The Decibel - Ontario pushes to allow retail access to risky investments

Episode Date: February 9, 2026

Ontario’s securities watchdog is facing pressure from the Ontario government to open up access to high-risk investments, called private asset funds, to regular, retail investors, according to exclusive reporting by The Globe and Mail. Industry experts warn that this unusual move could lead to investors’ money being locked up for years in long-term real estate or infrastructure projects that have extremely complex fee structures.Report on Business reporters Clare O’Hara and Jameson Berkow explain how this new proposal from the Ontario Securities Commission came about and what might be driving the Ford government to change the rules.Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

After years of high inflation, people are always looking for new ways to make more money, especially in their investments. And now, Ontario's investment regulator, the Ontario Securities Commission, wants to lower the barrier to some very high-risk investments called private asset funds. These funds advertise very high returns, but at a cost and with some drawbacks. Access to these funds changed after. the Ontario Securities Commission faced pressure from Premier Doug Ford's government. That's according to exclusive reporting from the globe.

And it's creating concerns from some in the industry around government overreach. Report on business journalists Claire O'Hara and Jameson Burko broke this story. And they're on the show today to explain what they found. I'm Cheryl Sutherland and this is the decibel from the Globe and Mail. Hi, Claire, hi Jameson. Thanks for joining me today. Great. Thanks for having us. Yeah, thanks for having me as well.

So you've been reporting on this story for eight months now, and you found that the Ontario Securities Commission faced pressure from Doug Ford's government to change its rules around private asset funds. So there's going to be a lot of complicated financial aspects to the story. And so we are going to do our best to break them all down. So let's start by talking about the Ontario Securities Commission or the OSC. Claire, what does the OSC do? So in Canada, we don't have a national securities regulator. So every province has their own investment

regulator that would oversee their capital markets. And the Ontario Securities Commission that will just refer to as the OSCE is the country's largest. And part of their mandate is around investor protection. So they're making sure that investors are protected from any unfair or fraudulent practices that are going on in financial services. And they also review and approve a bulk of investment products that financial companies would want to sell to retail investors, including mutual funds. Because they also oversee all the investment funds and the managers of those funds, part of their mandate is also what's called capital formation. So encouraging businesses to raise more money and trying to remove barriers in the market that allows, you know, developers

and companies and all sorts of people who need to raise money from investors to try to, try and make it easier for them to do that. Okay. So is Jameson, is it normal that the Ontario government would add capital formation, or in other words, raising money for companies to the OSC mandate? Like, do other regulators in Canada have this dual mandate? It is a unique feature of the OSC, and it was something actually that was specifically added by the Ford government in one of its previous terms in government. So it was several years back now that they added it. It is part of the mandate of other securities regulators across Canada, but more unofficially, in Ontario, it's the only jurisdiction where it is explicitly stated, like right there in black and white. They actually

had to change provincial law so that it was written down in the law that said, you also have to foster capital formation. It's something other regulators, you know, try to pay attention to, but it's not something that's sort of their raison d'etre. So why would the Ford government add that to its mandate. Like, how does it serve the province? Well, it makes it easier, Cheryl, to raise funds for things like infrastructure, you know, bridges and roads and all the various things that the Ford government has promised, you know, there was even that talk of that massive tunnel underneath the 401. That is going to be massive, I mean, if it ever actually gets built, it's going to be massively expensive. So this would be one of the tools in the toolkit that would be available to raise

for some of these huge mega projects that the government wants to do. Okay, so the change the OSC has made is around private asset funds. So, Claire, what is a private asset fund? And in a very broad sense, how is it different from publicly traded investments? Right. So let's think about a traditional mutual fund. In that scenario, it's a group of investors who come together and pool all their money together, and it allows them to buy a whole group of or an index of stocks or figure out,

income or bonds in one single purchase. It's very easy to do. When we think of private asset funds, these are things that are currently typically bought by big institutional investors like pension plans. They're very hard to access. And they would include things like Jameson was pointing out like infrastructure, real estate. There's even private loans or private credits that companies would go to another lender that someone like myself who doesn't have a lot of money wouldn't be able to get directly into a real estate building or a mall. These private asset funds are typically for someone who's known as the ultra high net worth or high net worth investor. Okay. Yeah. And so when you talked about mutual funds, I think many people will be familiar from a mutual fund. A lot of people

have investments in those. And those are publicly traded stocks and bonds that are, you know, in this mutual fund, whereas these private asset funds are not publicly traded stocks and bonds. Exactly. Mutual funds are wildly popular investments. Everyone, most People have them in their retirement portfolios. Canadians own more than $2.4 trillion of mutual funds. Private assets are much smaller in terms of the number of assets in there. But I will say when we look at private asset funds over the last five years, it's a much smaller pool of funds, but it has doubled over the last five years. So it is growing and it's getting a little bit more attention among asset companies.

