Desjardins Global Asset Management Inc. and Desjardins Investments Inc.
Headnote
Policy Statements 11-203 respecting Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from conflict of interest/self-dealing and reporting provisions in section 13.5 of Regulation 31-103, and section 4.1 of Regulation 81-102 to facilitate investment by investment funds subject to Regulation 81-102 into a related limited partnership that is not a reporting issuer -- relief subject to certain conditions.
Applicable Legislative Provisions
Pursuant to 3.3 of Policy Statement 11-203 respecting Process for Exemptive Relief Applications in Multiple Jurisdictions and Regulation 11-102 respecting Passport System.
Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.5(2)(a) and 15.1.
Regulation 81-102 respecting Investment Funds, ss. 4.1(2) and 19.1.
2025-SMVD-1011937
SEDAR+ No: 06148000
February 24, 2025
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(the Jurisdictions)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
DESJARDINS GLOBAL ASSET MANAGEMENT INC.
AND
DESJARDINS INVESTMENTS INC.
(the Filers)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application (the Application) from the Filers on their own behalf and on behalf of each existing investment fund that is a reporting issuer and to which Regulation 81-102 respecting Investment Funds (Regulation 81-102) and Regulation 81-107 respecting Independent Review Committee for Investment Funds (Regulation 81-107) apply, for which a Filer or an affiliate of a Filer acts as manager (the Existing 81-102 Funds), and each investment fund to be established in the future, that will be a reporting issuer and to which Regulation 81-102 and Regulation 81-107 will apply, for which a Filer or an affiliate of a Filer will act as manager (the Future 81-102 Funds and together with the Existing 81-102 Funds the 81-102 Funds), which invest or will invest in DGAM Canadian Private Real Estate Fund L.P. (the Real Estate Fund) (the Proposed Investment), for a decision under the securities legislation of the Jurisdictions (the Legislation) pursuant to:
a) section 15.1 of Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations (Regulation 31-103) exempting the Filers, or an affiliate of the Filers, as the registered adviser of an 81-102 Fund from the restriction contained in section 13.5(2)(a) of Regulation 31-103 which prohibits a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, from making an investment in any issuer in which a responsible person or an associate of a responsible person is a partner, officer or director unless this fact is disclosed to the client and the written consent of the client is obtained before the investment is made (the 31-103 Restriction); and
b) section 19.1 of Regulation 81-102, exempting the 81-102 Funds from the restriction contained in subsection 4.1(2) of Regulation 81-102 which prohibits a dealer managed investment fund to knowingly making an investment in a class of securities of an issuer of which a partner, director, officer or employee of the dealer manager of the investment fund, or a partner, director, officer or employee of an affiliate or associate of the dealer manager, is a partner, director or officer, unless the partner, director, officer or employee (a) does not participate in the formulation of investment decisions made on behalf of the dealer managed investment fund; (b) does not have access before implementation to information concerning investment decisions made on behalf of the dealer managed investment fund; and (c) does not influence, other than through research, statistical and other reports generally available to clients, the investment decisions made on behalf of the dealer managed investment fund (the 81-102 Restriction);
in order to allow the 81-102 Funds to make the Proposed Investment (the Exemptions Sought).
Under the Process of Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
a) the Autorité des marchés financiers (the AMF) is the principal regulator for the Application,
b) the Filers have provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in every jurisdiction in Canada other than the Jurisdictions, and
c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in Regulation 14-101 respecting Definitions, Regulation 11-102, Regulation 31-103, Regulation 81-102 and Regulation 81-107 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filers:
DGAM
1. Desjardins Global Asset Management Inc. (DGAM) is a corporation incorporated under the Business Corporation Act (Québec).
2. DGAM's head office is located at 1 Complexe Desjardins, 20th Floor, South Tower, Montréal, Québec, Canada, H5B 1B2.
3. DGAM is a member of a group of entities which fall under Fédération des caisses Desjardins du Québec's (FCDQ) umbrella (the Desjardins Group), a financial services cooperative established under the Act respecting financial services cooperatives (Québec) and is a wholly owned indirect subsidiary of FCDQ. As such, DGAM is an affiliate of DII (as defined below).
4. DGAM is registered as portfolio manager (PM) and as exempt market dealer in all jurisdictions of Canada. DGAM is also registered as investment fund manager in Alberta, Manitoba, Ontario, Québec, Nova Scotia and Newfoundland and Labrador. ln addition, DGAM is registered as adviser in Manitoba, commodity trading manager in Ontario and as derivatives portfolio manager in Québec.
