March 4, 2025

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

AND

IN THE MATTER OF AGF INVESTMENTS INC. (the Filer)

AND

IN THE MATTER OF THE TOP FUNDS (as defined below)

The principal regulator in the Jurisdiction has received an application (the Application) from AGF Investments Inc. (AGFI) and its affiliates (AGFI, together with its affiliated registered investment fund managers and/or affiliated registered portfolio managers, as applicable, the Filer) on their behalf and on behalf of investment funds managed by the Filer that are reporting issuers subject to National Instrument 81-102 Investment Funds (NI 81-102) and National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) (the Existing Public Top Funds) and investment funds managed by the Filer that are not reporting issuers subject to NI 81-102 and NI 81-107 (the Existing Private Top Funds, together with the Existing Public Top Funds, the Existing Top Funds) and any future investment fund managed by the Filer that is, or will be, a reporting issuer and that is subject to NI 81-102 and NI 81-107 (the Future Public Top Funds, and together with the Existing Public Top Funds, the Public Top Funds) or is not, or will not be, a reporting issuer subject to NI 81-102 and NI 81-107 (the Future Private Top Funds, together with the Existing Private Top Funds, the Private Top Funds, and the Private Top Funds together with the Public Top Funds, the Top Funds) for a decision under the securities legislation of the Jurisdiction (the Legislation), with respect to a Top Fund investing a portion of its assets in Kensington Private Equity Fund (the Trust), which is managed by Kensington (as defined below):

Exempting the Top Funds from the restriction in the Legislation which prohibits:

(a) an investment fund from knowingly making an investment in a person or company in which the investment fund, alone or together with one or more related investment funds, is a substantial security holder;

(b) an investment fund from knowingly making an investment in an issuer in which any of the following has a significant interest:

(i) any officer or director of the investment fund, its management company or distribution company or an associate of any of them; or

(ii) any person or company who is a substantial security holder of the investment fund, its management company or its distribution company; and

(c) an investment fund, its management company or its distribution company from knowingly holding an investment described in paragraph (a) or (b) above (collectively, the Related Issuer Relief);

Exempting the Filer, with respect to the Top Funds investing in the Trust, from the restriction in paragraph 13.5(2)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) that prohibits a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as adviser, to invest in securities of any issuer in which a responsible person or an associate of a responsible person is a partner, officer or director, unless the fact is disclosed to the client and the written consent of the client to the investment is obtained before the purchase (the Consent Relief); and
Exempting the Filer, with respect to the Top Funds investing in the Trust, from the requirement to prepare a report in accordance with the requirements of the Legislation of every transaction of purchase of securities from or sale of securities to any related person or company (the Reporting Relief).

The Related Issuer Relief, the Consent Relief and the Reporting Relief are collectively referred to as 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 section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Québec, Prince Edward Island, Saskatchewan and Yukon (together with Ontario, the Jurisdictions).

Terms defined in National Instrument 14-101 Definitions (NI 14-101), MI 11-102, NI 81-102 and NI 81-107 have the same meaning if used in this decision, unless otherwise defined.

The Filer and Kensington

AGFI is a corporation amalgamated under the laws of the Province of Ontario, with its head office located in Toronto, Ontario. AGFI and its affiliates are each directly or indirectly wholly owned by AGF Management Limited.
AGFI is registered in the categories of (a) exempt market dealer in the Provinces of Alberta, British Columbia, Manitoba, Ontario, Quebec and Saskatchewan, (b) portfolio manager in each of the provinces and territories of Canada, (c) investment fund manager in the Provinces of Alberta, British Columbia, Newfoundland and Labrador, Ontario and Quebec, and (d) a commodity trading manager in the Province of Ontario.
AGFI is the manager of Existing Top Funds and AGFI or its affiliates will be the manager or portfolio manager of any Future Public Top Funds and Future Private Top Funds (together, the Future Top Funds). To the extent that AGFI or an affiliate of AGFI is the manager or portfolio manager of any Future Top Fund, the representations set out in this decision will apply to the same extent to such Future Top Fund and AGFI or its affiliates.
On March 8, 2024, AGF Capital Partners Inc., a wholly owned subsidiary of AGF Management Limited, acquired 51% of the voting interests in KCPL Holdings Inc., which amalgamated with Kensington Capital Partners Limited on December 1, 2024, with the resulting entity being named Kensington Capital Partners Limited (KCPL). KCPL wholly owns Kensington Capital Advisors Inc. (Kensington). AGF Capital Partners Inc. is an affiliate of the Filer. As a result, the Filer is considered to be an affiliate or associate of Kensington. Kensington is the manager and trustee of the Trust.
The Filer is considered to be an affiliate of Kensington.
No officers or directors of the Filer are also officers or directors of Kensington.
AGFI and any of its affiliates who are intending on relying on this Decision are currently registered as investment fund managers and/or portfolio managers for any of the Existing Top Funds are not in default of securities legislation in any Jurisdiction.

