Mackenzie Financial Corporation et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Investment fund managers applying on behalf of investment funds that are subject to NI 81-102 for relief from subclause 111(2)(c)(ii) and subsection 111(4) of the Securities Act (Ontario) which prohibit an Investment Fund from knowingly making or holding an investment in an issuer in which a substantial securityholder of the mutual fund, its management company or its distribution company, has a significant interest -- Investment fund managers applying for relief from management company reporting requirements in subsections 117(1) in respect of investment funds' investments in related closed-end pooled fund -- additional investments by a substantial securityholder of the investment fund managers, could result in it indirectly holding a significant interest in a closed-end pooled fund -- investment funds managed by the investment fund managers propose to invest up to 10% of net assets in the closed-end pooled fund in accordance with the illiquid asset restriction in NI 81-102 -- Relief subject to IRC approval and annual reporting of the particulars of any investments made in reliance on the relief.

Applicable Legislative Provisions

Securities Act (Ontario), R.S.O. 1990, c. S.5, as am., ss. 111(2)(c)(ii), 111(4), 113, and 117.

February 4, 2022

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction)

AND

IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF MACKENZIE FINANCIAL CORPORATION I.G. INVESTMENT MANAGEMENT INC. COUNSEL PORTFOLIO SERVICES INC. (the Filers)

AND

THE INVESTMENT FUNDS (as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) granting an exemption to:

1. The fixed income mutual funds listed in Appendix "A" hereto, which are subject to National Instrument 81-102 Investment Funds (NI 81-102) (the Fixed Income Funds), other investment funds currently managed by the Filers that are subject to NI 81-102, (together with the Fixed Income Funds, the Existing Investment Funds) and any investment funds established in the future that are subject to NI 81-102 and of which one of the Filers is the manager (together with the Existing Investment Funds, the Investment Funds), from the following provisions in the Legislation (the Requested Relief):

(a) the requirements in the Legislation which prohibit an Investment Fund from knowingly making or holding an investment in an issuer in which a substantial securityholder of the Investment Fund, its management company or its distribution company, has a significant interest (the Related Issuer Investment Restriction); and

(b) the requirements in the Legislation which require a management company to file a report within 30 days after the month end of (i) every transaction of purchase or sale of securities between an Investment Fund and any related person or company and (ii) every transaction in which an Investment Fund is a joint participant with one or more related persons or companies (the Management Company Reporting Requirement).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for the application; and

(b) the Filers have provided notice that section 4.7(1)(c) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relief upon in British Columbia, Alberta, Saskatchewan, Nova Scotia, New Brunswick, and Newfoundland and Labrador (together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

Mackenzie

1. Mackenzie Financial Corporation (Mackenzie) is a corporation formed under the laws of Ontario. It is the trustee, manager, and portfolio adviser of certain of the Existing Investment Funds, including certain Fixed Income Funds as identified in Appendix "A" (the "Existing Mackenzie Funds"). Mackenzie is therefore the "management company" of the Existing Mackenzie Funds as defined in the Legislation

2. Mackenzie is registered as a portfolio manager, investment fund manager, exempt market dealer and commodity trading manager in Ontario. Mackenzie is registered as a portfolio manager, investment fund manager and exempt market dealer in Quebec and Newfoundland and Labrador. Mackenzie is also registered as a portfolio manager and exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan, and Yukon.

3. Neither Mackenzie nor any of the Existing Mackenzie Funds are in default of any of the requirements of securities legislation of any of the Jurisdictions.

4. Mackenzie is an indirect, wholly owned subsidiary of IGM Financial Inc. ("IGM"). Power Corporation of Canada ("Power") owns approximately 65% of the voting securities of IGM. Power therefore is a "substantial securityholder" of Mackenzie as defined under the Legislation.

