TORONTO (January 18, 2021) – CI Global Asset Management (“CI GAM”) today announced proposed changes to its First Asset-branded mutual funds, including fund mergers and the introduction of fixed administration fees.
In addition, the previously announced mergers of three liquid alternative exchange-traded funds (“ETFs”) into other liquid alternative investment funds with identical mandates were completed after the close of business on January 15, 2021. The ticker symbols of each series of the terminating ETFs have been carried over to the corresponding ETF series of the continuing funds, which begin trading today on the Toronto Stock Exchange (the “TSX”).
First Asset mutual funds
CI GAM plans to merge two First Asset mutual funds into other funds it manages and to implement fixed administration fees for the remaining two First Asset mutual funds. These changes require the approval of securities regulators and unitholders in the affected funds, which include First Asset Canadian Convertible Bond Fund, First Asset Canadian Dividend Opportunity Fund, First Asset REIT Income Fund and First Asset Utility Plus Fund.
First, CI GAM is proposing the following two fund mergers (the “Mergers”):
If the Mergers are approved, First Asset Utility Plus Fund and First Asset Canadian Dividend Opportunity Fund will be terminated and unitholders will receive the equivalent dollar value of securities in the same series of the corresponding continuing funds upon completion of the Mergers. The Mergers will not result in a taxable disposition for unitholders, but the terminating funds may pay a distribution when the mergers take place.
In each case, the terminating and continuing funds have the same CI GAM portfolio management team. Both First Asset Utility Plus Fund and Signature Global Infrastructure Fund are managed by Kevin McSweeney and Massimo Bonansinga, and both First Asset Canadian Dividend Opportunity Fund and CI North American Dividend Fund are managed by Peter Hofstra. In addition, the management and administration fees of the continuing funds are lower than the management fees and operating expenses of the corresponding terminating funds.
CI GAM has proposed the Mergers to reduce duplication in its fund lineup and create larger, more efficient funds with increased potential for diversification opportunities. The costs and expenses associated with the Mergers are being borne by CI GAM, not the funds.
Second, CI GAM is proposing to implement fixed administration fees for each series of First Asset Canadian Convertible Bond Fund and First Asset REIT Income Fund, replacing the current variable operating expenses being charged to these funds (the “Fixed Administration Fee Proposal”, and together with the Mergers, the “Proposals”).
If approved by unitholders, CI GAM, as manager, will be responsible for the operating expenses of each fund, other than certain expenses, in exchange for the payment by the fund of a fixed administration fee. Under the Fixed Administration Fee Proposal, the management expense ratio (“MER”) of each fund series will consist of the management fee, the fixed administration fee, certain expenses and applicable taxes.
The benefits to unitholders of fixed administration fees include greater predictability and transparency of the MER for each fund, as well as protection from potential increases in future operating expenses.
Pursuant to National Instrument 81-101 Investment Funds, both Proposals require the approval of unitholders of the funds. In addition, the Mergers will require regulatory approval. Accordingly, unitholder meetings will be held on March 25, 2021 and, if required, adjourned meeting(s) will be held on April 1, 2021. Holders of record for each series of units of these funds on February 12, 2021 will be entitled to receive notice and vote at the meetings. The Notice and Access Documents which detail the Proposals will be mailed to unitholders and the Management Information Circular will be available on www.sedar.com and www.firstasset.com on or about February 23, 2021. Pending the required unitholder and regulatory approvals, if applicable, the Proposals will be implemented on or about April 19, 2021.
The Independent Review Committee of the funds has reviewed the Proposals with respect to the potential conflict of interest matters and provided its positive recommendation, having determined that the Proposals achieve a fair and reasonable result for each fund.
Risk rating changes
CI GAM has also reviewed the risk ratings for each fund involved in the Proposals and will be changing the risk rating for First Asset REIT Income Fund from “Low to Medium” to “Medium.” In addition, the risk rating for Signature Global Infrastructure Fund will be changed from “Medium” to “Low to Medium.”
Risk rating changes are based on the risk classification methodology mandated by the Canadian Securities Administrators to determine the risk level of mutual funds. CI GAM reviews the risk rating for each of the funds it manages at least on an annual basis, as well as when a fund undergoes a material change. Such changes are not the result of any changes to the investment objectives, strategies or management of the funds.
CI Liquid Alternatives™ ETF mergers
The mergers of three liquid alternative ETFs into liquid alternative mutual funds with identical mandates, as listed below, were completed after the close of business on January 15, 2021:
As a result of the mergers, each continuing fund now offers both mutual fund series units and ETF series units. In each case, the investment objectives and the portfolio management team for the terminating ETF and continuing fund remain unchanged. No action is required by unitholders in the terminating ETFs as a result of the mergers.
In connection with the completed mergers, each unitholder of the terminating ETF received one ETF C$ Series unit and/or ETF US$ Hedged Series unit, as applicable, of the continuing fund for each Common Unit and/or US$ Common Unit of the terminating ETF held. The ticker symbol(s) of each terminating ETF have been carried over to the corresponding continuing fund. As a result, as of today, the following number of units of each continuing fund will be listed on the TSX and commence trading:
|Fund and Series
||Number of Outstanding Units
||Aggregate Net Asset Value
|CI Lawrence Park Alternative Investment Grade Credit Fund – ETF C$ Series (CRED)
|CI Lawrence Park Alternative Investment Grade Credit Fund – ETF US$ Hedged Series (CRED.U)
|CI Marret Alternative Absolute Return Bond Fund – ETF C$ Series (CMAR)
|CI Marret Alternative Absolute Return Bond Fund – ETF US$ Hedged Series (CMAR.U)
|CI Munro Alternative Global Growth Fund – ETF C$ Series (CMAG)
There were no taxable dispositions for securityholders; however, the mergers resulted in the terminating ETFs paying distributions, as shown below. The distributions will not be paid in cash but have been reinvested and the resulting units immediately consolidated so that the number of units held by each investor will not change.
||Reinvested Distribution Amount (to be reinvested and consolidated)
|CI Lawrence Park Alternative Investment Grade Credit ETF
|CI Marret Alternative Absolute Return Bond ETF
|CI Munro Alternative Global Growth ETF
Each terminating ETF has now been terminated.
More information about CI Liquid Alternatives™ is available at www.ci.com/liquidalts.