The Top Funds

The securities of each of the Public 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 and Fund Facts, prepared in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure. Each Public Top Fund is, or will be, a reporting issuer under the securities legislation of one or more Jurisdictions.
The securities of each Private Top Fund are, or will be, distributed solely to investors pursuant to exemptions from the prospectus requirements in accordance with National Instrument 45-106 Prospectus Exemptions (NI 45-106) and the securities legislation of one or more Jurisdictions. Each Private Top Fund has, or will have, an offering memorandum, investment product sheet or statement of investment policies and guidelines, which is provided to investors. None of the Private Top Funds are, or will be, reporting issuers under the securities legislation of any Jurisdiction.
Each Public Top Fund is subject to NI 81-107 and the Filer has established an independent review committee (IRC) in order to review conflict of interest matters pertaining to its management of the Public Top Funds are required by NI 81-107. The Private Top Funds have not constituted an IRC.
The Existing Top Funds are not in default of the securities legislation of any Jurisdiction.
Each Top Fund may wish to invest in securities of the Trust and, as a result, the Filer is seeking the Requested Relief in order to permit the Top Fund to make such investments. A Top Fund may wish to invest in the Trust, provided the investment is consistent with the Top Fund's investment objectives and strategies. Each Top Fund, including each Private Top Fund, will comply with the investment restrictions and practices provided for in Part 2 of NI 81-102 in making such investments, in particular, the concentration restriction provided for in section 2.1, the control restriction provided for in section 2.2 and the illiquid assets restriction provided for in section 2.4. Each Top Fund will treat securities of the Trust as illiquid assets for these purposes.

The Trust

The Trust is an open-ended investment trust governed by the terms of an Amended and Restated Declaration of Trust dated March 22, 2024, as may be further amended from time to time.
The Trust was created to provide exposure to a diversified portfolio of private equity investments, including private equity funds and direct investments in private companies. The Trust's investment objective is to maximize long-term total returns for unitholders through distributions of net income and net realized capital gains from private equity investments identified by the Filer which will include private equity funds and direct investments in private companies.
The Trust is a reporting issuer in the Provinces of British Columbia and Quebec.
Securities of the Trust are distributed solely to investors pursuant to exemptions from the prospectus requirements in accordance with National Instrument 45-106 - Prospectus Exemptions and the Legislation. The Trust has an offering memorandum which is provided to investors.
The Trust is not an "investment fund" as such term is defined under Canadian securities legislation.
The Trust is not in default of the securities legislation of any Jurisdiction.

Related Issuer Relief

The amount invested from time to time in the Trust by a Top Fund, together with one or more other Top Funds, may exceed 20% of the outstanding voting securities of the Trust. As a result, each Top Fund could, together with one or more other Top Funds, become a "substantial security holder" of the Trust within the meaning of section 110 of the OSA and contrary to section 111(2)(b). The Top Funds are, or will be, "related investment funds", as such term is defined in section 106(1) of the Legislation by virtue of common management by the Filer.
In addition, the Filer may from time to time have a "significant interest" in the Trust and/or a person or company who is a substantial security holder of the Top Fund, the Filer may have a "significant interest" in the Trust within the meaning of section 110 of the Legislation, which, under section 111(2)(c) would prohibit the Top Funds from investing in the Trust.
Since the Trust is not an "investment fund" pursuant to Canadian securities legislation, the Top Funds are unable to rely on exemptions from these provisions that would otherwise be available under section 2.5 of NI 81-102.
In the absence of the Related Issuer Relief, these provisions would significantly restrict a Top Fund's ability to invest in the Trust.

Consent Relief

The Filer is or will be considered a "responsible person" (as such term is defined in NI 31-103) of a Top Fund and the Trust since:

(a) the Filer is or will be the portfolio manager of a Top Fund and the Filer is an affiliate of Kensington, the manager of the Trust, and

(b) certain executive officers and directors of the Filer are also directors of KCPL, an affiliate of Kensington.

Subsection 6.2(2) of NI 81-107 provides an exemption for investment funds from the "investment fund conflict of interest investment restrictions" (as defined in NI 81-102) for purchases of related issuer securities if the purchase is made on an exchange. However, NI 81-107 does not apply to the Private Top Funds and the exemption in subsection 6.2(2) of NI 81-107 does not apply to purchases of non-exchange-traded securities and therefore does not apply to purchases of the Trust, by a Public Top Fund.
In the absence of the Consent Relief, the action of the Filer in causing a Top Fund to invest in the Trust would therefore require disclosure to the "client" and the prior written consent of the "client" to the investment, which would in the case of a Top Fund, refer to each investor in a Top Fund.

