Frequently Asked Questions


Fund Overview

  1. How is the Fund structured?
    The Algonquin Debt Strategies Fund (the “Limited Partnership” or the “Fund”) is a limited partnership. The Algonquin Trust (the “Trust”) is a Mutual Fund Trust that invests solely and directly in the Limited Partnership. Each structure contains special terms that are outlined within their respective Offering Memoranda. Investors should be aware; the Trust has expenses that are separate to those of the Limited Partnership. As such, the Trust’s performance will be slightly below that of the Limited Partnership.
  1. Which structure is right for me?
    Commonly, we recommend individuals, estates, and trusts to invest via the Trust and corporations to invest directly in the Limited Partnership. Because each investor’s situation is different and the two Fund structures have certain unique features, we recommend seeking the advice of your advisor to determine the structure that best suits you.
  1. Where is Algonquin Capital Registered?
    The Ontario Securities Commission is our principal regulator. Algonquin Capital is registered as an Investment Fund Manager, Exempt Market Dealer and Portfolio Manager in Ontario. The following table shows Algonquin Capital’s registrations in other provinces:

     

    Province Registration Category
    Alberta, British Columbia, Manitoba, Nova Scotia Exempt Market Dealer
    Quebec, Newfoundland & Labrador Exempt Market Dealer/ Investment Fund Manager
  1. Can I hold this investment in my RRSP, RESP or TSFA?
    Access to the Limited Partnership is available for registered and tax-free savings accounts through the Trust. Investors must subscribe to units of the Trust, which invests solely and directly in the Limited Partnership.
  1. When can I invest?
    The Fund is currently open to new investors. Investors purchase units of the Limited Partnership or the Trust on the first business day of each month based upon their respective Net Asset Values (“NAVs”) as calculated by the independent Fund administrator.
  1. What are the key service providers to the Fund?
    The ongoing operations of the Limited Partnership and the Trust are supported by the following reputable service providers:
     

    Role Service Provider Name
    Investment Manager Algonquin Capital Corporation
    Prime Broker TD Securities Inc.
    Futures Broker RBC Futures
    Fund Administrator SGGG Fund Services Inc.
    Auditor KPMG LLP
    Legal Counsel Wildeboer Dellelece, AUM Law

What Can the Fund Invest In?

  1. What limitations are on the investment strategy of the Fund?
    The following limitations apply to the Fund:

    • A minimum of 70% of total exposure is held in investment grade securities, where investment grade is defined as securities that have at least a BBB rating (or equivalent) by at least one recognized rating agency;
    • A minimum of 60% of total exposure will be invested in “North American” securities. The Investment Manager defines “North America” to include the jurisdictions of Canada and the US;
    • A maximum of 15% of the total exposure will be invested in a single corporate issuer;
    • The maximum amount of leverage that the Partnership can employ is 6:1;
    • The maximum market value of “Alternative Debt Instruments” will not exceed 10% of the total exposure. Alternative Debt Instruments include bank loans, private placements, unrated debt and structured credit instruments.
  1. Can the Fund invest in derivatives?
    The Fund can and does intend to use interest rate futures, interest rate swaps and options, and credit derivatives as well as equity index futures and options. Derivative instruments can be used to achieve investment returns or to mitigate risk.
  1. How does the Fund protect itself from changes in interest rates?
    The core of our strategy is to separate a corporate bond into its two risk components: credit risk and interest rate risk. We do this by buying a corporate bond, while simultaneously selling a government bond. This bond package is now largely insulated from changes in interest rates.

Where Does This Fit in My Investment Portfolio?

  1. What is the Fund’s target return?
    The Fund targets an absolute return of 6% to 9% after fees with little sensitivity to changes in interest rates as well as equities.
  1. Why would I invest?
    The Fund offers investors portfolio diversification from both interest rates and equities. With correlation in the public equity markets at sustained highs and yields on fixed income at record lows, the inclusion of alternative investment classes is a necessary element in constructing portfolios designed to increase total returns to investors without exposing them to increased risk and volatility.
  1. How much should I invest?
    The appropriate amount of investment varies for each investor based upon their unique financial circumstances and investment objectives. We believe it is prudent to construct diversified portfolios. As such, we caution against allocations to the Limited Partnership and/or the Trust that may represent more than 10% of your portfolio.