IGIM

5. I.G. Investment Management Inc. (IGIM) is a corporation continued under the laws of Ontario. It is the trustee, portfolio adviser, and manager of certain of the Existing Investment Funds, including certain Fixed Income Funds as identified in Appendix "A" (the "Existing IGIM Funds"). IGIM is therefore the "management company" of the Existing IGIM Funds.

6. IGIM is registered as a portfolio manager and investment fund manager in Manitoba, Ontario, Quebec, and Newfoundland and Labrador and as a portfolio manager in British Columbia, Alberta, Saskatchewan, New Brunswick, Nova Scotia, Prince Edward Island, the Northwest Territories, Nunavut and Yukon.

7. Neither IGIM nor any of the Existing IGIM Funds are in default of any of the requirements of securities legislation in any of the Jurisdictions.

8. IGIM is an indirect, wholly owned subsidiary of IGM. Power is therefore a "substantial securityholder" of IGIM under the Legislation.

9. The portfolio management department of IGIM has implemented information barriers between it and the other Filers and between it, Power and Power's subsidiaries.

Counsel

10. Counsel is a corporation formed under the laws of Ontario. It is the trustee, manager and portfolio adviser of certain Existing Investment Funds (the Existing Counsel Funds). Counsel is therefore the "management company" of the Existing Counsel Funds.

11. Counsel is registered as a commodity trading manager, investment fund manager and portfolio manager in Ontario. Counsel is registered as an investment fund manager in Quebec and Newfoundland and Labrador.

12. Neither Counsel nor any of the Existing Counsel Funds are in default of any of the requirements of securities legislation in any of the Jurisdictions.

13. Counsel is an indirect, wholly owned subsidiary of IGM. Power is therefore a "substantial securityholder" of Counsel under the Legislation.

14. While the portfolio management departments of Mackenzie and Counsel operate independently, formal information barriers have not been implemented between them. However, information barriers have been implemented between them and IGIM and between them, Power and Power's subsidiaries.

The Investment Funds

15. Each of the Investment Funds, (including the Fixed Income Funds) is or will be a mutual fund or non-redeemable investment fund subject to NI 81-102 and is a reporting issuer in each of the Jurisdictions. Any Investment Funds established in the future will be subject to NI 81-102 and will be a reporting issuer in at least one of the Jurisdictions.

16. Each of the Existing Investment Funds currently distributes its securities under a prospectus prepared in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure ("NI 81-101") or National Instrument 41-101 General Prospectus Requirements (NI 41-101). Any Investment Funds established in the future will distribute securities under a prospectus prepared in accordance with NI 81-101 or NI 41-101.

17. One of the Filers or an affiliate will be the manager of any Investment Funds established in the future and will therefore be the management company of the Investment Fund under the Legislation.

Sagard

18. Sagard Holdings Inc. ("Sagard") is a wholly owned subsidiary of Power. Power's direct or indirect ownership interest of its subsidiaries is referred to as the "Power Ownership Percentage" of the applicable subsidiary in this Decision. As such, Power is deemed to own beneficially an amount equal to the Power Ownership Percentage of any voting securities owned by Sagard pursuant to the Legislation.

19. Sagard is a multi-strategy alternative asset manager with professionals principally located in Canada, the U.S. and Europe. The operations of Sagard are comprised of asset management and investing activities. Sagard manages multi-billion dollars of assets under management, including unfunded commitments, primarily across four asset classes: private credit, healthcare royalties, venture capital and private equity.

20. Power maintains formal information barriers among IGM, Great-West Lifeco Inc. and Power and, therefore, Sagard operates independently of Great-West Lifeco Inc. and IGM.

SCP II

21. Sagard Credit Partners II ("SCP II") is a limited partnership formed under the laws of Ontario and managed by Sagard and the general partner of which is a special purpose general partner wholly-owned by Sagard. SCP II is a private credit fund whereby SCP II makes loans directly to borrowers in the private market. A limited partner in SCP II has an interest in such loans equivalent to a participating (non-administrative) lender.