5. DGAM, or an affiliate of DGAM, is, or will be, the PM of the 81-102 Funds.
6. The Real Estate Fund is managed and advised by DGAM.
7. A partner, director, officer or employee of DGAM, or a partner, director, officer or employee of an associate or an affiliate of DGAM, may also be a partner, director or officer of the Real Estate Fund. Consequently, as an 81-102 Fund may be a "dealer managed investment fund", the restrictions in subsection 4.1(2) of Regulation 81-102 may apply to an investment by an 81-102 Fund in the Real Estate Fund.
8. The Proposed Investment structure may also result in an 81-102 Fund investing in the Real Estate Fund in which a responsible person or an associate of a responsible person is a partner, officer or director, or performs a similar function or occupies a similar position.
9. DGAM is a "dealer manager" as such term is defined under Regulation 81-102.
10. DGAM is not a reporting issuer in any jurisdiction of Canada.
11. DGAM is not in default of the legislation in any jurisdiction of Canada.
DII
12. Desjardins Investments Inc. (DII) is a corporation incorporated under the Business Corporation Act (Québec).
13. DII's head office is located at 1 Complexe Desjardins, 25th Floor, South Tower, Montréal, Québec, Canada, H5B 1B2.
14. DII is a member of the Desjardins Group and is a wholly-owned indirect subsidiary of FCDQ. As such, DII is an affiliate of DGAM.
15. DII, or an affiliate of DII, is, or will be, the investment fund manager, the promoter, registrar and transfer agent of the 81-102 Funds, including the 81-102 Funds that are exchange traded funds (ETF).
16. DII is duly registered as an investment fund manager in Québec, Ontario and Newfoundland and Labrador.
17. DII is not a reporting issuer in any jurisdiction of Canada.
18. DII is not in default of the legislation in any jurisdiction of Canada.
The 81-102 Funds
19. Each 81-102 Fund is, or will be, an "investment fund" to which Regulation 81-102 applies, as such term is defined under the Legislation.
20. An 81-102 Fund may be a "dealer managed investment fund" as such term is defined under Regulation 81-102.
21. Each 81-102 Fund has, or will have, as applicable, a prospectus, a simplified prospectus, ETF facts, and/or fund facts, prepared in accordance with Regulation 41-101 respecting General Prospectus Requirements, or Regulation 81-101 respecting Mutual Fund Prospectus Disclosure, as applicable.
22. Securities of each 81-102 Fund are, or will be, qualified for distribution in one or more jurisdictions of Canada and therefore each 81-102 Fund is or will be a reporting issuer in those jurisdictions.
23. None of the Existing 81-102 Funds are in default of the legislation in any jurisdiction of Canada.
24. To the extent that an 81-102 Fund wishes to invest in the Real Estate Fund, its investment objective and strategies will permit such an investment.
25. No 81-102 Fund will actively participate in the business or operations of the Real Estate Fund.
26. Each 81-102 Fund is subject to Regulation 81-107 and the Filers have established an independent review committee (an IRC) in order to review conflict of interest matters pertaining to the 81-102 Funds as required by Regulation 81-107.
The Real Estate Fund
27. The Real Estate Fund is an investment vehicle established as a limited partnership governed under the laws of the Province of Quebec. The general partner of the Real Estate Fund is DGAM Canadian Private Real Estate General Partner Inc., a wholly owned subsidiary of DGAM.
28. The investment objective of the Real Estate Fund is to achieve favourable risk-adjusted returns over the long-term by assembling a diversified and balanced portfolio of Canadian real estate properties through direct investments, co-investments and fund investments.
29. The Real Estate Fund seeks to acquire a diversified Canadian real estate portfolio, with (a) 75% to 100% of the gross asset value invested in stable and sustainable core or core plus income projects with rental growth prospects and (b) up to 25% of the gross asset value invested in value-add real estate properties or development projects.
30. The Real Estate Fund seeks to invest in real estate assets in the multifamily (apartment rentals) subsector (up to a maximum of 40% of the Real Estate Fund gross portfolio value), the retail subsector (up to a maximum of 40% of the Real Estate Fund gross portfolio value), the office subsector (up to a maximum of 40% of the Real Estate Fund gross portfolio value), the industrial subsector (up to a maximum of 40% of the Real Estate Fund gross portfolio value) and other real estate subsectors such as life sciences, data centers, student residences and senior residences (up to a maximum of 20% of the Real Estate Fund gross portfolio value). Environmental, social and governance (ESG) considerations will be evaluated prior to undertaking any investment by the Real Estate Fund and on an ongoing basis.
