Nevertheless, many alternative funds, particularly those not covered by a prospectus, are still automatically rated as high risk.
This classification limits the number of retail investors who can allocate to these products and restricts the amount they can invest, despite these strategies often demonstrating lower volatility than broader indices.
The associations advocate for dealer internal risk ratings systems to align with historical risk-adjusted data from funds within indices, as per this guideline, to ensure Canadian retail investors have fair access to diversified, risk-reducing fund structures with non-correlated returns.
Claire Van-Wyk-Allan, managing director and head of Canada at AIMA, stated, “With proven methodology through volatile market activity, AIMA and CAIA stand behind our risk rating guidelines that more accurately reflect the historical risk-adjusted returns that these strategies can provide balanced portfolios.”
She emphasized the need for Canadian dealers to align internal risk ratings to enable retail investors to access alternative investment funds for diversification, risk reduction, and non-correlated returns without being hindered by a high-risk profile.