22. SCP II is not an "investment fund" for purposes of the Legislation because, among other things, SCP II does not invest in a portfolio of securities but instead originates private loans.

23. SCP II has term of 7 years from the date of final closing, plus three possible extensions of one year each. The final closing must occur within 18 months of the initial closing, which occurred in Q4 of 2020.

24. SCP II draws capital from its limited partners up to the amount of their capital commitment for up to three years following the final closing, subject to two one-year extensions.

The Sagard Funds

25. In addition to SCP II, Sagard manages other private credit funds ("Sagard Private Credit Funds") and private equity funds ("Sagard Private Equity Funds. SCP II, the Sagard Private Credit Funds and the Sagard Private Equity Funds are hereinafter referred to as the "Sagard Funds".

26. Similar to SCP II, the Sagard Funds are not "investment funds" for purposes of the Act. The Sagard Private Credit Funds, like SCP II, do not invest in a portfolio of securities. Rather, they originate and administer private loans. The Sagard Private Equity Funds are not investment funds due to the nature of the investment strategy as an active investor engaged with management of its portfolio company investments. Once an investment is disposed of by the Sagard Fund, the Sagard Fund does not typically re-invest the proceeds but rather distributes the proceeds to its investors.

Reason for Requested Relief

27. Each of the Fixed Income Funds seeks to invest in SCP II consistent with their investment objectives.

28. From time to time, the Investment Funds may, if consistent with their investment objectives and strategies, wish to invest in a Sagard Fund.

29. Power, through Sagard and its affiliates, has invested directly in SCP II. As of the date of this Decision, Sagard's capital commitment to SCP II is in an amount such that the Power Ownership Percentage of SCP II is currently less than 10% of SCP II's committed capital. Power, through one or more subsidiaries may directly or indirectly increase its investment in SCP II such that the Power Ownership Percentage of SCP II would be greater than 10% of SCP II's aggregate committed capital. This would result in Power having a "significant interest" in SCP II under the Legislation. SCP II would also be considered a "related person or company" to the Investment Funds under the Legislation.

30. Power, through Sagard or other affiliates, may also commit capital to investing in a Sagard Fund. If such investment exceeds 10% of the committed capital of the applicable Sagard Fund, Power would be considered to have a significant interest in the Sagard Fund under the Legislation.

31. Since Power is a substantial securityholder of each of the Filers, then absent the Requested Relief, the Related Party Investment Restriction would prohibit the Fixed Income Funds from investing in SCP II, or continuing to invest in SCP II, and the Investment Funds would be prohibited from investing in the Sagard Funds.

32. Absent the Requested Relief, the Management Company Reporting Requirement would require the Filers to file a report of (i) every transaction of purchase or sale of securities between an Investment Fund and a Sagard Fund and (ii) every transaction in which an Investment Fund is a joint participant with one or more Sagard Funds, within 30 days of the month end in which the transaction occurred.

Generally

33. An investment by an Investment Fund in a Sagard Fund will be consistent with its investment objectives.

34. An investment by an Investment Fund will be in an amount that constitutes less than 10% of all capital commitments to the Sagard Fund.

35. The aggregate investment by Investment Funds managed by Mackenzie, collectively, in a Sagard Fund will be in an amount that constitutes less than 20% of all capital commitments to that Sagard Fund. Similarly, the aggregate investment by Investment Funds managed by Counsel, collectively, or IGIM, collectively, in a Sagard Fund will respectively be in an amount that constitutes less than 20% of all capital commitments to that Sagard Fund.

36. Securities of the Sagard Funds are considered "illiquid assets" under NI 81-102 and, therefore, an Investment Fund will not invest more than the limit on such investment as set forth in NI 81-102, or as may otherwise be permitted through exemptive relief.