Reporting Relief

The Filer is a "management company" as defined in the Legislation.
In the absence of the Reporting Relief, the Filer would be required to file a report of every purchase and sale of securities of the Trust by the Top Funds or every purchase or sale effected by the Top Funds through any related person or company with respect to which the related person or company received a fee either from the Top Funds or from the other party to the transaction or from both within 30 days after the end of the month in which such purchase or sale occurs (the Reporting Requirement).

Investments by Top Funds in the Trust

An investment by a Top Fund in the Trust 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 as part of its allocation to illiquid securities.
No Top Fund will actively participate in the business or operations of the Trust.
Kensington, as manager of the Trust, calculates a net asset value (NAV) that is used for the purposes of determining the purchase and redemption price of the securities of the Trust.
The Filer does not currently actively participate in the valuation of the Trust's portfolio by Kensington. Kensington's internal valuation team that is currently responsible for valuation of the Trust's portfolio operates independently of the Filer.
In accordance with standard industry practice for similar private equity funds, the value of each underlying investment made by the Trust will be calculated by the manager, Kensington, as most of the investments made by the Trust, including investments that are made through underlying funds, will be in the form of investments for which no published market exists. Kensington, in its capacity as manager of the Trust, is required to make good faith determinations as to the fair value of these investments in determining the applicable NAV, as well as on a quarterly basis in connection with the preparation of the Trust's financial statements. A copy of the Trust's valuation policies is available upon request and summarized in the Trust's offering memorandum.
Generally, the portion of the Trust's portfolio invested in underlying private equity funds are not investment funds for purposes of securities legislation, and the value of such investments by Kensington will be guided by definitive information that Kensington receives from such third party managers of such private equity funds. The portion of the Trust's portfolio invested in publicly-listed securities will be the last closing price for such securities on the principal stock exchange on which they are listed and traded. The portion of the Trust's portfolio invested directly in private companies will be based on Kensington's good faith determination as to the fair value of such investments based on information made available to it.
Kensington's advisory board consists of independent members who are not employees of Kensington or the Filer (the Advisory Board). The Advisory Board provides oversight to Kensington's valuation program, including an assessment for consistency and reasonability across the portfolio of the Trust. The committee meets quarterly to review the results of material valuation adjustments, audit findings and independent valuation reviews.
The annual financial statements of the Trust, which include the statements of financial position, statements of comprehensive income, and changes in net assets, are prepared by management in accordance with International Financial Reporting Standards, is audited by external third party auditors. The current auditor is Deloitte LLP.
In addition to the annual audit of financial statements by Deloitte LLP, the Trust's portfolio, on a voluntary and discretionary basis, undergoes a valuation review by PwC LLP in its capacity as an arms-length valuator. Through the combination of the external audit, independent valuation reviews, audited third party manager reports and level one publicly quoted prices, over 90% of the fair value of the Trust's portfolio is independently verified over a rolling three-year period. The frequency of valuations of the Trust is consistent with industry practice.
Investments by a Top Fund in the Trust will be effected at the applicable NAV determined by Kensington, the manager of the Trust, in accordance with its valuation policies.
Each Top Fund is, or will be, valued and redeemable daily. The Trust may be potentially subject to lock-up periods, early redemption penalties, and limitations on redemptions.
A Top Fund will not invest in the Trust unless the portfolio manager of the Top Fund believes that the liquidity of the Top Fund's portfolio is adequately managed through other strategies. As part of such strategies, a Top Fund will not invest more than 10% of its NAV, at the time of purchase, in securities of the Trust, and it will not invest in securities of the Trust that represent, at the time of purchase, more than 10% of the securities of the Trust. The Top Fund will also comply with section 2.4 of NI 81-102 with respect to illiquid investments and the Filer will include an investment by a Top Fund in the Trust in its basket of illiquid securities for the purposes of compliance with this section.
No fees or sales charges will be incurred, directly or indirectly, by a Top Fund with respect to an investment in the Trust that, to a reasonable person, would duplicate a fee payable by the Top Fund to the Filer or its investors for the same service.

Other

It would be costly and time-consuming for the Top Funds to comply with the Reporting Requirement in respect of every transaction in the Trust. In particular, National Instrument 81-106 Investment Fund Continuous Disclosure requires the Public Top Funds to prepare and file annual and interim management reports of fund performance (MRFPs) that include a discussion of transactions involving related parties to the Public Top Funds. Such disclosure is similar to that required under the Reporting Requirement and fulfills the objective to inform the general public about transactions involving related parties to the Public Top Funds. As noted above, investors of Private Funds will be provided with offering documents that describe the nature of this these related party investments, and such investments in the Trust will only be made if in accordance with such top Funds investment objectives and subject to the restrictions set out in Part 2 of NI 81-102.
A Top Fund's investment in the Trust will represent the Filer's business judgment uninfluenced by considerations other than the best interests of the Top 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) securities of the Private Top Funds are distributed in Canada solely to investors pursuant to exemptions from the prospectus requirements in NI 45-106 or the Legislation;

