RBC Global Asset Management Inc. (Re), 2025 CanLII 106408

October 20, 2025

AND

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on behalf of the Filer and each existing and future mutual fund managed by RBC GAM and advised by the Filer that is, or will be, a reporting issuer to which National Instrument 81-102 Investment Funds (NI 81-102) and National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) apply (the Top Funds).

The Filer intends for one or more Top Funds to invest, as the Filer considers in the best interest of the Top Fund and in accordance with its investment objectives and strategies, in securities of Phillips, Hager & North Private Placement Corporate Debt Fund (the Initial Underlying Fund), and/or in any future investment fund that is, or will be, managed by RBC GAM and advised by the Filer and that is not subject to NI 81-102 or NI 81-107 (the Future Underlying Funds and, together with the Initial Underlying Fund, the Underlying Funds), and therefore has applied for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Top Funds from the following prohibitions in NI 81-102:

(a) subsection 2.5(2)(a) of NI 81-102, which prohibits an investment fund from purchasing or holding a security of another investment fund unless, if the investment fund is a mutual fund, other than an alternative mutual fund, either of the following applies:

(i) the other investment fund is a mutual fund, other than an alternative mutual

fund, that is subject to this Instrument; (ii) the other investment fund is an alternative mutual fund or a non-redeemable investment fund that is subject to this Instrument and, at the time of the purchase of that security, the investment fund holds no more than 10% of its net asset value in securities of alternative mutual funds and non-redeemable investment funds; and

(b) subsection 2.5(2)(c) of NI 81-102, which prohibits an investment fund from purchasing or holding a security of another investment fund unless the other investment fund is a reporting issuer in a jurisdiction

(collectively, the Exemption Sought).

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 Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (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:

The Filer

RBC GAM is a corporation formed by amalgamation under the federal laws of Canada and its head office is located in Toronto, Ontario.
RBC GAM is registered as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer under the securities legislation of each Jurisdiction, is registered as an investment fund manager in each of British Columbia, Ontario, Québec and Newfoundland and Labrador, and is also registered in Ontario as a commodity trading manager.
The Filer is not in default of the securities legislation of any Jurisdiction.

The Top Funds

Each Top Fund is, or will be, an investment fund to which NI 81-102 applies, and is, or will be, organized and governed by the laws of a Jurisdiction.
RBC GAM is, or will be, the manager of the Top Funds and the Filer is, or will be, the portfolio adviser of the Top Funds.
The securities of each of the Top Funds are, or will be, qualified for distribution in one or more of the Jurisdictions and distributed to investors pursuant to a simplified prospectus or long form prospectus (each, a Top Fund Prospectus) and fund facts or ETF facts document, 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), as applicable.
Each Top Fund is, or will be, a reporting issuer under the securities legislation of one or more Jurisdictions.
Each existing Top Fund is not in default of the securities legislation of any Jurisdiction.
Each Top Fund Prospectus discloses, or will disclose, in its description of the Top Fund’s investment strategies that the Top Fund may invest up to 10% of its assets directly or indirectly in the Underlying Funds. This limit is consistent with the classification of the Underlying Funds as illiquid assets for purposes of NI 81-102.
Each Top Fund is, or will be, subject to NI 81-107 and the Filer has established, or will establish, an independent review committee (IRC) in order to review conflict of interest matters pertaining to its management of the Top Funds as required by NI 81-107.

