The Portfolio Management Association of Canada (“PMAC”), through its Industry, Regulation & Tax Committee, is pleased to have the opportunity to provide comments on CSA Notice 81-324 and Request for Comment – Proposed CSA Mutual Fund Risk Classification Methodology for Use in Fund Facts (the “Notice”) which proposes, among other things, a CSA risk classification methodology (the “Proposed Methodology”) for use by mutual fund managers in the Fund Facts document.
PMAC supports the mandatory use of a standard deviation risk rating methodology that would provide investors with consistency and would enhance transparency in the market by enabling both investors and third parties to independently verify the risk rating disclosure of a mutual fund in the Fund Facts. We also believe in the importance of meaningful comparisons across funds and minimizing subjectivity. At the same time, the chosen methodology must be easily understood and for this reason, we would suggest that any adopted risk rating methodology require additional disclosure explaining the methodology to investors in plain language.
While we have not provided comments on each of the specific questions posed by the Canadian Securities Administrators (“CSA”) in the Annex, we include some general comments on certain of the proposals referenced in the Notice.