Okay. You mentioned that usually private asset funds are for people that have a lot of money. but can you kind of give me a better sense of who exactly can invest in these assets? Right. So the term that everyone might see when they read about private asset funds is a credited investor, a very jargony word. It means someone who has typically over a million dollars investable assets, and that does not include your house. So you have to have a million dollars of cash in investments. And sometimes they also have stipulations. You have to make more than $200,000. And some people say that that's probably still too low to be classified as a high net worth individual.

And then also the accredited investors would probably, you know, it does include institutional investors like pension plans or family offices or endowments. I think an important piece of context for the accredited investor definition. Claire's absolutely right, of course. But bear in mind, those standards were set in the late 1990s and never adjusted. So what was a million dollars in investable assets in the 1990s, $200,000 a year in income in the 1990s, that was an ultra-high net worth person. Today, you'd barely be able to afford a detached house in Toronto. So the perspective is kind of jarring. Yeah, that's very true.

Yeah, things have changed a lot since the 1990s. Jamison, is it common practice? Do other regulators elsewhere limit who can invest in private assets? Yes, it is actually pretty much the standard across not just Canada, but all of North America, that there are limits to the amount of private assets that a typical investor can hold. And there's, you know, different thresholds for what is considered, as Claire described, the definition of an accredited investor. But generally, they don't just sort of open the floodgates to everyone because there is that kind of higher risk component there. So, so Claire, help me understand why. are these funds riskier to investors than mutual funds that are full of publicly traded stocks and bonds?

So if I'm a retail investor and I want to buy a mutual fund, I can do so. I can walk into a bank branch. I could go to my financial advisor or I can even log on to my online trading platform and I could buy a mutual fund. I can see exactly how much I'm going to invest. And then the regulatory rules say I have to get the disclosure necessary for that mutual fund. So I'm going to get a document. It's going to show me, you know, all the top 10 holdings, that are in that. If it's an index fund, I'm going to see all the investments that are in there and the percentage breakdowns of what's in that fund. And at any point in time, if I'm in a cruncher I need to sell part of that mutual fund, I can cash out for it. And I'm going to know exactly what the value of my fund is for it. I also don't need a lot of money to get into a mutual fund, you know, anywhere from

$500 to $5,000 to start out. And I can hold it in my RSP. I can hold it in my tax-free savings account. It's very easy to do so. When we look at private assets. They become riskier. First of all, an credit investor does have to buy this through a financial advisor. So I can't just go onto a discount platform and buy it myself. I have to go through a financial advisor. And the disclosure around them, this is what a lot of investor advocates are talking about these days, is that the disclosure around private assets is very opaque. I might not know the exact value of what's inside that fund. And let's take like real estate, for example, if I go into a private asset fund and it's got a number of different real estate properties. Maybe some of them are

commercial properties or those big box factories, might have some student housing, shopping malls, apartment buildings, and we all know that real estate fluctuates. And today in the real estate market, it's very hard to determine which of that plethora of real estate is more valuable than the other. So I kind of have to take the word of the fund that tells me what the underlying assets are. I don't get as much disclosure. I don't get as much disclosure. I also don't really know what the fees are up front. They can be explained to me, but it's also a little bit not as transparent as a traditional mutual fund. And the biggest thing around private assets is when I want to get my money out.

It's very difficult for fund managers to sell a shopping mall or to sell an apartment building. So they're not going to be able to move the underlying asset as quickly. And if a lot of people want to all of a sudden get their money out all at once, that's where we get into situations where a fund manager would have to what we call gate the fund, close the gate it, and now no one can get their money out. Wow. Okay, right. So this kind of is a difference between, you know, the fund is not liquid, right? This is this term of like being e-liquid.

