Canadian Emerging Managers Canada has often been described as the emerging market play without the emerging market risk – we find ourselves, fortunately, at the intersection of global interests with a strong commodities sector and robust financial architecture on offer.

Appetite for all things Canadian, from instruments, generally rangebound both a domestic and international global equity markets, and the desire perspective, has been steadily on the to buttress a portfolio with non- rise, and has correspondingly rippled correlated sources of return, to name into Canada’s alternative investment but a few. These factors, coupled with landscape. Then it should come as Canadian allocations to alternatives no surprise to the reader that a new historically lagging our international “emerging” class is rising, that of peers, has helped to set the stage for the emerging manager in alternative further growth. Within the backdrop investments. While investors have of roughly $70 trillion in investable long benefitted from the return assets, the $2 trillion global hedge fund profile of traditional asset classes industry has now matched pre-crisis within the Canadian investment allocation levels. Meanwhile, only 15% landscape, a confluence of events of the roughly 250 Canadian alternative has led to substantial growth in the funds post alternative sector: a compressed in excess of $100 million. Canadian yield environment in long-only credit emerging managers remain relatively

54 | R AISING CAPITAL early entrants in a well-established across an array of market themes. A industry at a potentially auspicious greater variety of strategies is at the time. And while Canadian managers ready while the amount of capital that were not immune to the crisis of 2008, can be deployed is growing steadily, in the number of hedge funds in Canada an increasingly global and fluid capital is, in lockstep with global peers, also market. As The Economist pointed out approaching pre-crisis levels.1 not long ago , the world now has more millionaires than Australians, and over Greater Breadth of Strategies, 1,000 billionaires – roughly 5 times Deeper Pool of Investors more than just 15 years ago.2 And therein lies the opportunity. Industry polls suggest that allocations Right Place, Right Time, will continue along a positive Right-Sized? trajectory. The thesis that has proven Meanwhile emerging managers have, successful in the majority of global arguably, competitive advantages over financial centres – that of a deep and “incumbents”. An ability to “adapt to broad pool of alternative investment changing market conditions and exploit strategies available to a growing field new opportunities”3 or, put differently, of institutional and HNW investors – a degree of agility, supported by bodes well for continued growth in the evidence of statistically higher returns, domestic market. The fact that roughly has been presented by numerous 40% of the alternative universe in research outlets. As there is no free Canada is represented by equity long/ short strategies – that number was associated with a higher degree of risk; estimated at 50% roughly five years ago risk that may be offset by a lack –supports the premise that new entrants of cross-correlation to an investor’s have different approaches on offer. other allocations. Long-biased equity managers once Many strategies are, arguably, right- represented the majority in Canada, sized for the Canadian market, and and now have given up some territory not infinitely scalable, though one to or market-cycle can argue that the majority have agnostic managers, allowing investors not yet brushed up against capacity the opportunity to tactically invest constraints – a potential marriage of

1 AIMA: AIMA Canada Hedge Fund Primer, June 2010 2 The Economist: More millionaires than Australians – January 20, 2011 3 HFR Asset Manager: Emerging Manager Outperformance

2012 AIMA CANADA HANDBOOK | 55 timing and opportunity for Canada’s And Canada, with 0.5% of the Emerging Manager set. Canadian world’s population contains three of managers, meanwhile, are not subjected the world’s largest pension funds4, to a crowded market, as proprietary two of the world’s largest insurance trading activity has been significantly companies5 and a 1st place ranking on pared down in the domestic market, the World Economic Forum’s list of and waning in international markets. the world’s soundest banking systems. Correspondingly, former traders and Incidentally, many Canadian Prime analysts with strong pedigrees whose Brokers are wholly-owned by Canada’s experience has often been framed banks, further helping to bolster a within the construct of institutional- sense of stability as local and global calibre risk management and investors consider allocations to governance, find themselves leading alternative managers. rapidly-growing independent asset Performance and Capital management firms. Preservation Emerging Managers, Emerging managers in Canada, and Established Infrastructure their “well-established” confrères, Meanwhile, as managers grow, they have a bright future ahead. Headwinds are supported by a strong network in global markets and a challenging of service providers and business environment for traditional asset partners, and a well-established classes have investors on the hunt regulatory framework. World-class for new sources of return. As long administrators, consultants, advisors as emerging managers focus on and prime brokers with local expertise performance, continue to evidence and global reach are on hand to help replicable investment theses, and facilitate business operations and generate returns delineated from expansion. While the majority of , they will continue to command Canada’s alternative asset managers attention. Couple that with a judicious are at an earlier stage of their life approach to risk management, best cycle – often with tenures under five practices in reporting, corporate years – they can draw from a deep governance, and transparency and well of agents, advisors and investors. they will retain a loyal following.

