Mutual fund reps should be able to sell alternative mutual funds, says industry trade group the Alternative Investment Management Association (AIMA).
AIMA is floating a proposal for a proficiency regime that would enable fund reps to deal in alt funds, which currently can be sold only by investment dealer reps.
The proposal aims to address the fact that the vast majority of reps in the fund dealer world currently can’t sell alt funds because they and their supervisors don’t meet the existing proficiency requirements under the Canadian Securities Administrators’ (CSA) rules, and there aren’t corresponding self-regulatory standards in the fund dealer world.
“As a result, clients of Canadian mutual fund dealers have been generally unable to access the benefits of portfolio diversification, risk-reduction and non-correlated returns that are available via alternative mutual fund strategies,” AIMA said in its proposal.
To remedy the situation, AIMA is calling on the Mutual Fund Dealers Association of Canada (MFDA) and the CSA to set proficiency standards for distributing alt funds.
“The adoption of a sensible proficiency standard to permit alternative mutual funds to be distributed through the MFDA channel is the logical next step in the evolution of the ‘liquid alts’ market in Canada,” said Michael Burns, a partner with McMillan LLP and a past chair of AIMA Canada.
AIMA suggested that regulators phase in proficiency requirements for alt funds by first approving existing courses that reps could use to establish proficiency in the short-term. The courses recommended by AIMA included the Chartered Alternative Investment Analyst (CAIA) designation, the CAIA Fundamentals certificate course and the Canadian Securities Institute’s Alternative Strategies: Hedge Funds and Liquid Alternatives course.
Approving these courses would enable the MFDA to develop its own policy prescribing requirements for fund dealers over time, AIMA said.
“We are recommending a phased solution designed for ease of implementation which will provide all Canadians access to the benefits of alternatives while ensuring dealers meet high standards of proficiency. Bridging courses will serve to meet proficiency until the MFDA adopts standards proposed by AIMA for training,” said Belle Kaura, chair of AIMA Canada and vice president, legal, and CCO of Third Eye Capital.
In a statement, AIMA said that it encourages “the CSA to work with the MFDA on any proposed proficiency requirements relating to the distribution of alternative mutual funds that will provide a more viable alternative for MFDA dealers to sell these investment products for the ultimate benefit of the end client.”