And so can we talk about this idea of gating? This is really interesting. So Jameson, give me an example of why a private fund would close its gates, so to speak, and kind of explain what goes on here. Well, usually it happens in response to a lot of their investors wanting to cash out. And the fund manager is saying, well, you know, we don't have a bunch of cash sitting around to buy you out. So we're just going to close the gates, so to speak. And, you know, this can go on in some cases for years. There's actually no specific restrictions for how long a fund can remain gated. We've seen several of these funds get gated just over the last year. Probably the best example I could give you, though, Cheryl, would be a private mortgage lender called Romspin. They had a $3 billion, a little more than that, actually, $3 billion fund that was gated in mid-20202. So we're coming up on four years now that it's been gated. And not only that, have investors in that entire fund been, you know, trapped in that fund for nearly four years,

but the distributions, which are basically the same as dividends that people tend to get paid when they invest in those funds, those have been cut a few times now. And so not only have they had their money trapped, but the income they make or are supposed to make off their money has declined. And there's been really no recourse available to them other than to sit and wait. And at the same time when the fund is gated, the investor will continue to pay the fees, right? So the fund managers still get to collect the fees of managing the fund

because they still have to make sure that it's up and running. So an investor can find that very frustrating, that they're still paying those fees, but they're not able to get their money out. That's a great point. Yeah. So you're paying fees and you just have no sense of when you can actually get your money out of this fund. Very interesting. So how much do you have to invest in these private asset funds?

Because we talked about mutual funds being generally between $500 to $5,000. How much would you have to invest in a private asset fund? It's definitely much higher than the typical $500 that I mentioned with a traditional mutual fund. And it can be as much as $25,000. to start. And then they might let you have smaller increments to add to that, but it is usually up north of $20, $25,000. Okay, so not a small amount of money here.

Okay, so just to recap, so these private asset funds are less transparent than stocks, bonds, or mutual funds because they don't always disclose how your money is used. You can't verify the returns they are promising. They are often hidden fees. And they are more illiquid, meaning you can't always take your money out when you want do. Yeah, that's a good recap. Yeah. Okay. You got it. Okay, we can move on now. Okay, so, so give this woman her CFA. Okay. So why would retail investors, you know, in other words, regular people want to even invest in these funds then? So I think that the biggest thing out there is that you want to maybe hedge

against the stock market a little bit. You don't want to have all your eggs in one basket. And before the whole traditional have 60% in equities and 40% in bonds, that conversation is changing a little bit. And people started to buy real estate. That was sort of your hedge. You had a home. And so I think that conversation has been like, well, we want to be like the pension plans. Why can't we have what the pension plans have? There's also that even like basic emotional motivation, right?

And this comes back to not really being able to verify the returns that a lot of these private funds claim to have. Because what they claim to have is very attractive. It's double digit returns over several. years. So if you're an investor looking at that saying, ooh, I can make 15, 20, 25% on my money, why wouldn't I want to do that as opposed to the, you know, five, six, seven, eight percent that the mutual funds are promising me. Of course, the big problem with that being that that isn't necessarily the return you're actually going to get. Why do private asset funds need retail investors? Like, why can't they just get more money from wealthy people and institutional investors?

Yeah, Cheryl, it's a great question. And we started to, to dig into it. And what we're hearing is, you know, first of all, when we think about institutional investors like the pension plans and family offices, they do allocate like a percentage of what they can invest into private assets. So they're not going to be putting all of their money in there. And over time, as I said, these investors have been in these products for a long time. Those investors are starting to kind of max out on the amount of money they're going to allocate to these funds. And so that kind of leaves these private asset managers looking, where else can we go to sell these products? Like, where else can we get traction?

But then you look at the risk involved in that as so crucial. It really shows that there's this potential for creating a dynamic where these funds have not necessarily performed that well. They're having a bit of a hard time convincing the existing accredited investors and institutional investors to put more of their money, even if they have room, to do so. So the logic being, well, then let's put in money from people who can afford to take much less risk. So sort of raises the possibility that it's going to be the retail investors, the average everyday investors who are left holding the bag as sort of the last money in to these funds. And that's one of the things that investor advocates raised a red flag about.