The Underlying Funds

The Initial Underlying Fund falls, and each Future Underlying Fund will fall, within the definition of “investment fund” under the Securities Act (Ontario).
RBC GAM is, and will be, the manager of the Initial Underlying Fund and any Future Underlying Fund and the Filer is, and will be, the portfolio adviser of the Initial Underlying Fund and any Future Underlying Fund. To the extent that RBC GAM is the manager and the Filer is the portfolio adviser of any Future Underlying Fund, the representations set out in this decision will apply to the same extent to such Future Underlying Fund.
The Initial Underlying Fund is an investment fund structured as a trust to which NI 81-102 and NI 81-107 does not apply, and is organized and governed by the laws of a Jurisdiction. Future Underlying Funds may be structured as trusts, limited partnerships or corporations to which NI 81-102 and NI 81-107 will not apply, and will be organized and governed by the laws of a Jurisdiction.
No Underlying Fund has prepared or will prepare a simplified prospectus in accordance with NI 81-101 or a long form prospectus in accordance with NI 41-101.
The Underlying Funds are not, or will not be, reporting issuers in any of the Jurisdictions or listed on any recognized stock exchange.
Securities of the Underlying Funds will be distributed solely to investors pursuant to exemptions from the prospectus requirements in accordance with National Instrument 45-106 Prospectus Exemptions and the securities legislation of a Jurisdiction.
The Initial Underlying Fund is not in default of the securities legislation of any of the Jurisdictions.
The investment objective of the Initial Underlying Fund is to provide a relatively high level of income and reasonable stability of capital by investing primarily in a well-diversified portfolio of fixed-income securities issued primarily by Canadian corporations by way of private placement.
The securities of each Underlying Fund are generally considered illiquid assets for purposes of NI 81-102. Securities of the Initial Underlying Fund are redeemable daily.
The Filer has one valuation policy that is utilized in the calculation of net asset value (NAV), which applies to both the Top Funds and the Underlying Funds managed by it. The Filer calculates NAV for the Underlying Funds in accordance with Part 14 of National Instrument 81-106 Investment Fund Continuous Disclosure.
The value of the underlying portfolio assets of the Initial Underlying Fund, which consist of assets that are classified as levels 1, 2 and 3 under IFRS 13 (Fair Value Measurement), is determined utilizing a framework (the Valuation Framework) that, depending on the level classification, considers arm’s length broker quotes and/or fair value price as calculated by multiple third-party pricing vendors and, for level 3 private debt assets that are bonds, a valuation methodology developed by the Filer that uses significant third party inputs that are not observable market data (the Level 3 Private Debt Valuation Methodology).
Under the Level 3 Private Debt Valuation Methodology, the Filer generally follows the following two approaches in determining the fair value price of private debt assets that are bonds and considered level 3 assets under IFRS 13:

(1) obtaining the price and/or spread from an arm’s length broker/dealer and where only the spread is available, calculating the price using the broker/dealer’s bond calculator or the Filer’s internal bond calculator; or

(2) where the spread is not available from the broker/dealer, obtaining an independent valuation from at least one third-party vendor and using the Filer’s internal bond calculator to determine or verify the third-party vendor’s pricing information.

The Filer’s internal bond calculator is a valuation method developed by the Filer that uses third-party input values such as the benchmark, amortization schedule (if applicable) and general deal terms sourced from the term sheet for the bond. A spread that is provided by an arm’s length broker/dealer or third-party vendor is combined with the input values to calculate the price of the bond.
The Valuation Framework, including the Level 3 Private Debt Valuation Methodology, is overseen and administered by the fund and portfolio operations group of the Filer, whose members do not include the portfolio management teams who make the investment decisions for the Initial Underlying Fund. The Valuation Framework may be adjusted from time to time by the Filer in its discretion.
A Future Underlying Fund will utilize the Valuation Framework similar to that of the Initial Underlying Fund. The value of any level 3 portfolio assets of each Future Underlying Fund will be determined (a) by the Filer utilizing the Level 3 Private Debt Valuation Methodology, or (b) independently by an arm’s length third party.
Each Underlying Fund produces, and will produce, audited financial statements on an annual basis, in accordance with generally accepted accounting principles with a qualified auditing firm as the auditor of those financial statements.
No Top Fund will actively participate in the business or operations of an Underlying Fund.

Investments by Top Funds in the Underlying Funds

An investment by a Top Fund in an Underlying Fund will only be made if the investment is, or will be, compatible with the investment objectives of the Top Fund and allows, or will allow, the Top Fund to obtain exposure to asset classes in which the Top Fund may otherwise invest directly. Each Top Fund will comply with the investment restrictions and practices provided for in Part 2 of NI 81-102 in making such investments except where exempted pursuant to the Exemption Sought or other exemptive relief.
The Filer believes that the investment by a Top Fund in an Underlying Fund will provide the Top Fund with an efficient and cost-effective manner of pursuing portfolio diversification and asset diversification instead of purchasing securities directly.
Investments by a Top Fund in an Underlying Fund will be effected at an objective price. The Filer’s policies and procedures provide that an objective price, for this purpose, will be the NAV per security of the applicable Underlying Fund.
A Top Fund will not invest in an Underlying Fund unless the portfolio adviser of the Top Fund believes that the liquidity of the Top Fund’s portfolio is adequately managed through other strategies.

