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Investing in booms without the bust?



Managed by Auspice Capital Advisors Ltd. of Calgary and sponsored by Toronto-based CI Global Asset Management, the ETF can hold positions in up to four energy commodities (crude oil, natural gas, gasoline and heating oil); three metals (gold, silver and copper); and five agricultural commodities (wheat, corn, soybeans, cotton and sugar).

This alone makes CI Auspice distinct from other commodities mutual funds and ETFs offered by prospectus to Canadian retail investors. Most of those invest in either gold or silver, or both precious metals. Single commodity funds investing in crude oil, natural gas and uranium also are available.

However, CI Auspice won’t necessarily hold a particular commodity at any one time — or, for that matter, any of the 12. In early October, for instance, the ETF held only natural gas exposure, amounting to one-12th of assets, with the rest in cash. The ETF seeks to replicate the returns of the Auspice Broad Commodity Index, whose constituent holdings are based on price trends.

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“We will go long commodities if they’re in an uptrend. And then if they go into a downtrend, we go to cash,” said Brennan Basnicki, an Auspice director and partner. “We’re trying to provide that upside commodity exposure but with risk management.”

The risk rating, according to the ETF Facts regulatory filing, is low to medium.

The CI Auspice ETF will hold no more than a one-12th exposure to any of the 12 commodities. “We don’t overallocate to a single position if none of the other markets are trending,” Basnicki said. “As opportunities improve, as prices rebound, we will systematically add positions back on.”

Because Auspice invests in commodities through futures contracts, the bulk of the ETF’s assets are held in cash, primarily in units of the CI Money Market Fund. Recently, this fund was yielding 3.8%, providing a significant portion of the ETF’s total return. The CI Auspice ETF’s management fee is 0.52%, and on top of that the administration fee is 0.10%.

In pitching the ETF to advisors and investors, CI and Auspice say that lack of investment in new supply and “generational demand shock” have created the conditions for a “commodity supercycle.” Among the factors contributing to this bullish scenario, they say, are government policies that impede resource development, the Ukraine-Russia war and supply chain complications.

Even so, the ETF’s tactical approach is based purely on technical trading trends, such as a commodity trading at higher highs and higher lows over the past several months.

“We can talk about the fundamentals all day, but ultimately if a commodity is trending up, we’re long. If it’s trending down, we go to cash,” said Basnicki. “We just let price-based strength determine our position. That removes all of our biases and is a lot more effective.”

Portfolio turnover will vary, with holding periods for a commodity that can typically range from several months to one year or more. “We’re not trying to pick bottoms and tops,” Basnicki said. “We’re not trying to capture anything too short-term. We’re really trying to capture the bulk of major market moves in individual commodities.”

Auspice, led by president, chief investment officer and founder Tim Pickering, also manages the U.S.-listed Direxion Auspice Broad Commodity Strategy ETF. This US$308-million ETF, whose strategy is the same as its new Canada-listed counterpart, has the top Morningstar rating of five stars for risk-adjusted performance in its peer group. That ETF also has returned an annualized 9.0% in the five years ended Sept. 30, and 9.7% over 12 months.

Auspice’s re-entry into Canadian ETFs, this time under CI sponsorship, follows the terminations of its natural gas ETF in March 2018 and its Canadian crude-oil ETF in May 2020. Both provided continuous exposure to a single commodity, in sharp contrast to what Auspice’s risk-managed and diversified commodity ETFs now offer.

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Foreign investors to face additional scrutiny under proposed changes to investment act – National | – Global News



The federal government on Wednesday unveiled what officials bill as the biggest update to Canada’s foreign direct investment laws in over a decade, with new rules requiring approval for investments in “sensitive sectors” and broader efforts to share information on firms under review.

The pre-implementation requirement is one of several changes outlined in a bill seeking to modernize the Investment Canada Act in order to further protect Canada from malicious foreign actors.

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Ottawa to unveil investment law reforms to address ‘national security concerns’

“The reality is, geopolitics of the world today have vastly changed in the last few years,” Minister of Innovation, Science and Industry Francois-Philippe Champagne told reporters Wednesday evening in Ottawa.

“That’s why we must be prepared to face the challenges that could endanger our economic security, and I would say our national security.”

Click to play video: 'Canada unveils Indo-Pacific strategy in bid to move away from over-reliance on China'

Canada unveils Indo-Pacific strategy in bid to move away from over-reliance on China

The proposed amendments do not specify what sectors will require the new pre-implementation filing, which will require firms seeking to make foreign investments in those sensitive sectors to give advance notice of those proposed investments. The change is meant to give the government a chance to ensure foreign investors do not gain access to “sensitive assets, information, intellectual property or trade secrets” that would become available on the closing of a deal before a national security review can be done.

Champagne told reporters the list of sectors the changes seek to protect will include critical minerals — where lithium, graphite and cobalt are increasingly being used for electric vehicles and other goods — as well as sensitive technologies and those holding Canadians’ personal information.

“We’ve seen more and more in the digital economy, people want (to) access the data of Canadians,” Champagne said.

He also mentioned quantum and artificial intelligence as technologies in need of protection.

Failure to submit the filing will result in a fine of at least $500,000, according to the legislation.

Other changes in the proposed bill include a more streamlined process to initiate a national security review of any foreign investment and additional powers to the industry minister during such a review.

The legislation would also increase penalties for any non-compliance with the act to $25,000 per day, per infraction, with no limit.

Why reform the foreign investment law now?

The government says the proposed changes are meant to address “evolving national security concerns,” and are the latest move by Ottawa amid renewed scrutiny on its ability to counter foreign interference and influence in its domestic affairs.