4 P&I / Towers Watson Top 300 Pension Funds: Analysis as at 2010 year end 5 Forbes Global 2000 list 6 World Economic Forum: The Global Competitiveness Report 2011 – 2012

56 | R AISING CAPITAL And when assessing the emerging manager landscape, the investor may wish to focus on manager talent and pedigree, and de-emphasize the importance of a limited track record. As Einstein once stated: “Everything that can be counted does not necessarily count; and everything that counts cannot necessarily be counted.”

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may provide financial advisory services, or other services for or have lending or other credit relationships with hedge fund managers. © CIBC World Markets Inc. 2012.

2012 AIMA CANADA HANDBOOK | 57 FOREIGN INVESTORS IN CANADIAN HEDGE FUNDS

Cathy Singer Barry Segal Partner Partner Norton Rose Canada LLP Norton Rose Canada LLP

Michael Bunn Associate Norton Rose Canada LLP

As the number and size of hedge funds operated by Canadian fund managers continues to grow we have seen increased interest in these products from non- Canadian investors. In this article, we will provide a brief overview of issues that a non-Canadian investor should be aware of when considering an investment in a Canadian domiciled hedge fund. Investors should note that Canadian managers - not to detract from securities law is individually regulated the many funds in other provinces by the thirteen Canadian provinces and territories. and territories. Although there is harmonization among the various While the term “hedge fund” is not jurisdictions with respect to certain a defined term under Ontario law, matters, there is no centralized securities it generally references a redeemable administrator in Canada along the investment fund (defined as a “mutual lines of the Securities and Exchange fund” under Canadian securities law) Commission in the United States. whose securities are privately placed As such, in this article we will focus on to sophisticated investors. Unlike hedge funds that are domiciled in the mutual funds that are offered to the province of Ontario, which is home to general public by way of prospectus the majority of Canadian hedge fund and that are required to abide by more

58 | R AISING CAPITAL conservative investment objectives, Offering Document strategies and restrictions, hedge funds Although not legally required, Ontario are permitted unlimited latitude in their hedge funds will generally provide investment choices, constrained only by investors with an offering document certain conflict of interest provisions prior to their investment in the hedge outlined below and restrictions imposed fund. The offering document will detail, by contract between the hedge fund and among other things, the investment its investors. objectives, investment strategies and Investor Qualifications investment restrictions of the hedge fund. The offering document is a If an Ontario hedge fund is placing contract between the investor and the securities with an investor that is hedge fund and the investor can sue the domiciled or resident outside of Ontario hedge fund should they suffer a loss as a result of the hedge fund unilaterally requirements will not apply provided breaking the terms of the contract (for that reasonable precautions are taken by example, by violating an investment the Ontario hedge fund to ensure that restriction contained in the offering the securities will not be redistributed into Ontario. the consent of investors). Note that However, the Ontario hedge fund although Ontario law provides investors will want to ensure that any investor with certain “statutory” rights of action against the hedge fund should investor’s home jurisdiction have there be a misrepresentation in the been met and that the securities law hedge fund’s offering document, these requirements in the investor’s home statutory rights do not apply to non- jurisdiction do not require the hedge Ontario investors (who instead have to sue under common law). Nevertheless, or similar document. The Ontario as Ontario and non-Ontario residents hedge fund will also want to determine generally receive identical offering whether the placement of securities documents from a hedge fund, the with the investor will result in the hedge existence of the statutory rights of fund or its manager having to make any action for Ontario residents will likely result in the hedge fund manager paying regulatory authority in the investor’s particular attention to the accuracy of home jurisdiction. The Ontario hedge disclosure in the offering memorandum fund may have to obtain comfort with respect to these matters by engaging the services of local counsel in the investor’s Statutory Protections home jurisdiction and by having the Ontario domiciled hedge funds offer investor make representations regarding investors certain statutory protections. these matters in the subscription Set out below are a number of these agreement that it completes. protections.

2012 AIMA CANADA HANDBOOK | 59 Manager Registration signed by a person or company that is The manager of an Ontario hedge fund authorized to sign an auditor’s report by is required to register with the Ontario the laws of a jurisdiction in Canada and Securities Commission in one or more must meet the professional standards categories depending on the functions of that jurisdiction. The preparation that it performs for the hedge fund. As part of the registration process, provides investors with an impartial third the manager must establish that it meets minimum capital and insurance and performance of the Ontario hedge requirements and that certain of its fund in which they are investing. Taxation requirements. The fact that all managers of Ontario hedge funds must undergo The Canadian tax implications of an a rigorous registration process should investment are important for a non- provide investors with a level of comfort Canadian investor to consider when regarding the entity that manages the deciding whether to invest in an Ontario Ontario hedge fund in which they are hedge fund. The following is a general investing. For more details on registration issues, please see the article entitled investor should always consult its own Securities Registration and Compliance. Canadian tax advisor prior to making an investment in an Ontario hedge fund. Financial Statements The Canadian tax consequences to a Each Ontario hedge fund is required non-Canadian of investing in an Ontario hedge fund will depend on the structure statements for its most recently completed of the fund as well as the other investors in the fund. Many funds are structured things, (i) a statement of changes in as partnerships, although trust structures are also common. year and the immediately preceding A non-Canadian investor in an Ontario investment portfolio as at the end of that hedge fund that is a partnership will be taxable in Canada on its share of statements are required for each interim the fund’s income (whether or not six month period. distributed) to the extent that the investor is considered to carry on business in Canada. This will be determined by must be sent to investors on or before the reference to a host of factors including the nature and the location of assets held year end, with the deadline for interim by the fund and the type and frequency statements being the 60th day after the of trading activity in the fund. The six month interim period for the hedge investor may also be taxable in Canada fund. The auditor’s report accompanying if the fund realizes capital gains from

