Monday Market Minute | Nov 20, 2023

Ninepoint restructuring efforts continue as alternative fund industry watches

What Moved

Ninepoint Partners made progress on restructuring efforts for several of its alternative fund strategies, working to align fund structures with the liquidity profiles of underlying assets. The firm's challenges had become a case study in the Canadian alternative fund industry — a prominent manager navigating the consequences of the structural mismatch between open-ended redemption features and illiquid underlying positions. The broader industry was paying close attention, as several other managers faced similar, if less acute, tensions.

Why It Matters

The Ninepoint experience accelerated a structural evolution in how Canadian alternative funds were designed. New fund launches increasingly adopted closed-end structures, lock-up provisions, and gated redemption mechanisms that aligned investor liquidity expectations with portfolio composition. For investors, the lesson was clear: the premium for illiquidity exists because illiquidity is real. Funds that offered the illusion of daily or monthly liquidity on assets that could not be sold in those timeframes were making a promise they could not keep under stress. Structure mattered as much as strategy.

Signal to Watch

Whether the OSC and CSA would introduce new regulatory guidance on liquidity risk management for alternative fund managers, codifying the lessons from Ninepoint and similar situations into formal compliance requirements.

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