CANADA Law and Practice Contributed by: Darin Renton, Jill Winton, Amy Chao and Irena Ninkovic, Stikeman Elliott LLP
Stikeman Elliott LLP 5300 Commerce Court West 199 Bay Street Toronto Ontario M5L 1B9 Canada Tel: +1 416 869 5500 Fax: +1 416 947 0866 Email: info@stikeman.com Web: www.stikeman.com
1. General 1.1 General Overview of Jurisdiction
with Canadian investors that qualify as “permitted cli - ents”. Permitted clients include pension plans, finan - cial institutions, investment funds, managed accounts and ultra-high net worth entities (CAD25 million) and individuals (CAD5 million). 1.2 Key Trends While there are no pending regulatory developments applicable to alternative funds, the growth and devel - opment of the industry, including crypto-asset and ESG funds and the use of artificial intelligence sys - tems, are being closely monitored by the Investment Management Division of the Ontario Securities Com - mission (OSC), which is Canada’s largest securities regulator. An OSC consultation on improving investor access to long-term assets led to a new Long-Term Asset Fund Project through the OSC LaunchPad sup - port programme. The Project intends to foster innova - tive investment fund products that provide investors with access to long-term assets. OSC staff also con - tinue to collect annual data on the capital markets under their annual Investment Fund Survey covering all investment funds and the Risk Assessment Ques - tionnaire used to gather information about the busi - ness operations, practices and procedures of firms registered with the OSC. 2. Funds 2.1 Types of Alternative Funds and Structures Types of Alternative Funds In Canada, alternative funds are commonly formed either as standalone funds with direct portfolios or as
Canada has one of the safest and strongest financial systems in the world and is a robust and growing mar - ket for alternative funds. The Canadian market can be segmented into resident funds and non-resident funds, which are subject to different Canadian regu - lation. The resident fund segment comprises privately placed hedge funds and prospectus qualified alternative mutual funds and ETFs (or liquid alts). The Canadian market has grown significantly since 2019, when the Canadian Securities Administrators (CSA) made liquid alts accessible to the retail market. By the end of Q2 2025, Morningstar Inc. estimated the market to have grown to CAD38.4 billion from the CAD26.4 billion in Q3 of 2023 reported by Scotiabank, with alternative funds comprising 26% of mutual fund sales and liquid alts comprising about 4% of total ETF sales in the first half of 2025. The non-resident fund segment comprises privately placed non-resident investment entities into Cana - da and the formation of Canadian domiciled feeder and access funds providing investment exposure to underlying offshore funds. The offering of non-resident fund securities and strategies in Canada is facilitated by robust international exemptions from Canadian registration requirements covering dealing, advising, investment fund management, commodity futures and derivatives conduct rules. These international exemp - tions make it very efficient for non-resident funds and managers to deal in and advise on foreign securities
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