60 | R AISING CAPITAL the disposition of “taxable Canadian trust” for tax purposes (i.e., having over property” which includes certain direct 150 unitholders and meeting certain or indirect interests in Canadian real other criteria), the 25% withholding tax property and resource property. The will not apply to distributions of capital applicability of relief from Canadian gains of the fund (other than gains tax under a relevant tax treaty between arising from dispositions of “taxable the investor’s country of residence and Canadian property”) provided the fund Canada should also be considered. makes the appropriate designation in its tax return for the year. If the fund An Ontario partnership that has non- is not a mutual fund trust and it has Canadian investors will be treated non-resident investors, the fund may be as a non-resident of Canada for tax subject to an additional 36% tax on its purposes which may result in adverse income from dispositions of “taxable tax consequences to the fund and Canadian property” and businesses its investors. This is particularly the carried on in Canada. case for funds which expect to earn Canadian source interest or dividends Non-Canadians may also be taxable in from investments. Such partnerships Canada if they realize a gain on the sale may not permit direct investment or other disposition of their investment by non-Canadians. In that case, a in an Ontario hedge fund and their Canadian corporation is often used by interest in the fund constitutes “taxable non-Canadian investors to make the Canadian property”. An interest in an investment. The Canadian corporation Ontario trust (other than a mutual fund will be taxable in Canada on its share trust) or partnership may be “taxable of partnership income and capital gains Canadian property” if, at any time (whether or not distributed). Distributions during the prior 5-year period, more from the Canadian corporation to the than 50% of the fair market value of the non-Canadian investor will generally be interest was derived directly or indirectly subject to Canadian withholding tax at a from Canadian real property, resource rate of 25%, or less (generally either 5% properties and certain other properties. or 15%) under the terms of an applicable If a hedge fund is a mutual fund trust, tax treaty. certain ownership thresholds must be A non-Canadian investor in an Ontario before an interest in the fund will be hedge fund that is formed as a trust is considered “taxable Canadian property”. not directly taxable on the income or capital gains earned by the trust, but may Foreign investors might be pleased to be subject to Canadian withholding tax know that, given the tax considerations on amounts distributed from the trust. detailed above, many Canadian The rate of withholding tax on trust hedge fund managers operate parallel distributions is 25% unless a treaty- investment vehicles domiciled in tax reduced rate applies (generally 15%). neutral jurisdictions.

2012 AIMA CANADA HANDBOOK | 61 THE CANADIAN ASSET RAISING LANDSCAPE

Katrina Rempel Vice President, Prime Brokerage Services – Capital Introduction BMO Capital Markets

The Canadian alternative investment space is coming of age. Canadian investors from large institutions to high net worth individuals are embracing hedge fund investments. Difficult and volatile markets have left investors searching for higher returns and protection from downside risk.

There are compelling reasons to invest Canada is home to world-class with a Canadian manager and Canadian service providers including funds have been highly successful prime brokers, administrators gathering assets from high net worth and law firms. individuals and family offices, both The smaller size of many Canadian domestically and globally. Canadian funds enables the managers to be investors value the diverse strategies nimble and quickly capitalize on and expertise that Canadian managers opportunities in the market that provide while global investors are might elude larger funds. attracted to many additional advantages Far from being purely a commodity of Canadian hedge funds: play, Canadian fund managers The view of Canada as a safe have expertise in executing a haven has increased the attractiveness variety of sophisticated Canadian of Canadian alternative investment and global strategies. managers to global investors. The Canadian Investor Landscape Canada’s financial industry is The primary allocators to alternative well regulated. investments in Canada fall into two broad categories: institutional and high