31. The Real Estate Fund is not considered to be an "investment fund" (as such term is defined under the Legislation) but, in certain respects, operates in a manner similar to an investment fund. The Real Estate Fund is managed and advised by DGAM. The net asset value that is used for purposes of determining the purchase and redemption price of an interest in the Real Estate Fund is calculated by a party that is independent of the Filers.
32. The Real Estate Fund is not a reporting issuer in any jurisdiction of Canada. Interests in the Real Estate Fund are sold pursuant to exemptions from the prospectus requirements in accordance with Regulation 45-106 respecting Prospectus Exemptions.
33. The Real Estate Fund is not in default of the legislation of any jurisdiction of Canada.
34. The investments of the Real Estate Fund which consist primarily of Canadian real estate properties are primarily illiquid and the interests of the Real Estate Fund will therefore have limited liquidity.
35. The value of the real property assets of the Real Estate Fund is independently determined on a quarterly basis (the Appraisal) by one or more appraisal firms that is arm's length to the Filers, the Real Estate Fund, and all other investment funds or vehicles managed by DGAM and who is a member in good standing of the Appraisal Institute of Canada or any equivalent or similar organization (Independent Appraiser).
36. The aggregate net asset value of the portfolio assets of the Real Estate Fund is independently determined on a quarterly basis by one or more internationally recognized accounting firms and/or appraisal firms that is arm's length to the Filers, the Real Estate Fund, and all other investment funds or vehicles managed by DGAM (Independent Valuator) on the basis of, among others, the most recent Appraisal as at the relevant date and documents such as audited financial statements, models or valuations of the portfolio assets. The aggregate net asset value of the portfolio assets of the Real Estate Fund may be determined by an Independent Valuator over the course of a quarter using the methodology described in the Real Estate Fund's constating documents. The auditor of the Real Estate Fund will not act as an Independent Valuator.
37. The Real Estate Fund is redeemable semi-annually, subject to redemption limitations, including lock-up periods, and other restrictions on redemptions in a given period of time, or on such other date selected by the General Partner in its discretion.
38. An investment by an 81-102 Fund in the Real Estate Fund will be compatible with the investment objective and strategies of the 81-102 Fund.
39. If the Exemptions Sought are granted, an 81-102 Fund will acquire securities of the Real Estate Fund, in compliance with section 2.4 of Regulation 81-102. The investments in the Real Estate Fund are included as part of the calculation for the purposes of the illiquid asset restriction in section 2.4 of Regulation 81-102. Regulation 81-102 allows holdings in illiquid investments so long as the aggregate exposure to illiquid investments is within the thresholds of the rule. As a result, an 81-102 Fund will not be able to purchase an interest of the Real Estate Fund if, immediately after purchase, more than 10% of the net asset value of the 81-102 Fund would be made up of "illiquid assets". DGAM has its own liquidity policy and manages and will manage each 81-102 Funds liquidity prudently under the policy. Given the readily available liquidity of the remainder of each 81-102 Funds' investment portfolio, the Filers believe that the risk of an 81-102 Fund needing to liquidate its investments in the Real Estate Fund when markets are under stress or in other environments where liquidity may be reduced is remote.
40. The IRC of the 81-102 Funds will review and provide its approval, including by way of standing instructions, for the purchase of interests of the Real Estate Fund by the 81-102 Funds, in accordance with section 5.2(2) of Regulation 81-107.
Generally
41. An 81-102 Fund will not invest in the Real Estate Fund if, immediately after the purchase, the 81-102 Fund would hold securities representing more than 10% of: (i) the votes attaching to the outstanding voting securities of the Real Estate Fund; or (ii) the outstanding equity securities of the Real Estate Fund.
42. The Filers do not anticipate that any fees or sales charges would be incurred by an 81-102 Fund with respect to an investment in the Real Estate Fund.
43. ln the absence of relief of the Regulation 31-103 Restriction, DGAM or its affiliates would be precluded from causing an 81-102 Fund to invest in the Real Estate Fund in these circumstances unless the consent of each investor in the 81-102 Fund is obtained. Each 81-102 Fund may have a large number of investors and, as a result, obtaining the consent of each such investor is not practical.
44. Subsection 6.2(3) of Regulation 81-107 provides an exemption for investment funds from the "investment fund conflict of interest investment restrictions" (as defined in Regulation 81-102) for purchases of related issuer securities if the purchase is made on an exchange. However, the exemption in subsection 6.2(3) of Regulation 81-107 does not apply to purchases of non-exchange-traded securities and therefore does not apply to purchases of the Real Estate Fund by an 81-102 Fund.
