RESOURCES
How to Invest in Alternatives
Alternative investments are increasingly discussed in portfolio conversations, particularly as investors look beyond traditional equities and bonds. For many investors, however, an important first question remains: who is eligible to invest in alternatives and how can they invest?
The answer depends on the type of alternative investment, the regulatory framework under which it is offered, and in some cases, the province or territory where the investor resides. This article aims to provide a clear, high-level overview designed to help investors understand how access to alternative investments works in Canada.
However, the best course of action if you are considering investing in alternative funds, such as Invico Diversified Income Fund, is to consult with an investment or financial advisor.
Alternatives Are Not a Single Category
“Alternatives” is an umbrella term encompassing a wide range of strategies and asset classes, including private credit, private equity, and real assets, such as commodities. From a regulatory perspective, however, what matters most is how the investment is offered, not simply what it invests in.
In Canada, most alternative investment funds fall into one of two broad categories:
- Exempt or private market investments, which are subject to additional eligibility requirements.
- Prospectus-qualified alternatives, which are designed to be accessible to a wide range of investors.
Understanding the distinction between these two pathways is essential.
Private Market Alternatives: Eligibility Matters
Private market investments, including the funds offered by Invico Capital Corporation, are typically sold under prospectus exemptions. These exemptions are intended for investors who can meet specific financial criteria or who are advised by registered professionals.
Accredited Investors
One pathway into private market investments is through the accredited investor status. In Canada, an accredited investor is generally someone who meets defined income or asset thresholds, such as:
- Holding more than $1 million in financial assets (net of related liabilities), alone or with a spouse
- Earning more than $200,000 in net income in each of the two most recent years (or $300,000 combined with a spouse), with a reasonable expectation of maintaining that level
- Having more than $5 million in net assets
Accredited investor status allows individuals to invest in a broad range of private funds that are typically not available to the general public.
Non-Accredited Investors
Some private investments may also be available to non-accredited investors, typically through an offering memorandum (“OM”) exemption. Under this framework, investors receive a detailed disclosure document outlining the fund’s strategy, risks, fees, and governance.
However, access through an OM exemption often comes with investment limits, additional risk acknowledgements, and suitability requirements. These safeguards are designed to protect investors and vary depending on both the investor’s financial profile and their province or territory of residence.
Prospectus-Qualified Alternatives: Accessible to Most Investors
Prospectus-qualified funds include traditional mutual funds and exchange-traded funds (ETFs), as well as a newer category of mutual funds often referred to as liquid alternatives.
These funds are offered under Canada’s standard mutual fund regulatory framework and are available to retail investors without special accreditation. While they may use more advanced investment tools – such as derivatives, short selling, or modest leverage – they are still subject to investor protection rules, ongoing disclosure requirements, and regulatory oversight.
For many Canadians, prospectus-qualified alternative funds represent the most straightforward way to gain exposure to alternative strategies.
Provincial Differences and Why They Matter
Canada does not have a single national securities regulator. Instead, securities regulation is overseen at the provincial and territorial level, with coordination through the Canadian Securities Administrators (CSA).
While many rules are harmonized, certain exemptions can differ by jurisdiction. This means:
- An investment available to a retail investor in one province may not be available, or may be subject to different limits, in another.
- Documentation, disclosure, and suitability obligations can vary depending on where the investor resides.
As a result, eligibility for private alternative investments should never be assumed and must be evaluated on a case-by-case basis.
The Role of the Investment or Financial Advisor
Given the regulatory complexity surrounding alternative investments, working with a registered investment or financial advisor is strongly recommended.
An advisor can help:
- Determine which alternative investment structures are appropriate and permitted for an investor
- Confirm eligibility, including accredited or non-accredited status
- Assess suitability in the context of overall portfolio goals, liquidity needs, and risk tolerance
- Ensure compliance with applicable provincial and federal regulations
In Summary
Alternative investments can play a meaningful role in a well-constructed portfolio, but access in Canada is governed by a layered regulatory framework that depends on product structure, investor eligibility, and provincial rules.
If you are interested in learning more about alternative investments, such as the funds or investment strategies offered by Invico, including Invico Diversified Income Fund, Invico Credit Opportunities, and Invico Secondaries, the next step is to speak with your investment or financial advisor.
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