62 | R AISING CAPITAL net worth which includes family offices, Although many Canadian institutions multi-family offices and High Net have been historically reluctant to Worth Individuals (HNWIs). allocate to funds that have assets under management of less than $1 billion Institutions (which has historically precluded many The largest Canadian institutions Canadian hedge fund managers), this and pension plans have been active is now changing as more and more hedge fund participants for many investors have come to appreciate the years, executing sophisticated global outperformance of smaller, newer investment programs. In recent and niche hedge funds. This has led to years, mid-tier institutions have success for several Canadian funds in been increasingly likely to consider raising institutional assets domestically. allocations to hedge funds as a means to achieve their investment goals. High Net Worth – Family Offices Many institutions that do not currently and HNWIs allocate to hedge funds are on an Canadian family offices are educational learning curve. It is likely knowledgeable and sophisticated that this process will bear fruit for the investors. Many family offices are hedge fund industry in the near future, established organizations with both for Canadian and global managers. experienced investment teams that do extensive in-house research. Their Institutions that, in the past, have smaller size and flexible investment invested in Funds of Hedge Funds mandates enable them to allocate are more likely to invest directly with to managers of all sizes. Along with single managers as their familiarity HNWIs they have been the largest with hedge funds and their knowledge purchasers of Canadian hedge funds level increases. Many organizations are to date. willing to hire external expertise to assist with investment decisions. Canada is the world’s seventh-largest Many large Canadian institutional market for high net worth and ultra investors hire a consultant to source high net worth individuals: they alternatives while the remainder have numbered approximately 300,000 at in-house departments that focus on the end of 2010 which is an increase alternative investments. of about 12% as compared to 2009.1 Canada’s population of HNWI is

1 Merrill Lynch Global Wealth Report

2012 AIMA CANADA HANDBOOK | 63 defined as individuals with investable Managers that want to sell their funds assets of $1 million or more. This through the bank-owned brokerage group represents more than 60% of the firms’ retail networks must meet some assets under management in Canada.2 stringent requirements before they are approved by the various distribution While many HNWI have the knowledge channels. Their criteria vary among and skills to execute their own organizations but at a minimum, the investment programs, others work fund must be available for sale on with a multi- (MFO) for FundSERV (a third-party investment assistance in the deployment of both fund processing system) and the traditional and alternative assets. An managers must have an established MFO is an independent organization track record (usually three years). Many that provides a variety of services to funds that have been approved for multiple families for the purpose of sale in the retail networks have seen supporting their wealth. In addition to material allocations. allocating to hedge funds on behalf of their clients, some MFOs may build Growth Going Forward a proprietary alternative investment It is a sign of continuing optimism that vehicle for their clients. the Canadian alternative investment industry shows growth in all areas HNWI Advice at Canadian including fund managers, investors Broker-Dealers and service providers. Canadian Canada has a large number of wealth managers continue to receive inflows advisors who target HNWI through the into a broadening array of strategies broker-dealer retail networks that are from both Canadian and overseas associated with the six largest banks institutional and HNWI investors. in Canada. Many of these advisors are seeking additional ways to add value to their client’s portfolios and will allocate to increasingly sophisticated investment vehicles, such as hedge funds, on behalf of their clients. The benefits include diversification, higher returns and an improved risk-return profile.

2 Globe and Mail, Are You Ready For a Wealth Manager, January 8, 2010

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2012 AIMA CANADA HANDBOOK | 81

Member Directory Hedge Fund and FoHF Managers MEMBER DIRECTORY HEDGE FUND AND FoHF MANAGERS

Aberdeen Asset Management Inc. Global Fund Of Hedge Fund Provider Member since: 2012 Renee Arnold [email protected] | +1 416 777 5570 Toronto, ON www.aberdeen-asset.ca

Acorn Global Investments Inc. Systematic Member since: 2010 Gordon Corbett [email protected] | +1 905 257 0773 ext 102 Oakville, ON www.acorn.ca

Arrow Capital Management Inc. Funds of Hedge Funds and Canadian Hedge Fund Managers Member since: 2001 Rob Parsons [email protected] | +1 416 323 3199 Toronto, ON www.arrow-capital.com

Aurion Capital Management Inc. Member since: 2010 Grant Bunker [email protected] | +1 416 866 2445 Toronto, ON www.aurion.ca

84 | MEMBER DIRECTORY: HEDGE FUND AND FoHF MANAGERS Blackheath Fund Management Inc. Managed Futures – Sentiment and Volatility Member since: 2009 Christopher Foster [email protected] | +1 416 363 2962 Toronto, ON www.blackheath.ca

BluMont Capital Corporation Long-Short Equity Member since: 2003

James Wanstall [email protected] | 1 416 202 6695 Toronto, ON www.blumontcapital.com

Clairwood Capital Management Inc. Long-Short Equity Member since: 2011 Glenn Paradis [email protected] | +1 647 404 8145 Toronto, ON www.clairwoodcapital.com

Crystalline Management Inc. Canada Relative Value and Arbitrage Member since: 2009 Claude Perron [email protected] | +1 514 284 0248 ext 222 Montréal, QC www.arbitrage-canada.com

2012 AIMA CANADA HANDBOOK | 85 MEMBER DIRECTORY HEDGE FUND AND FoHF MANAGERS

Dexia Asset Management – Canadian Representative Office FoHF and 15 single strategies Member since: 2012 Christophe Vandewiele [email protected] | +1 416 974 9055 Toronto, ON www.dexia-am.com