We'll be right back. So given all that you have laid out here, why would the OSCE want to make it easier for people with less money to invest in these riskier assets? Yeah, so this sort of digs into where we started to look into our story. In 2024, the OSC came out with a consultation paper, and what they were proposing is they wanted to open up the doors for retail investors to have access to these type of funds. But because of the issues that we all just laid out, they wanted to say, how can we offer retail investors these assets in a safer way? Right now, a typical mutual fund, legally, they're not allowed to invest in this stuff.

They can only hold about 10% of their assets and illiquid assets. And the OSC was looking, hey, is there a way that we could change that? So they came out with a consultation paper that laid out a proposal of how they could actually change that rule to allow big fund companies that we know and love and have in our portfolios to be able to access these type of funds. So this consultation paper was not the first time the OSC has kind of brought up the idea of retail investors having access to private assets. In 2021, there was a big initiative that Capital Markets Task Force, which was also another Ford government initiative. One of the

paragraphs that came out of that is they had suggested the task force had suggested that the OSC perhaps look at writing a paper or a proposal around private equity. It was specific to private equity. And in that proposal, they wanted the OSC to look at having a retail fund that would help bridge the gap for smaller companies that had financing difficulties. The 2024 consultation paper was a little bit different. It's interesting because that paper, while it was kind of different, as clear rightfully pointed out, when we asked the OSC, you know, what was the impetus of all this, they pointed to that task force from 2021 as an example of, you know, what drove the need to consider this. And so what they're really proposing or what they were proposing, of course, that proposal is not

active at this moment was to create this whole new type of mutual fund that was effectively a private fund but had a bunch of similar protections to the mutual fund world built into it, which you know, we don't need to get into the fact that the industry really balked at that and the costs and compliance involved. They said it was going to erase that illiquidity premium because they were going to have to pay all these extra fees. But, you know, to draw the connection, Cheryl, to the Ford government and their big push to, you know, find more sources of funding for the big projects they want to do. There's even a section of the consultation paper itself where they say the Ontario government is looking at innovative ways to finance transportation, housing, energy, and municipal services, including through the crowding in. And that's air quotes, but that's actual quotes they use crowding in of private sector investment.

and that their proposal, they said, is aligned with this goal as it contemplates an ecosystem that could include financing these projects through investment fund product structures. So, you know, the way to simplify that sort of long-winded statement is the Ontario government would really like it if we did this and this is what we're proposing to do. Okay. So it sounds like the 2024 proposal was met with some outcry from the people in the investment community. What did the OSCE do? Essentially, Cheryl, they decided that they should go in another direction because they did face that really widespread outcry. And so now what they're moving forward with, at least at the moment, they haven't actually given up on this proposal. They more just kind of put it on the back burner for the time being.

and they're taking this more ad hoc approach now where they're asking the manufacturers of these funds, the companies that actually create these funds, to come to them with ideas for private funds and to sort of have one-off conversations, which advocates are frankly even more alarmed about because at least in the original consultation, there was a framework being built. There was a set of rules that they could, while if they didn't agree with, there was at least clear recourses for any potential wrongdoing, whereas now it's much more scattershot, and it's much more difficult to keep track of who's doing what, where, and why. With the original proposal, which James had said, it's sort of on the back burner, and the OSCE has said they're not completely killing it off. They

think it could still be a potential future. But the big thing about the proposal is they need to make regulatory rule changes. That can take several years to do. The biggest thing out there was, are retail investors really asking for these products? Is there enough? retail investors for all of us to launch these products. And the other thing was if a lot of retail investors all of a sudden wanted to pull their money out, that the OSC was saying, well, then the fund company would have to collapse and close down the fund. That doesn't seem attractive if you're in that fund and you're not one of the people wanting to leave, that all of a sudden your fund gets closed because, you know, a certain percentage of investors. I guess it's just important

to stress that when you say collapsing a fund, Claire, I think folks should know what that effectively means is that everything they own in that fund has to be basically fire sold. So if you own like a mall and an apartment building, you have to find a buyer for that like, you know, yesterday and you're going to have very opportunistic pliers swooping in and buying it for pennies on the dollar. Something you mentioned, Claire, is about whether or not there is an appetite for these funds from, you know, regular investors. So is there appetite for these funds, Jamison? Do people think retail investors will invest in these? That's something of an open question. There's certainly no direct evidence that people are clamoring for these funds. That's part of the reason that, you know,

