CI Investments Inc. will be closing certain funds to new investments in in response to proposed changes to Canadian tax laws contained in the recent federal budget, the company said Friday.

In the budget announced March 21, the federal government proposed to eliminate the tax advantages associated with the use of forward agreements to achieve capital gains treatment on income that would otherwise be treated as ordinary income. The government refers to these as “character conversion transactions.”

Although legislation implementing this change has not been finalized, CI believes that it is likely that further increases to the size of character conversion transactions will not be permitted. For that reason, CI has decided that certain funds using forward agreements will be closed to new investments as of the close of business on Monday, April 15.

CI says it is closing the funds to safeguard the interests of their current investors. It also believes that the budget proposals, as currently interpreted, will permit the funds listed below to continue to benefit from the tax efficiency offered by the forward agreements until the expiry of those agreements.

The funds that will be closed to new investments are:

  • Cambridge Income Corporate Class
  • Cambridge Income Fund
  • CI Global High Dividend Advantage Corporate Class
  • CI Global High Dividend Advantage Fund
  • CI Short-Term Advantage Corporate Class
  • Signature Diversified Yield Corporate Class
  • Signature Diversified Yield Fund
  • Signature High Yield Bond Corporate Class
  • Signature High Yield Bond Fund

CI also announced the following other changes:

  • Trident Global Opportunities Fund, a hedge fund, also uses a forward agreement and will be closed to new investments as of the close of business on April 30, 2013. CI is considering launching a new version of this fund.
  • Signature Enhanced Yield Fund is being renamed Signature Diversified Yield II Fund to reflect the similar investment mandates of the two funds. Both funds provide exposure to a diversified portfolio of global high-yield securities, including corporate bonds, real estate investment trusts and dividend-paying shares.
  • Select Income Advantage Managed Corporate Class is being renamed Select Income Managed Corporate Class.
  • CI Income Advantage Fund is being renamed CI Income Fund and the fund will continue to operate in accordance with its investment objectives and prospectus. The strategies of the fund will be modified to describe its direct investments in greater detail.
  • CI Short-Term Corporate Class will be reopened to new investments.

CI also notes that there continues to be confusion in the marketplace regarding the budget’s impact on mutual fund corporations or corporate class funds. CI emphasizes that the budget measure does not directly affect the corporate class structure, which offers tax advantages that include switching or rebalancing between funds within the corporate structure without triggering capital gains, thereby deferring taxes, and minimizing taxable dividends through the sharing of expenses and gains and losses within the corporation.

CI is a subsidiary of CI Financial Corp. (TSX: CIX), an independent, Canadian-owned wealth management firm with approximately $104.7 billion in assets.