Di Tomasso Group Inc. Long-Short Commodity Trading Advisor Member since: 2011 John Di Tomasso [email protected] | +1 250 744 1650 Victoria, BC www.ditomassogroup.com

Fiera Capital Inc. Global Macro, Market Neutral, Long-Short Equity, Fixed Income Funds Member since: 2004 Jim Craven [email protected] | +1 416 955 4898 Toronto, ON www.fierasceptre.com

Front Street Capital Long-Short Equity and Income Member since: 2006 Chris Fontana [email protected] | +1 416 915 2439 Toronto, ON www.frontstreetcapital.com

86 | MEMBER DIRECTORY: HEDGE FUND AND FoHF MANAGERS Galileo Funds Inc. Long-Short Canadian Equity Member since: 2012 Evelyn Foo [email protected] | +1 416 594 3633 Toronto, ON www.galileofunds.com

Garrison Hill Capital Management Inc. Fundamentally-driven Global Macro Member since: 2008 Michael Yhip [email protected] | +1 416 203 2212 Toronto, ON www.ghcm.ca

Fiera Capital Inc. GCIC Ltd. Global Macro, Market Neutral, Long-Short Equity, Long-Short Equity Fixed Income Funds Member since: 2006 Member since: 2004 Christian Postance Jim Craven [email protected] | +1416 365 5661 [email protected] | +1 416 955 4898 Toronto, ON Toronto, ON www.dundeewealth.com www.fierasceptre.com

Goodwood Inc. Equity Long-Short, Activist Member since: 2002 Curt Cumming [email protected] | +1 416 203 2522 Toronto, ON www.goodwoodfunds.com

2012 AIMA CANADA HANDBOOK | 87 MEMBER DIRECTORY HEDGE FUND AND FoHF MANAGERS

Groundlayer Capital Inc. Long-Short North American Equity (Long Bias) Member since: 2007

Robert Grundleger [email protected] | +1 416 365 2301 Toronto, ON

Hillsdale Investment Management Inc. Quantitative Long-Short Global Equity Member since: 2002 Ian Pember [email protected] | +1416 913 3920 Toronto, ON www.hillsdaleinv.com

HR Stratégies Inc. Funds of Hedge Funds Member since: 2004 Claude Godon [email protected] | +1 514 393 3515 Montréal, QC www.hrstrategiesinc.com

Integrated Managed Futures Corp. Commodity Trading Advisor Member since: 2003 Paul Patterson [email protected] | +1 416 363 6526 Toronto, ON www.iamgroup.ca/managedfutures

88 | MEMBER DIRECTORY: HEDGE FUND AND FoHF MANAGERS Groundlayer Capital Inc. JC Clark Ltd. Long-Short North American Equity (Long Bias) Long-Short US & Canadian Equity Member since: 2007 Member since: 2003

Robert Grundleger Sean Wynn [email protected] | +1 416 365 2301 [email protected] | +1 416 361 4533 Toronto, ON Toronto, ON www.jcclark.com

Hillsdale Investment Management Inc. JDM Investment Partners Ltd. Quantitative Long-Short Global Equity Concentrated North American Equity Member since: 2002 Member since: 2012 Ian Pember James Maxwell [email protected] | +1416 913 3920 [email protected] | +1 416 996 1113 Toronto, ON Ottawa, ON www.hillsdaleinv.com www.ipfund.ca

HR Stratégies Inc. Kensington Capital Partners Ltd. Funds of Hedge Funds Funds of Hedge Funds Member since: 2004 Member since: 2008 Claude Godon KENSINGTON Eamonn McConnell TM [email protected] | +1 514 393 3515 smart alternatives [email protected] | +1 416 362 9030 Montréal, QC Toronto, ON www.hrstrategiesinc.com www.kcpl.com

Integrated Managed Futures Corp. Landry Morin Inc. Commodity Trading Advisor Long-Short Equity Member since: 2003 Member since: 2010 Paul Patterson Richard Morin [email protected] | +1 416 363 6526 [email protected] | +1 514 985 5225 Toronto, ON Montréal, QC www.iamgroup.ca/managedfutures www.landrymorin.com

2012 AIMA CANADA HANDBOOK | 89 MEMBER DIRECTORY HEDGE FUND AND FoHF MANAGERS

Lawrence Park Capital Partners Ltd. Fixed Income Member since: 2011 David Fry [email protected] | +1 416 646 2180 Toronto, ON www.lpcapitalpartners.com

Man Investments Canada Corp. Alternative Investments Manager Member since: 2006 Toreigh Stuart [email protected] | +1 416 775 3600 Toronto, ON www.maninvestments.com

Mapleridge Capital Corporation Managed Futures Member since: 2008

Cheryl Davidson [email protected] | +1 416 733 9818 ext 241 Toronto, ON www.mapleridgecapital.com