45. Section 6.2(3) of Regulation 81-107 also does not provide an exemption from the restrictions in subsection 4.1(2) of Regulation 81-102, and therefore relief from the 81-102 Restriction is required in the circumstances.
46. An 81-102 Fund's investment in the Real Estate Fund will represent the business judgment of a responsible person uninfluenced by considerations other than the best interests of the 81-102 Fund.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemptions Sought are granted provided that:
(a) an investment by an 81-102 Fund in the Real Estate Fund will be included as part of the calculation for the purposes of the illiquid asset restriction in section 2.4 of Regulation 81-102;
(b) at the time of each investment, the purchase is consistent with, or is necessary to meet, the investment objective of the 81-102 Fund and represents the business judgment of the portfolio adviser of the 81-102 Fund uninfluenced by considerations other than the best interests of the 81-102 Fund and is in fact in the best interests of the 81-102 Fund;
(c) the PM of the 81-102 Funds remains subject to suitability obligations when investing in the Real Estate Fund;
(d) that the PM of the 81-102 Funds remains subject to its legislative and regulatory obligations regarding the management of conflicts of interest.
(e) in respect of an investment by an 81-102 Fund in the Real Estate Fund, no sales or redemption fees will be paid as part of the investment in the Real Estate Fund;
(f) in respect of an investment by an 81-102 Fund in the Real Estate Fund, no management fees or incentive fees will be payable by the 81-102 Fund that, to a reasonable person, would duplicate a fee payable by the Real Estate Fund for the same service;
(g) in respect of an investment by an 81-102 Fund in the Real Estate Fund, no incentive or additional remuneration will be provided to the portfolio manager of the 81-102 Fund;
(h) an 81-102 Fund will not invest at the net asset value of the Real Estate Fund unless the net asset value of the Real Estate Fund is independently calculated by an arm's length third party and the annual financial statements of the Real Estate Fund are audited and made available to the 81-102 Fund;
(i) where applicable, an 81-102 Fund's investment in the Real Estate Fund will be disclosed to investors in such 81-102 Fund's quarterly portfolio holding reports, financial statements and/or fund facts/ETF facts documents;
(j) the prospectus of the 81-102 Fund discloses, or will disclose in the next renewal or amendment thereto following the date of a decision evidencing the Exemptions Sought, the fact that the 81-102 Fund may invest in the Real Estate Fund, which are investment vehicles managed by DGAM, the nature of the conflict of interest and how it is mitigated or avoided, the approximate or maximum percentage of the net asset value that is intended to be invested in the Real Estate Fund, and the fees and expenses payable;
(k) the IRC of the 81-102 Fund will review and provide its approval, including by way of standing instructions, prior to the purchase of securities of the Real Estate Fund by the 81-102 Fund, in accordance with section 5.2(2) of Regulation 81-107;
(l) the manager of the 81-102 Fund complies with Section 5.1 of Regulation 81-107 and the manager and the IRC of the 81-102 Fund comply with Section 5.4 of Regulation 81-107 for any standing instructions the IRC provides in connection with the transactions;
(m) where an investment is made by an 81-102 Fund in the Real Estate Fund, the annual and interim management reports of fund performance for the 81-102 Fund disclose the name of the related person in which an investment is made, being the Real Estate Fund;
(n) where an investment is made by an 81-102 Fund in the Real Estate Fund, the records of portfolio transactions maintained by the 81-102 Fund include, separately for every portfolio transaction effected by an 81-102 Fund through any affiliate of a Filer, the name of the related person in which an investment is made, being the Real Estate Fund;
(o) the securities of the Real Estate Fund held by an 81-102 Fund will not be voted at any meeting of the security holders of the Real Estate Fund, except that the 81-102 Fund may arrange for the securities of the Real Estate Fund it holds to be voted by the beneficial holders of securities of the 81-102 Fund;
(p) If the IRC becomes aware of an instance where a Filer or an affiliate of a Filer, in its capacity as manager of an 81-102 Fund, did not comply with the terms of this decision, or a condition imposed by the Legislation or the IRC in its approval, the IRC of the 81-102 Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the jurisdiction under which the 81-102 Fund is organized; and
(q) DGAM will provide upon request to the Canadian securities regulatory authorities concerned the particulars of any investments made in reliance on the Exemptions Sought.
English version signed by:
"Hugo Lacroix"
Superintendent, Securities Markets and Distribution
Autorité des marchés financiers