Goldman Sachs Asset Management, L.P.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from subparagraphs 13.5(2)(b)(ii) and (iii) of NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to permit in-specie transfers between private funds and managed accounts and other funds, subject to conditions.
Applicable Legislative Provisions
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.5 and 15.1.
February 3, 2025
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 GOLDMAN SACHS ASSET MANAGEMENT, L.P. (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) granting an exemption to each Filer from the prohibitions contained in subparagraphs 13.5(2)(b)(ii) and 13.5(2)(b)(iii) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to permit In Specie Transfers (as defined below) by:
(a) a Managed Account (as defined below) in relation to a Fund (as defined below); and
(b) a Private Fund in relation to another Fund (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(i) the Ontario Securities Commission is the principal regulator for this application, and
(ii) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of Alberta, British Columbia and Québec (together with the Jurisdiction, the Jurisdictions).
Interpretation
Terms defined in MI 11-102, National Instrument 14-101 Definitions, National Instrument 81-102 Investment Funds (NI 81-102) and NI 31-103 have the same meaning if used in this decision, unless otherwise defined. Additionally, the following terms shall have the following meanings:
"81-102 Funds" means collectively, the Existing 81-102 Funds and the Future 81-102 Funds (each, a "81-102 Fund").
"Clients" means individuals, private holding companies, pension plans, endowments, trusts, insurance companies, corporations, investment funds, other collective investment vehicles that are not investment funds and other entities to whom the Filer offers, or may offer, discretionary portfolio management services through a Managed Account (each, a "Client").
"Discretionary Management Agreement" means a written agreement between the Filer and a Client seeking discretionary portfolio management or related services.
"Existing 81-102 Funds" means any existing investment fund of which the Filer and/or a Knowledge Affiliate (as defined below) is a portfolio adviser (including a sub-advisor) and to which NI 81-102 applies.
"Existing Private Funds" means any existing collective investment vehicle (which may or may not be an investment fund) that:
(i) is not a reporting issuer,
(ii) the securities of which are distributed on a private placement basis pursuant to available prospectus exemptions, and
(iii) for which the Filer and/or a Knowledge Affiliate acts as a portfolio adviser (including a sub-advisor).
"Fund Securities" means units or shares of any of the Funds (each, a "Fund Security").
"Funds" means collectively, the Private Funds and the 81-102 Funds (each, a "Fund").
"Future 81-102 Funds" means any investment fund established in the future of which the Filer and/or a Knowledge Affiliate is a portfolio adviser (including a sub-advisor) and to which NI 81-102 applies.
"Future Private Funds" means any future collective investment vehicle (which may or may not be an investment fund) that:
(i) is not a reporting issuer,
(ii) the securities of which will be distributed on a private placement basis pursuant to available prospectus exemptions, and
(iii) for which the Filer and/or a Knowledge Affiliate will act as a portfolio adviser (including a sub-advisor).
"In Specie Transfer" means causing (i) a Managed Account to deliver portfolio securities to a Fund in respect of the purchase of Fund Securities of such Fund, or causing a Managed Account to receive portfolio securities from the investment portfolio of a Fund in respect of a redemption of Fund Securities of such Fund or (ii) a Private Fund to deliver portfolio securities to another Fund in respect of the purchase of Fund Securities of such other Fund, or causing a Private Fund to receive portfolio securities from the investment portfolio of another Fund in respect of a redemption of Fund Securities of such other Fund.
"Managed Account" means an account managed by the Filer for a Client that is not a "responsible person" and over which the Filer has discretionary authority.
"NI 81-102" means National Instrument 81-102 Investment Funds.
"NI 81-107" means National Instrument 81-107 Independent Review Committee for Investment Funds.
"Private Funds" means collectively, the Existing Private Funds and the Future Private Funds (each, a "Private Fund").
Representations
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is a limited partnership governed by the laws of Delaware, USA and is headquartered in New York, New York USA. The general partner of the Filer is GSAM Holdings LLC, which is wholly owned by The Goldman Sachs Group, Inc. (GS Group) and the limited partner is GSAM Holdings II LLC, which is wholly owned by GSAM Holdings LLC.
2. The Filer provides investment management and advisory services for large institutional clients and primarily conducts business outside of Canada.
