Mutual funds get more room to meet investor redemptions amid COVID’s volatility

TORONTO – Canada’s securities regulators are giving mutual funds temporary additional flexibility to borrow money in response to recent market volatility amid the COVID-19 pandemic.

The relief will be available to any mutual fund in Canada that invests a portion of its assets in bonds or other fixed income securities, including equity funds.

The Canadian Securities Administrators says the extra liquidity will help mutual funds to accommodate redemption requests from investors.

The CSA says the limit will be raised to 10 per cent of a fund’s net asset value at the time of the borrowing, from the current ceiling of five per cent.

It says the flexibility is subject to conditions, including strict controls and additional disclosure about how the funds will use the borrowed funds.

The CSA is a national organization representing provincial and territorial securities commissions across Canada.

This report by The Canadian Press was first published April 17, 2020.