Bill VanGorder, the chief Advocacy and Education Officer for the Canadian Association of Retired Persons (CARP) recently provided feedback on the Ontario Securities Commission’s (OSC) consultation paper regarding the proposed Ontario Long-Term Asset Fund (OLTF).
VanGorder’s assessment was polite but hardly positive. The main thrust of his argument is that seniors could be exploited by ruthless sales people selling a product that would tie up their assets for an unreasonable amount of time. He wrote, in part:
“We understand Long-term assets are illiquid assets that are risky, cannot be readily sold, are difficult to value, and lock in investors for periods of up to 10 years without the disclosures required of regulated publicly traded companies.
“As we enter 2025, market risks are elevated, food inflation persists, tax increases loom, GIC rates have declined and political uncertainty prevails. The timing of such a fund appears out of sync with the needs of Main Street.”
CARP’s position is that seniors, who are typically in the de-accumulation phase of their lives, prioritize reliable income and liquidity over high-risk, long-term investments. While there might be an upside for investors willing to take their time and indulge in chances, that doesn’t describe the senior population of any country—in particular one that is traditionally risk-averse, like Canada.
Looking at the OLTF proposition from a senior’s perspective, CARP sees many fault lines. VanGorder outlines a number of them in his official response, which have been rendered as bullet points by the CARP Action editor.
Objections to OLTF from CARP’s perspective include:
- Seniors living on fixed incomes may require ready access to cash if there is a need for increased expenditures for medical care or retirement residence
- The inclusion of OLTF in a portfolio can make rebalancing difficult if the non OLTF portion of the portfolio declines
- Seniors and retirees do not have the luxury of time to recover if a risky OLTF fails to deliver a positive return
- If a retiree or any investor relocates out of Ontario, she/he may need to exit the OLTF to meet the suitability requirements of other provinces.
- The OLTF can be a real issue in the settlement of wills due to redemption restrictions.
VanGorder’s final assessment is that the Commission should focus its efforts on protecting the interests of seniors and other vulnerable investors:
“We would prefer the Commission focus its limited resources on higher priority retail investor protection issues such as advisor proficiency, improved disclosure practices, modernized complaint handling, fraud prevention, senior investor protection, more impactful enforcement on firms and their management and support for CIRO’s proposal to permit OEOs to provide investor access to non-tailored advice.”
Bill VanGorder urges you to learn more about the issues:
High-risk exempt market securities unsuitable for older investor with limited assets | Ombudsman for Banking Services and Investments https://search.app/oAW8UtGMkUwaqUANA
Why liquid versions of illiquid assets can pose problems for investors – Steadyhand Investment Funds
Canada’s private debt funds face a reckoning after retail investors jolted by redemption freeze: G&M March 2022
https://www.theglobeandmail.com/business/article-canadas-private-debt-funds-face-a-reckoning-after-retail-investors/
The pitfalls of private equity: National Association of Federal Retirees
https://www.federalretirees.ca/en/news-views/news-listing/april/the-pitfalls- of-private-equity
The Impact Of Redemption Suspension On Investors – FasterCapital
https://fastercapital.com/topics/the-impact-of-redemption-suspension-on-investors.html
The Rise of the Private Markets Poses Risks for Retail Investors and Capital Formation