Marret Asset Management Inc. Fixed Income Arbitrage Member since: 2006 Denise Dillon [email protected] | +1 416 306 3895 Toronto, ON www.marret.ca

90 | MEMBER DIRECTORY: HEDGE FUND AND FoHF MANAGERS Niagara Capital Partners Ltd. Macro / Managed Futures Member since: 2004 David Rothberg [email protected] | +1 416 350 2911 Toronto, ON www.niagaracapital.ca

Northwater Capital Management Inc. Intellectual Property Funds and Risk Parity Portfolios Member since: 2007

Neil Simons [email protected] | +1 416 360 5435 Toronto, ON www.northwatercapital.com

Polar Securities Inc. US Long-Short Equity and Canadian Multi-Strategy Member since: 2003 Tom Sabourin [email protected] | +1 416 369 4459 Toronto, ON www.polarsecurities.com

RDA Capital Inc. Multi-Strategy Member since: 2010 François Magny [email protected] | +1 514 985 2107 Montréal, QC www.rdacap.com

2012 AIMA CANADA HANDBOOK | 91 MEMBER DIRECTORY HEDGE FUND AND FoHF MANAGERS

Ross Smith Asset Management Inc. Arbitrage Member since: 2011 Weston Pring [email protected] | +1 403 294 6893 Calgary, AB www.rsam.ca

Rosseau Asset Management Ltd Event Driven / Special Situations Member since: 2003 Jow Lee [email protected] | +1 416 777 0712 Toronto, ON www.rosseau.com

RP Investment Advisors Investment Grade Fixed Income Long-Short Member since: 2011 Dannielle Ullrich [email protected] | +1 647 776 1777 Toronto, ON www.rpia.ca

Salida Capital LP Long-Short Equity - Natural Resources Member since: 2005 Dejan Knezevic [email protected] | +1 416 849 2564 Toronto, ON www.salidacapital.com

92 | MEMBER DIRECTORY: HEDGE FUND AND FoHF MANAGERS Ross Smith Asset Management Inc. Shoreline West Asset Management Capital Structure Arbitrage Multi-Strategy Member since: 2011 Member since: 2011

Weston Pring Greg Sullivan [email protected] | +1 403 294 6893 [email protected] | +1 604 737 1445 Calgary, AB Vancouver, BC www.rsam.ca

Rosseau Asset Management Ltd Sigma Analysis & Management Ltd Event Driven / Special Situations Managed Account Operator Member since: 2003 Member since: 2009 Jow Lee Luis Seco [email protected] | +1 416 777 0712 [email protected] | +1 416 907 0716 Toronto, ON Toronto, ON www.rosseau.com www.sigmanalysis.com

RP Investment Advisors Silvercreek Management Inc. Investment Grade Fixed Income Long-Short Short-equity biased, Special situations-value-based Member since: 2011 Member since: 2003 Dannielle Ullrich Bryn Joynt [email protected] | +1 647 776 1777 [email protected] | +1 416 485 3953 Toronto, ON Toronto, ON www.rpia.ca www.silvercreekmanagement.com

Salida Capital LP Spartan Fund Management Inc. Long-Short Equity - Natural Resources Multi-Strategy Member since: 2005 Member since: 2009 Dejan Knezevic Gary Ostoich [email protected] | +1 416 849 2564 [email protected] | +1 416 601 3171 Toronto, ON Toronto, ON www.salidacapital.com www.spartanfunds.ca

2012 AIMA CANADA HANDBOOK | 93 MEMBER DIRECTORY HEDGE FUND AND FoHF MANAGERS

Sprott Asset Management Long-Short Equity, Fixed Income/Currency & Asset-Based Lending Member since: 2004 James R. Fox [email protected] | +1 416 943 6718 Toronto, ON www.sprott.com

Summerwood Capital Corp. Currency - Quantitative, Directional and Exotic Member since: 2006 Phil Schmitt [email protected] | +1 416 628 8400 Toronto, ON www.summerwoodgroup.com

SW8 Asset Management, Inc. Multi-Strategy, North American Equity Long-Short focus Member since: 2011 Danielle Skipp [email protected] | +1 647 340 6272 Toronto, ON www.sw8.ca

Third Eye Capital Management Inc. Credit Member since: 2008 Arif N. Bhalwani [email protected] | +1 416 601 9824 Toronto, ON www.thirdeyecapital.com

94 | MEMBER DIRECTORY: HEDGE FUND AND FoHF MANAGERS Vertex One Asset Management, Inc. Multi-Strategy/Event-driven Member since: 2002 Jeff McCord [email protected] | +1 604 681 5787 Vancouver, BC www.vertexone.com

Vision Capital Corporation Long-Short REIT/Real Estate Focused Member since: 2011