3. The Filer is registered in the Jurisdictions in the categories of portfolio manager, as a commodity trading manager in Ontario and as a derivatives portfolio manager in Québec. The Filer also relies upon the international investment fund manager exemption in Ontario, Québec, and Newfoundland and Labrador.
4. The Filer is an indirect wholly-owned subsidiary of GS Group, a public company listed on the New York Stock Exchange. The Filer operates a global investment management business that spans asset classes, industries and geographies. As of December 30, 2023, the Filer oversees more than $1.66 trillion in assets under supervision.
The Funds
5. Each Fund is, or will be, an investment fund under securities legislation or a collective investment vehicle that does not meet the definition of an investment fund under securities legislation.
6. Each Fund is, or will be, organized as a limited partnership, a corporation or a trust established under the laws of Canada or a Jurisdiction.
7. The securities of each 81-102 Fund are, or will be, qualified for distribution in one or more of the Jurisdictions under a prospectus prepared and filed in accordance with the securities legislation of such Jurisdictions.
8. Each 81-102 Fund is, or will be, subject to the provisions of NI 81-102.
9. Each Private Fund is not, or will not be, a reporting issuer under the laws of any Jurisdiction.
10. The Filer and/or an affiliate of the Filer is or will be the investment fund manager of the Funds that are investment funds and the manager of the Private Funds that are not investment funds.
11. The Filer, the Existing Private Funds and the Existing 81-102 Funds are not in default of securities legislation in any Jurisdiction.
12. An independent review committee (IRC) has been established, or will be established, for each 81-102 Fund in accordance with the requirements of NI 81-107.
The Managed Accounts
13. The Filer offers, or may in the future offer, discretionary portfolio management services to Clients seeking investment management or related services under Discretionary Management Agreements.
14. Pursuant to the Discretionary Management Agreement entered into with each Client, the Client appoints the Filer to act as portfolio adviser in connection with an investment portfolio held in a Managed Account of the Client with full discretionary authority to trade in securities for the Managed Account without obtaining the specific consent or instructions of the Client to execute the trade.
15. The Filer may, where authorized under the applicable Discretionary Management Agreement, from time to time, invest the assets in a Client's Managed Account in securities of any one or more of the Funds in order to give such Client the benefit of asset diversification and economies of scale related to the reduction of transaction costs on portfolio trades, and generally to facilitate portfolio management.
In Specie Transfers
16. The Filer may wish to deliver portfolio securities held in a Managed Account to a Fund in respect of a purchase of Fund Securities, and may wish to, or otherwise be required to, receive portfolio securities from a Fund in respect of a redemption of Fund Securities by a Managed Account.
17. The Filer may also wish to deliver portfolio securities held in a Private Fund to another Fund in respect of a purchase of Fund Securities, and may wish to, or otherwise be required to, receive portfolio securities from another Fund in respect of a redemption of Fund Securities by a Private Fund.
18. The Filer is considered a "responsible person" within the meaning of NI 31-103 for any Fund for which it is the portfolio adviser.
19. In addition, an affiliate of the Filer may have access to investment decisions made on behalf of a Client or advice to be given to a Client (each a Knowledge Affiliate), and thus such Knowledge Affiliate would be considered a "responsible person" within the meaning of NI 31-103.
20. The Filer and/or a Knowledge Affiliate (each a "responsible person" within the meaning of NI 31-103) is or will be a portfolio adviser of the Funds that are "investment funds" for securities law purposes. Absent the grant of the Exemption Sought, the Filer is precluded by section 13.5(2)(b)(iii) of NI 31-103 from effecting In Specie Transfers between (i) a Managed Account and any such Fund, or (ii) a Private Fund and any such Fund.
21. An employee or agent of the Filer, or a partner, director, officer, employee or agent of an affiliate of the Filer may have access to, or participate in formulating, an investment decision made on behalf of a Client or advice to be given to a Client (each a Knowledge Individual), and thus such Knowledge Individual would be considered a "responsible person" within the meaning of NI 31-103.