Generally

Since the Underlying Funds are not reporting issuers and are not subject to NI 81-102, the Top Funds are unable to rely upon the exemption codified under subsection 2.5(7) of NI 81-102 for investments by investment funds subject to NI 81-102 in other investment funds.
Absent the Exemption Sought, a Top Fund would be prohibited by subsections 2.5(2)(a) and 2.5(2)(c) from purchasing or holding securities of an Underlying Fund because the Underlying Funds (i) are not subject to NI 81-102, and (ii) are not reporting issuers in the Jurisdictions.
The Filer considers that investments in the Underlying Funds by the Top Funds raise “conflict of interest matters” within the meaning of NI 81-107 and therefore if the Exemption Sought is granted, the Filer will request approvals of the IRC for the proposed investments of the Top Funds in the Underlying Funds, including by way of standing instructions. No such investments will be made until the IRC provides its approvals under section 5.2 of NI 81-107.
The decision to permit the Top Funds to invest in the Underlying Funds represents the Filer’s business judgment and is not influenced by factors other than the best interests of the Top Funds.
On an annual basis, the financial statements of each Underlying Fund are, or will be, audited by the Underlying Fund’s external auditors, which audit includes independent confirmation of the fair value of all or substantially all portfolio investments. Such appointed auditor also audits the value of the portfolio investments to ensure that they are accurately valued in accordance with the Underlying Fund’s valuation policy. Such financial statements will be accessible in the ordinary course by the Filer.
Aside from the sections covered by the Exemption Sought, the Top Funds will comply with section 2.5 of NI 81-102 with respect to any investment in an Underlying 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 Exemption Sought is granted, provided that:

(a) no Top Fund will actively participate in the business or operations of any Underlying Fund;

(b) each Top Fund will be treated as an arm's-length investor when making investments in each Underlying Fund, with each investment being accepted by the Underlying Fund on a fair and equitable basis as compared to all other third-party investors;

(c) the investment by a Top Fund in an Underlying Fund is compatible with the fundamental investment objectives of the Top Fund;

(d) the investments in the Underlying Funds are included as part of the calculation for the purposes of the illiquid asset restriction in section 2.4 of NI 81-102 for a Top Fund;

(e) in respect of an investment by a Top Fund in an Underlying Fund, no management fees or incentive fees will be payable by the Top Fund that, to a reasonable person, would duplicate a fee payable by an Underlying Fund for the same service;

(f) in respect of an investment by a Top Fund in an Underlying Fund, no sales or redemption fees will be paid as part of the investment in the Underlying Fund;

(g) where applicable, a Top Fund's investment in an Underlying Fund, will be disclosed to investors in such Top Fund's quarterly portfolio holding reports, financial statements and fund facts or ETF facts documents;

(h) the Top Fund Prospectus of a Top Fund that is relying on the Exemption Sought discloses, or will disclose in the next renewal or amendment thereto following the date of a decision evidencing the Exemption Sought, the fact that the Top Fund may invest in a related Underlying Fund, which are investment funds managed by the Filer;

(i) the IRC of a Top Fund will review and provide its approval, including by way of standing instructions, prior to the purchase of an Underlying Fund by the Top Fund in accordance with subsection 5.2(2) of NI 81-107. The Filer will comply with section 5.1 of NI 81-107 and the Filer and the IRC of the Top Fund will comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(j) the Filer does not cause the securities of an Underlying Fund held by a Top Fund to be voted at any meeting of the holders of such securities, except that the Filer may arrange for the securities the Top Fund holds of an Underlying Fund to be voted by the beneficial owners of the securities of the Top Fund who are not the Filer or an officer, director or substantial securityholder of the Filer;

(k) a Top Fund will invest in, and redeem, each Underlying Fund at the NAV per security of the Underlying Fund; and

(l) a Top Fund will invest in an Underlying Fund only where:

i. the Underlying Fund is managed by the Filer;

ii. the Underlying Fund is structured in similar ways to the Initial Underlying Fund; and

iii. the NAV of the Underlying Fund is based on the valuation of the Underlying Fund’s portfolio assets determined in accordance with the Valuation Framework (including for any level 3 assets, the Level 3 Private Debt Valuation Methodology or independent valuations obtained by an arm’s length third party).

“Darren McKall”

Darren McKall

Associate Vice President, Investment Management Division

Ontario Securities Commission

Application #2025/0349

SEDAR+ #6295976