Jeffrey Olin [email protected] | +1 416 362 6546 Toronto, ON www.visioncap.ca

SW8 Asset Management, Inc. Waratah Advisors Multi-Strategy, North American Equity Long-Short focus Long-Short US & Canadian Equity Member since: 2011 Member since: 2011 Danielle Skipp Daniel Dorenbush [email protected] | +1 647 340 6272 [email protected] | +1 416 687 6598 Toronto, ON Toronto, ON www.sw8.ca www.waratahadvisors.com

West Face Capital Inc. Opportunistic Member since: 2011

Alana Johnston [email protected] | +1 647 288 0344 Toronto, ON www.westfacecapital.com

2012 AIMA CANADA HANDBOOK | 95 MEMBER DIRECTORY HEDGE FUND AND FoHF MANAGERS

Westcourt Capital Corporation Income and Real Estate-linked Securities Member since: 2011 David Kaufman [email protected] | +1 416 671 1941 Toronto, ON www.westcourtcapital.com

OTHER ASSET MANAGERS BlackRock Asset Management Canada Limited Asset Manager – ETFs Member since: 2011 Eric Leveille [email protected] | +1 416 643 4050 Toronto, ON www.blackrock.com

Bullion Marketing Services Inc. Precious Metals Fund Manager Member since: 2005 Paul de Sousa [email protected] | +1 905 415 2933 Toronto, ON www.bmgbullion.com

Horizons ETFs Asset Manager – ETFs Member since: 2003 Jaime Purvis [email protected] | +1 416 601 2495 Toronto, ON www.horizonsetfs.com

96 | MEMBER DIRECTORY: HEDGE FUND AND FoHF MANAGERS Member Directory Service Providers MEMBER DIRECTORY PRIME BROKERS

BMO Capital Markets Prime Brokerage Services Member since: 2002 Katrina Rempel [email protected] | +1 416 359 7524 Toronto, ON www.bmo.com

CIBC Prime Services Group Prime Brokerage Services Member since: 2010 Claude Robillard [email protected] | +1 416 594 8534 Toronto, ON www.cibc.com

Deutsche Bank AG, Canada Branch Prime Brokerage Services Member since: 2012 Jeff Knupp [email protected] | +1 416 682 8000 Toronto, ON www.db.com

RBC Capital Markets Prime Brokerage Services Member since: 2003 Andrew Thornhill [email protected] | +1 416 842 6440 Toronto, ON www.rbccm.com

98 | MEMBER DIRECTORY: SERVICE PROVIDERS Scotia Capital Prime Finance Prime Brokerage Services Member since: 2005 Kripa Kapadia [email protected] | +1 416 863 7305 Toronto, ON www.scotiaprimefinance.com

2012 AIMA CANADA HANDBOOK | 99 MEMBER DIRECTORY ACCOUNTING FIRMS

Deloitte & Touche Canada Audit, Tax and Advisory Services Member since: 2003 George Kosmas [email protected] | +1 416 601 6084 Toronto, ON www.deloitte.ca

Ernst & Young LLP Audit, Tax and Advisory Services Member since: 2003 Joseph Micallef [email protected] | +1 416 943 3494 Toronto, ON www.ey.com/ca

KPMG LLP Audit, Tax and Advisory Services Member since: 2007 Peter Hayes [email protected] | +1 416 777 3939 Toronto, ON www.kpmg.ca

PricewaterhouseCoopers LLP Audit, Tax and Advisory Services Member since: 2002 Chris Pitts [email protected] | +1 416 947 8964 Toronto, ON www.pwc.com/ca/en

100 | MEMBER DIRECTORY: SERVICE PROVIDERS LAW FIRMS

Deloitte & Touche Canada Aird & Berlis LLP Audit, Tax and Advisory Services Member since: 2003 Member since: 2003 Jennifer Wainwright George Kosmas [email protected] | +1 416 865 4632 [email protected] | +1 416 601 6084 Toronto, ON Toronto, ON www.airdberlis.com www.deloitte.ca

Ernst & Young LLP Borden Ladner Gervais LLP Audit, Tax and Advisory Services Member since: 2004 Member since: 2003 Ron Kosonic Joseph Micallef [email protected] | +1 416 367 6621 [email protected] | +1 416 943 3494 Toronto, ON Toronto, ON www.blg.com www.ey.com/ca

KPMG LLP Davies Ward Phillips & Vineberg LLP Audit, Tax and Advisory Services Member since: 2010 Member since: 2007 Tim Baron Peter Hayes [email protected] | +1 416 863 5539 [email protected] | +1 416 777 3939 Toronto, ON Toronto, ON www.dwpv.com www.kpmg.ca

PricewaterhouseCoopers LLP Heenan Blaikie LLP Audit, Tax and Advisory Services Member since: 2010 Member since: 2002 Tom Cotter Chris Pitts [email protected] | +1 403 261 3451 [email protected] | +1 416 947 8964 Calgary, AB Toronto, ON www.heenanblaikie.com www.pwc.com/ca/en