22. In the case of a Fund that is a trust, the Filer and/or a Knowledge Affiliate (each a "responsible person" within the meaning of NI 31-103) is or will be the trustee of a Fund, and thus that Fund may be an associate of a responsible person. Absent the grant of the Exemption Sought, the Filer is precluded by section 13.5(2)(b)(ii) of NI 31-103 from effecting In Specie Transfers between (i) a Managed Account and any such Fund that is a trust, or (ii) a Private Fund and any such Fund that is a trust.
23. In the case of a Fund that is a limited partnership, the Filer, a director or officer of the Filer, a Knowledge Affiliate or a Knowledge Individual (each a "responsible person" within the meaning of NI 31-103) is or may be a limited partner of a Fund and thus that Fund may be an associate of such responsible person. Absent the grant of the Exemption Sought, the Filer is precluded by section 13.5(2)(b)(ii) of NI 31-103 from effecting In Specie Transfers between (i) a Managed Account and any such Fund that is a limited partnership, or (ii) a Private Fund and any such Fund that is a limited partnership.
24. In the case of a Fund that is a limited partnership, the Filer or a Knowledge Affiliate (each a "responsible person" within the meaning of NI 31-103) is or may be the general partner of the Fund and thus the Fund may be an associate of such responsible person. Absent the grant of the Exemption Sought, the Filer is precluded by section 13.5(2)(b)(ii) of NI 31-103 from effecting In Specie Transfers between (i) a Managed Account and any such Fund that is a limited partnership, or (ii) a Private Fund and any such Fund that is a limited partnership.
25. The Filer respectfully submits that effecting the In Specie Transfers will allow the Filer to manage each asset class more effectively and reduce transaction costs for the Clients and the Funds. For example, In Specie Transfers reduce market impact costs, which can be detrimental to the Clients and/or the Funds, and may provide access to a broader range of securities. In Specie Transfers also allow a portfolio adviser to retain within its control institutional-size blocks of portfolio securities that otherwise would need to be broken and re-assembled. Conversely, In Specie Transfers may also allow a portfolio advisor to more efficiently transact in odd lots of securities, which are otherwise difficult to trade.
26. Prior to engaging in In Specie Transfers on behalf of a Managed Account, each Discretionary Management Agreement or other documentation will contain the authorization of the Client for the Filer, as portfolio adviser of the Managed Account, to engage in In Specie Transfers.
27. The only cost which may be incurred by a Managed Account or a Fund for an In Specie Transfer is a nominal administrative charge levied by the applicable custodian for recording the trades and any commission charged by the dealer executing the trade.
28. The securities transferred under an In Specie Transfer will be valued on the same valuation day on which the purchase price or redemption price of the Fund Securities is determined. With respect to the purchase of Fund Securities, the securities transferred by a Managed Account or a Private Fund to a Fund under an In Specie Transfer in satisfaction of the purchase price of those Fund Securities will be valued as if the securities were portfolio assets of the receiving Fund, as contemplated by section 9.4(2)(b)(iii) of NI 81-102. With respect to the redemption of Fund Securities, the securities transferred to a Managed Account or a Private Fund in satisfaction of the redemption price of those Fund Securities will have a value equal to the amount at which those securities were valued in calculating the net asset value per security used to establish the redemption price of the Fund Securities, as contemplated by section 10.4(3)(b) of NI 81-102.
29. The valuation of any illiquid securities which would be the subject of an In Specie Transfer will be carried out according to the Filer's policies and procedures for the fair valuation of portfolio securities, including illiquid securities. Should any In Specie Transfer contemplated specifically by the Exemption Sought involve the transfer of an "illiquid asset" (as defined in NI 81-102), the Filer will obtain at least one quote for the asset from an independent arm's length purchaser or seller immediately before effecting the In Specie Transfer, other than in the case of an illiquid asset that is a mortgage, a loan or other type of illiquid asset for which the Filer, in its reasonable discretion, determines that it is not commercially reasonable to obtain such quote for the asset from an independent arm's length purchaser or seller, in which case the Filer will obtain at least one quote from an independent valuation agent immediately before effecting the In Specie Transfer. If any illiquid securities are the subject of an In Specie Transfer, the illiquid securities transferred will not materially change the exposure to illiquid securities for the Managed Account or Fund.