The federal government last month unveiled a new Indo-Pacific strategy aimed at countering a “disruptive” China that includes military, domestic security and cybersecurity enhancements, and a new Investment Canada Act rule restricting the involvement of foreign state-owned firms in Canada’s critical mineral sectors was announced on Oct. 28.

The new legislation would give Champagne, as industry minister, the ability to extend a national security review into any foreign investment after consulting with the public safety minister. Currently, extensions require a Governor in Council order. The government says the change would streamline the process and give security and intelligence agencies more time to complete their reviews.

Click to play video: 'Canada can contribute global minerals, metals, energy in place of Russia, China: Freeland'

Canada can contribute global minerals, metals, energy in place of Russia, China: Freeland

Champagne would also be able to impose conditions on an investment under national security review, including freezing the transfer of assets and intellectual property, and directly approve actions by investors that would mitigate a national security risk. The minister said this change brings Canada in line with the United States, which already has such rules in place.

He added that while the current version of the Investment Canada Act only allows the government to say “yes” or “no” to foreign investments being reviewed for national security concerns, the change would give Champagne the opportunity to say “maybe, but with conditions.”

The proposed changes would also allow Canada to share information about investors with foreign allies “to potentially address common national security threats.”

Government officials said in a technical briefing this is aimed at better examining investment proposals from firms that may be seeking sensitive technologies in multiple jurisdictions.

Currently, specific investor information is considered privileged and cannot be disclosed.

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Ottawa seeks to cut China out of Canadian critical mineral industry

Champagne’s mandate letter instructed him to modernize the Investment Canada Act with goals to “promote economic security and combat foreign interference” by strengthening the national security review process.

The Indo-Pacific Strategy also stated that Canada will implement changes to the Investment Canada Act in an effort to “strengthen the defence of Canadian infrastructure, democracy and Canadian citizens against foreign interference” at the domestic level — protecting Canadian critical minerals supply chains, intellectual property and research and strengthening Canada’s cybersecurity systems.

Following the announcement, Champagne ordered three Chinese firms to divest from Canadian critical mineral companies on Nov. 2.

— with files from Global’s Heidi Lee and The Canadian Press

&copy 2022 Global News, a division of Corus Entertainment Inc.

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Exclusive-Canada's biggest pension plan, CPPI, ends crypto investment pursuit -sources – SaltWire CB powered by Cape Breton Post



By Divya Rajagopal

TORONTO (Reuters) – Canada’s biggest pension fund, CPP Investments, has ended its effort to study investment opportunities in the volatile crypto market, two people familiar with the matter told Reuters.

The reasons behind CPPI’s abandonment of crypto research were not immediately clear. CPPI declined to comment but said it has made no direct investments in crypto. It referred to previous comments on cryptocurrency by its CEO, John Graham, in which he sounded a note of caution.

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CPPI’s Alpha Generation Lab, which examines emerging investment trends, had formed a three-member team in early 2021 to research crypto currencies and blockchain-related businesses, with a view to taking potential exposure, the people added.

But CPPI abandoned the pursuit this year and redeployed the team to other areas, the sources said.

CPPI’s move also comes as two of Canada’s largest pension funds have written off their investments after the collapse of crypto exchange FTX and crypto lender Celsius this year.

Earlier this year CPPI CEO Graham said that the pension plan, which manages C$529 billion ($388 billion) for nearly 20 million Canadians, did not want to invest in crypto merely because of the fear of missing out.

“You want to really think about what the underlying intrinsic value is of some of these assets and build your portfolio accordingly,” Graham said in a June speech. “So I’d say crypto is something we continue to look at and try to understand, but we just haven’t really invested in it.”

It was unclear when CPPI dropped its plan. One of the sources said the team was actively assessing investment opportunities as late as July this year, but the second source said the team ended its work earlier than that.

The details of CPPI’s pursuit of cryptocurrency investment and its decision to end it have not been previously reported.

The sources declined to be identified because the information was not public.

Canadian pension funds’ exposure to crypto sector has come under scrutiny following the FTX debacle. While Canadian pension funds are not prohibited from buying cryptocurrencies, they are known for their risk-averse investing strategies to generate steady returns for pensioners.

While CPPI has avoided crypto investments, some of its peers have been caught up in the sector’s mayhem this year. The Ontario Teachers Pension Fund (OTPP), which oversees about C$242 billion in assets, has written off its investments worth C$95 million in FTX. OTPP said it was “disappointed” with its investment in FTX.

Earlier this year, Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec (CDPQ), said it was writing off its investment of C$150 million in bankrupt crypto lending firm Celsius. CDPQ has initiated legal proceedings against Celsius in bankruptcy court.

The Ontario Municipal Employees Retirement System (OMERS), which manages C$121 billion, made three allocations to crypto-linked businesses through its OMERS Ventures business between 2012 and 2018 but exited all investments in 2020.

Another Canadian pension fund, OP Trust, told Reuters that it has investments in the digital asset fund space that is managed externally. The investment is in the underlying crypto technology, it said.

($1 = 1.3650 Canadian dollars)

(Reporting by Divya Rajagopal in Toronto; Additional reporting by Maiya Keidan; Editing by Denny Thomas and Matthew Lewis)

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National security concerns prompt bill to modernize foreign investment screening – EverythingGP



By Canadian Press

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Dec 7, 2022 | 12:29 PM

OTTAWA — The Liberal government says it will make the most significant updates to the federal investment screening law in more than a decade to address evolving national security concerns.

Industry Minister François-Philippe Champagne plans to table the proposed changes to the Investment Canada Act later today.

Champagne’s ministerial mandate letter directs him to promote economic security and combat foreign interference by modernizing the act to strengthen the national security review process and better address threats posed by investments from abroad.

He was also told to use all tools, including the Investment Canada Act, to ensure protection and development of Canada’s critical minerals.

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