I Want to Invest. What Do I Need to Know?

  1. Am I eligible to invest?
    You must be an ‘accredited investor’. Click Here to see the list of criteria that are used to qualify as an accredited investor. You must meet one of the criteria on the list.
  1. How do I invest?
    To discuss whether this investment is suitable for you, please contact your advisor or you may reach us directly by contacting Mr. Raj Tandon by email at raj.tandon@algonquincap.com or by phone on 416-214-3493. Raj is a registered Dealing Representative and one of the Founding Partners of Algonquin Capital. He will be happy to answer any questions you may have and should you wish to invest; Raj can guide you through the subscription process, including completing the subscription agreement.

    Please be advised, investments made from registered plans or tax free savings accounts typically need to be made via a full-service investment advisor.

    You will need to invest a minimum of $250k if you invest directly with Algonquin Capital. Investors seeking to invest less than $250k should do so through their full-service investment advisor, subject to a minimum investment of $25k.

  1. Which banks/ investment dealers distribute the Fund?
    Investors may subscribe to units of the Limited Partnership and/or the Trust through BMO, Scotiabank, CIBC, RBC, TD, Richardson GMP, Raymond James and Canaccord Genuity. Furthermore, we work with several family offices. Please contact Raj Tandon by email at raj.tandon@algonquincap.com or by phone on 416-214-3493 for more information.
  1. Why do I need to complete a W-8BEN or W-8BEN-E?
    The W-8BEN and W-8BEN-E are US tax forms. The Limited Partnership is a flow-through entity, therefore we are required to provide the prime broker with a W-8BEN or W-8BEN-E for each investor to avoid the application of US withholding tax. These forms must be updated every three years. Algonquin Capital, in its sole discretion, may reject an order or even redeem an investor’s units in the event we don’t receive the required documentation.
  1. How long is my money tied up?
    The Fund has no lock up period.
  1. How do I make a redemption request?
    An investor should send a written request (email is acceptable) to raj.tandon@algonquincap.com, giving at least 25 days notice. Redemptions are then processed once the month end NAV has been finalized.

What Investor Reporting Will I Receive?

  1. Does the Fund issue certificates?
    No certificates are issued when you make an investment. SGGG will send a confirmation to show that an investment has been made. We recommend keeping this confirmation and a copy of the subscription agreement for your records.
  1. How and when is the NAV calculated?
    The NAV is calculated monthly by SGGG Fund Services (“SGGG”) and is published a few business days after month-end. SGGG calculates the NAV using information, including valuation of the investment portfolio, obtained from independent sources. The NAV is reported by SGGG to individual unitholders each quarter. Algonquin Capital maintains its own daily NAV and reviews the monthly NAV calculation prepared by SGGG.
  1. What tax reporting can I expect?
    SGGG provides a T5013 – Statement of Partnership Income to each Limited Partner and a T3 – Statement of Trust Income Allocations and Designations to each investor in the Trust.
  1. Can I access information about my investment online?
    Investors subscribing directly through Algonquin Capital receive access to our investor portal. The investor portal provides investors with their transaction history and important investment reporting documents (e.g. financial statements, offering memorandum etc.).
  1. What financial information regarding the partnership can I expect?
    An investor can elect to receive the semi-annual unaudited financial statements prepared by SGGG Fund Services as well as the annual audited financial statements prepared by KPMG.

    What Fees Can I Expect to Pay?

  1. How do management fees and profit distribution work?

Please see the below example.

 

Nav Amount
Beginning $10.00 $1,000,000.00
Return after Fund Expenses $0.90 $90,000.00
Management Fee (1.5%+HST)* ($0.1847550) ($18,475.50)
Profit After Management Fee $0.715245 $71,524.50
Profit Distribution (15%)** ($0.1072868) ($10,728.68)
Net $0.6079583 $60,795.83
End $10.6079583 $1,060,795.83

* charged on period ending value
** HST not included

  1. How does the High Water Mark work?
    In the example below, profit distribution is paid in Year 1 and Year 3. The performance fee in Year 3, only applies to the gain in NAV from the end of Year 1.

    high_water_mark