30. The Filer will not cause any 81-102 Fund to engage in an In Specie Transfer if the applicable 81-102 Fund is not in compliance with the portfolio restrictions on the holding of illiquid assets described in section 2.4 of NI 81-102.
31. In Specie Transfers will be subject to (i) compliance with the written policies and procedures of the Filer respecting In Specie Transfers that are consistent with applicable securities legislation, and (ii) the oversight of the Filer's Chief Compliance Officer or his/her designate, to ensure that the transaction represents the business judgment of the Filer acting in its discretionary capacity with respect to the Fund and/or Managed Account, uninfluenced by considerations other than the best interests of the Fund and/or Managed Account.
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 Exemption Sought is granted provided that:
(a) If the transaction is the purchase of Fund Securities of a Fund by a Managed Account:
(i) The Filer obtains the prior written consent of the Client of the Managed Account before it engages in any In Specie Transfer in connection with the purchase of Fund Securities of the Fund and such consent has not been revoked;
(ii) The Fund would, at the time of payment, be permitted to purchase the portfolio securities held by the Managed Account;
(iii) The portfolio securities are acceptable to the portfolio adviser of the Fund and consistent with the Fund's investment objectives;
(iv) The value of the portfolio securities sold to the Fund by the Managed Account as consideration for the Fund Securities is equal to the issue price of such Fund Securities, valued as if the portfolio securities were portfolio assets of that Fund; and
(v) The account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Fund and the value assigned to such securities;
(b) If the transaction is the redemption of Fund Securities of a Fund by a Managed Account:
(i) The Filer obtains the prior written consent of the Client of the Managed Account to the payment of redemption proceeds in the form of an In Specie Transfer;
(ii) The portfolio securities are acceptable to the Filer as portfolio adviser of the Managed Account and consistent with the Managed Account's investment objectives;
(iii) The value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price;
(iv) The holder of the Managed Account has not provided notice to terminate its Discretionary Management Agreement with the Filer; and
(v) The account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Managed Account and the value assigned to such securities;
(c) If the transaction is the purchase of Fund Securities of a Fund by a Private Fund:
(i) The Fund would, at the time of payment, be permitted to purchase the portfolio securities held by the Private Fund;
(ii) The portfolio securities are acceptable to the portfolio adviser of the Fund and consistent with such Fund's investment objectives; and
(iii) The value of the portfolio securities sold to the Fund by the Private Fund as consideration for the Fund Securities is equal to the issue price of such Fund Securities, valued as if the portfolio securities were portfolio assets of that Fund;
(d) If the transaction is the redemption of Fund Securities of a Fund by a Private Fund:
(i) The portfolio securities are acceptable to the portfolio adviser of the Private Fund receiving portfolio securities and consistent with the Private Fund's investment objectives; and
(ii) The value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price;
(e) In the case of an In Specie Transfer involving an 81-102 Fund:
(i) The IRC of the Fund has approved the In Specie Transfer in accordance with the terms of section 5.2 of NI 81-107; and
(ii) Section 5.4 of NI 81-107 is complied with in respect of any standing instructions the IRC provides in connection with the In Specie Transfer;
(f) Each Fund keeps written records of all In Specie Transfers in a financial year of the Fund, reflecting details of the portfolio securities delivered to and by the Fund and the value assigned to such securities, for five years after the end of the financial year with the most recent two years in a reasonably accessible place;
(g) The Filer does not receive any compensation in respect of any sale or redemption of Fund Securities of a Fund and, in respect of any delivery of portfolio securities further to an In Specie Transfer, the only charge paid by a Fund or Managed Account, if any, is a nominal administrative charge levied by the applicable custodian for recording the trade and any commission charged by the dealer (if any) executing the trade; and
(h) If the In Specie Transfer involves the transfer of an "illiquid asset" (as defined in NI 81-102), the Filer will obtain at least one quote for the asset from an independent arm's length purchaser or seller immediately before effecting the In Specie Transfer, other than in the case of an illiquid asset that is a mortgage, a loan or other type of illiquid asset for which the Filer, in its reasonable discretion, determines that it is not commercially reasonable to obtain such quote for the asset from an independent arm's length purchaser or seller, in which case the Filer will obtain at least one quote from an independent valuation agent immediately before effecting the In Specie Transfer.
Application File #: 2024/0671