37. Each Fixed Income Fund's independent review committee ("IRC") established under National Instrument 81-107 Independent Review Committee for Investment Funds ("NI 81-107") has reviewed the proposed investment by each Fixed Income Fund in SCP II pursuant to subsection 5.3(1) of NI 81-107 and the IRC has provided a positive recommendation in respect of the investment by each Fixed Income Fund. Approval from the IRC will also be sought if any Fixed Income Funds make additional investments in SCP II.

38. Any proposed investment by an Investment Fund in a Sagard Fund will be reviewed by and subject to the approval of, the Investment Fund's IRC prior to the Investment Fund committing to the investment.

39. The IGM Related Party & Conduct Review Committee, which is comprised entirely of independent directors of IGM has reviewed and approved the proposed investments by the Fixed Income Funds to ensure that such investments are on terms and conditions at least as favourable as market terms and conditions, as per the Committee's mandate. The Committee has established parameters regarding financial aspects and parameters around terms and conditions of investments in the Sagard Funds applicable to all Investment Funds.

40. The Fixed Income Funds will not have any look-through rights with respect to the individual loans held by SCP II and SCP II has diversification requirements which will limit the indirect exposure of a Fixed Income Fund to any single underlying portfolio company. Further, the Fixed Income Funds will not have any rights to, or responsibility for, administering any of the loans held by SCP II.

41. The Filers believe that a meaningful allocation to private credit provides the Fixed Income Fund's investors with unique diversification opportunities and represents an appropriate investment tool for the Fixed Income Funds that has not been widely available in the past. Private credit investments have historically performed well in down markets; the Filers believe that permitting the Fixed Income Funds to increase their allocation to private credit, a subset of alternative investments, offer the potential to improve each Fixed Income Fund's performance while reducing its risk and volatility. Granting the Requested Relief would allow the Fixed Income Funds' investors to benefit from access to a larger allocation to the private asset class, helping the Fixed Income Funds and their investors meet their investment objectives.

42. The Filers believe that an investment in SCP II is in the best interests of the Fixed Income Funds. They note that Sagard has a strong team, history and depth of analysis. Sagard is able to source deals and access new opportunity sets in a niche area of the market that none of the Filers can do on their own. SCP II will comprise 15-25 private debt positions in non-cyclical sectors, thus providing a diversified portfolio. Private credit is an attractive niche market (10-13% return potential with immaterial interest rate risk), with secured positions at the top of the capital structure, strong structuring and documentation and strong fundamentals.

43. Pursuant to National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106), each Investment Fund prepares and files interim and annual management reports of fund performance (MRFPs) that disclose any transactions involving a related party, including the identity of that related party, the relationship to the Investment Fund, the purpose of the transaction, the measurement basis used to determine the recorded amount, and any ongoing commitments to the related party.

44. It is costly and time consuming for the Filers to also provide the reporting required by the Management Company Reporting Requirement, which is substantially similar to the information required by NI 81-106 to be disclosed in the MRFPs.

45. An investment in a Sagard Fund represents the business judgment of the portfolio manager of the Investment Fund uninfluenced by considerations other than the best interests of the Investment Fund.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted, provided that:

(a) The purchase or holding of a Sagard Fund is consistent with, or necessary to meet, the investment objectives of an Investment Fund;

(b) At the time of entering into any commitment of capital to a Sagard Fund, the IRC of the Investment Fund has approved the transaction in accordance with subsection 5.2(2) of NI 81-107;

(c) Each Filer, as the investment fund manager of an Investment Fund, complies with section 5.1 of NI 81-107 and the Filer and the IRC comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the Investment Fund's transactions in securities of a Sagard Fund; and

(d) No later than the time the Investment Fund files its annual financial statements, and no later than the 90^th day after the end of each financial year of the Investment Fund, the Filers file with the securities regulatory authority or regulator the particulars of any investments made in reliance on the Requested Relief.

"Mary Anne De Monte-Whelan"
Commissioner
Ontario Securities Commission

"Cathy Singer"
Commissioner
Ontario Securities Commission

Application File #: 2021/0619

Appendix "A"