2012 AIMA CANADA HANDBOOK | 101 MEMBER DIRECTORY LAW FIRMS

McMillan LLP Member since: 2002 Michael Burns [email protected] | +1 416 865 7261 Toronto, ON www.mcmillan.ca

Norton Rose Canada LLP Member since: 2011 Michael Bunn [email protected] | +1 416 216 4095 Toronto, ON www.nortonrose.com

Stikeman Elliott LLP Member since: 2009 Darin Renton [email protected] | +1 416 869 5635 Toronto, ON www.stikeman.com

Torys LLP Member since: 2002 Marlene Davidge [email protected] | +1 416 865 7322 Toronto, ON www.torys.com

102 | MEMBER DIRECTORY: SERVICE PROVIDERS FUND ADMINISTRATORS

CIBC Mellon Fund Administration Member since: 2009 Charbel Cheaib [email protected] | +1 416 643 6352 Toronto, ON www.cibcmellon.com

CITCO (Canada) Inc. Fund Administration Member since: 2008 Kieran Conroy [email protected] | +1 416 966 9200 Toronto, ON www.citco.com

Citigroup Fund Services Ltd. Fund Administration Member since: 2010 Donald King [email protected] | +1 905 212 8988 Toronto, ON www.citi.com

CommonWealth Fund Services Ltd. Fund Administration Member since: 2008 Mackenzie Crawford [email protected] | +1 416 687 6654 Toronto, ON www.commonwealthfundservices.com

2012 AIMA CANADA HANDBOOK | 103 MEMBER DIRECTORY FUND ADMINISTRATORS

Harmonic Fund Services Canada Inc. Fund Administration Member since: 2006 Allen Bernardo [email protected] | +1 416 507 4700 Toronto, ON www.harmonic.ky

RBC Dexia Investor Services Fund Administration Member since: 2006 Brad Taylor [email protected] | +1 416 955 2022 Toronto, ON www.rbcdexia.com

The Investment Administration Solution Inc. Fund Administration Member since: 2003 David Chan [email protected] | +1 416 368 9569 ext 288 Toronto, ON www.TheSolutionPeople.com

UBS Fund Services, Canada Fund Administration Member since: 2007 Heather Budd [email protected] | +1 416 971 4702 Toronto, ON www.ubs.com

104 | MEMBER DIRECTORY: SERVICE PROVIDERS INSTITUTIONAL INVESTORS

Canada Pension Plan Investment Board Plan Sponsor – Public Pension Member since: 2012 Marco Vetrone [email protected] | +1 416 874 5221 Toronto, ON www.cppib.ca

Ontario Teachers’ Pension Plan Member since: 2004 Jonathan Hausman [email protected] | +1 416 730 5388 Toronto, ON www.otpp.com

2012 AIMA CANADA HANDBOOK | 105 MEMBER DIRECTORY OTHER

Castle Hall Alternatives Inc. Due Diligence Consultant Member since: 2011 Chris Addy [email protected] | +1 450 465 8880 Montréal, QC www.castlehallalternatives.com

CIBC Wood Gundy Retail Brokerage Member since: 2004 Troy Killick [email protected] | +1 416 956 3456 Toronto, ON www.woodgundy.com

Cidel Financial Group Private Wealth Management - Private Bank Member since: 2003 Matt Maldoff [email protected] | +1 416 925 7585 Toronto, ON www.cidel.com

Montréal Exchange Canadian Derivatives Exchange Member since: 2003 Brian Gelfand [email protected] | +1 514 871 7884 Montréal, QC www.m-x.ca Certain institutional investor members are anonymous by request and this listing is current as of April 24, 2012. For an updated list of all public members, please go to http://aima-canada.org/aima_canada_member_directory.html

106 | MEMBER DIRECTORY: SERVICE PROVIDERS Castle Hall Alternatives Inc. Due Diligence Consultant Member since: 2011 Chris Addy [email protected] | +1 450 465 8880 Montréal, QC www.castlehallalternatives.com

CIBC Wood Gundy Retail Brokerage Member since: 2004 Troy Killick [email protected] | +1 416 956 3456 Toronto, ON www.woodgundy.com

Cidel Financial Group Private Wealth Management - Private Bank Member since: 2003 Matt Maldoff [email protected] | +1 416 925 7585 Toronto, ON www.cidel.com

Montréal Exchange Canadian Derivatives Exchange Member since: 2003 Brian Gelfand [email protected] | +1 514 871 7884 Montréal, QC www.m-x.ca FOR MORE INFORMATION ON AIMA CANADA, PLEASE CONTACT: James Burron, CAIA Chief Operating O!cer, AIMA Canada Suite 504 – 80 Richmond Street West Toronto, Ontario M5H 2A4 [email protected] +1 416 453 0111 www.aima-canada.org