several months ago when Claire and I started looking into this story, it really, you know, raise our eyebrows because it wasn't like a few years ago when the OSC spent a lot of resources building this really comprehensive regulatory regime for like crypto investing, for example. That doesn't really seem to be the case here. And that's part of what advocates pointed out to us that, you know, why are they doing it? And that's when Claire and I started to seek out sources that ended up drawing this very clear dotted line to the Ford government. Okay. So let's talk about that. What evidence did you find that the Ford government put pressure on the OSC around this change?

Well, aside from the sources that we spoke with who, you know, made it very clear that that is, where the impetus is coming from. There is that somewhat unusual reference that I mentioned earlier in the 2024 consultation paper where they actually call out the provincial government's priorities, which is a very unusual step. Remember, this is supposed to be an institution that is arm's length from the government. They're not part of the Ministry of Finance. They are supposed to be an independent regulator. And so when you see those references, it does raise something of a red flag. And other than that, Claire and I had to find sources who, of course, were protecting their identities because they're not authorized to really confirm these connections publicly.

But it's certainly been enough voices saying the same thing from different places that it really speaks to that confirmation. There's a lot of sources who also told us that the consultation paper that the OSC released was missing a lot of information that they expected the OSC to have, that it was very rushed. There was no data in the consultation paper to show, you know, where's the research behind that investors will get this added interest to their funds. Is that unusual? It is somewhat unusual for the OSCE to put out something that seems unfinished. Generally, they are very careful about dotting their eyes and crossing their T's.

And this one stood out apart from the standard there, I think. Well, I think the other part of it was it seemed that it didn't also have like the industry feedback before they went out with it because a lot of the industry comment letters were saying this is going to be so expensive and in terms of compliance and for us to build the mechanisms to ensure even investor protection around it. So it just seemed like there was kind of missing steps. Claire, what has the Ford government and the OSC said in response to your reporting? Yeah, so we did reach out to both parties involved in our story. the Ontario's Ministry of Finance did get back to us. And they were very direct in saying that while the government discusses capital formation initiatives with the OSC and they do receive updates, that it does not direct or expedite regulatory work.

So they're definitely part of the conversation, but they're saying they're not the ones that would green light these funds. And a spokesperson said to us that decisions about long-term asset fund design, timing, and investor safeguards rest solely with the OSC. And the OSC did also respond to us saying that, you know, as we pointed out earlier, they said that this wasn't the first time they had looked at this. It was part of the Capital Markets Task Force in 2021. But they believed that this new consultation was important to have because it was opening up, you know, innovative financial products that could enable capital formation and provide new opportunities for investors. Okay. So just to end here, can you speak to why it matters if the fore government was pressuring the OSCE to make this change? Jameson, I'll start with you.

It's just so critical, Cheryl, that people trust organizations like the OSC to be objective and to fulfill their mandate first and foremost to protect the people of Ontario from any sort of high risk. because especially things like this, they're very difficult to understand. And a lot of the investor advocates we spoke with and who have been involved in a lot of the former OSC consultations around products, you know, they really were questioning whether the OSC was responding to the retail investor demand or whether they were being pushed to launch this, you know, high-risk class of investments for the benefit of politicians. If all of a sudden, it turns out that even if it's, you know, not to a great extent, even if it's just a small degree, of political interference, and that affects the public trust in these institutions, that can be very damaging for the industry, for people who are trying to just save for their

retirement and for, you know, the financial health of Ontario and of Canada overall. And so it's really, really critical, I think, that we allow institutions like this to maintain their independence as a really ironclad principle. Jameson, Claire, thank you so much for joining us today. It was an absolute pleasure. This is such a fun thing to talk about. Thanks for having us. That was Claire O'Hara, the Globe's wealth management reporter, and Jameson Burko, who covers capital markets for the globe.

That's it for today. I'm Cheryl Sutherland. Our producers are Madeline White, Mikhail Stein, and Rachel Levy McLaughlin. Our editor is David Crosby. Adrian Chung is our senior producer. producer, and Angela Pichenza is our executive editor. Thanks so much for listening.