(b) an investment by a Top Fund in the Trust will be compatible with the investment objective and strategy of the Top Fund and, among other things, included as part of the calculation for the purposes of the Top Fund's compliance with the illiquid asset restriction in section 2.4 of NI 81-102;

(c) each Private Top Fund will comply with the investment restrictions and practices provided for in Part 2 of NI 81-102 in making such investments, in particular, the concentration restriction provided for in section 2.1, the control restriction provided for in section 2.2 and the illiquid assets restriction in section 2.4 and will treat investments in the Trust as illiquid assets for this purpose;

(d) at the time of the purchase by a Top Fund of securities of the Trust, either the Trust holds no more than 10% of its NAV in securities of other investment funds or the Trust:

(i) purchases or holds securities of investment funds that have adopted a fundamental investment objective to track the performance of a specific investment fund or similar investment product;

(ii) purchases or holds securities of investment funds that are "money market funds" (as such term is defined in NI 81-102); or

(iii) purchases or holds securities that are "index participation units" (as such term is defined in NI 81-102) issued by an investment fund;

(e) in respect of an investment by a Top Fund in the Trust, no sales or redemption fees will be paid as part of the investment in the Trust, unless the Top Fund redeems its securities of the Trust during a lock-up period, in which case an early redemption fee may be payable by the Top Fund;

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

(g) the securities of the Trust held by a Top Fund will not be voted at any meeting of the security holders of the Trust, except that the Top Fund may arrange for the securities of the Trust it holds to be voted by the beneficial holders of securities of the Top Fund;

(h) Kensington's Advisory Board provides oversight to Kensington's valuation program, including an assessment for consistency and reasonability across the portfolio of the Trust. The committee meets quarterly to review the results of material valuation adjustments, audit findings and independent valuation reviews;

(i) where applicable, a Public Top Fund's investment in the Trust, whether direct or indirect, will be disclosed to investors in such Public Top Fund's quarterly portfolio holding reports, financial statements and/or fund facts/ETF facts documents;

(j) the prospectus of the Public Top Fund 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 Public Top Fund may invest, directly or indirectly, in the Trust, which is an investment vehicle managed by an affiliate of the Filer;

(k) the offering memorandum, investment product sheet or statement of investment policies and guidelines, where available, or other disclosure document of a Private Top Fund, will be provided to each new investor in a Private Top Fund prior to their purchase of securities of the Private Top Fund, and will disclose the following information at the next update of such document:

(i) that the Private Top Fund may directly or indirectly purchase securities of the Trust;

(ii) the fact that the Filer is the investment fund manager or portfolio manager of the Private Top Fund and that an affiliate of the Filer is the manager of the Trust;

(iii) that no fees or sales charges will be incurred, directly or indirectly, by the Private Top Fund with respect to an investment in the Trust that, to a reasonable person, would duplicate a fee payable by the Private Top Fund to the Filer or its investors for the same service; and

(iv) that the Private Top Fund will comply with the investment restrictions and practices provided for in Part 2 of NI 81-102 in making such investments, in particular, the concentration restriction provided for in section 2.1, the control restriction provided for in section 2.2 and the illiquid assets restriction in section 2.4;

(l) the IRC of the Public Top Funds will be asked to review and provide its approval, including by way of standing instructions, prior to the purchase of the Trust, directly or indirectly, by a Public Top Fund, in accordance with section 5.2(2) of NI 81-107;

(m) the Filer complies with section 5.1 of NI 81-107 and the Filer and the IRC of the Public Top Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(n) where an investment is made by a Public Top Fund in the Trust, the Public Top Fund's annual and interim MRFP will disclose the name of the related person in which an investment is made, being the Trust;

(o) In addition to the annual audit of financial statements, the Trust's portfolio, on a voluntary and discretionary basis, undergoes a valuation review by an arms-length valuator;

(p) where an investment is made by a Top Fund in the Trust, the records of portfolio transactions maintained by the Top Fund include, separately for every portfolio transaction effected by a Top Fund by the Filer, the name of the related person in which an investment is made, being the Trust; and

(q) a Top Fund will invest in, and redeem, the Trust at the NAV of the applicable securities of the Trust. For greater certainty, the NAV of the Trust is based on the good faith determination of the manager of the Trust as to the fair value of the applicable portfolio assets in determining NAV.

"Darren McKall"

Darren McKall

Manager, Investment Management Division

ONTARIO SECURITIES COMMISSION

Application# 2024/0696

SEDAR Project# 6216422

AGF Investments Inc. (Re), 2025 CanLII 21573

Case Summary