A new Canadian ETF called the PLDT, which would offer bonds from a private sector bank as collateral, is being considered by a group of Canadian banks.
The proposal was unveiled Thursday by Canada’s financial regulator.
The ETF is being launched by the Investment Banking and Finance Association (IBFA), which represents the largest group of Canada’s banks.
It will be the first ETF that the Financial System Supervisory Board of Canada (FSSC) can approve, said Svante Pääbo, executive vice-president of the CFSA.
The board approved the initial application for the fund in September.
The fund’s focus is on bonds issued by private companies, including banks, according to the CFSC website.
It is being developed by Toronto-based First Capital, which has a focus on high-growth companies.
Päaa said the idea for the ETF was born after the FSB received several submissions from Canadian banks interested in the idea.
In a press release announcing the proposal, the CFSE said that the fund would be a “highly targeted fund with high exposure to large, publicly traded banks, and with a high-profile investor profile.”
The CFSA said the fund will be “a great asset allocation tool for investors, and is designed to provide a diversified portfolio of bond-like securities.”
The group is looking for proposals from banks with $500 million in assets or more.
The CFSC said the proposal is subject to regulatory approval and the board expects to announce a decision by the end of the year.
The group also plans to make public further details of the proposal and any further submissions from interested banks by the spring.
“The CFSA is very excited about this new fund,” said Stephen Dickey, senior vice-chair of the FSC’s Board of Directors.
A spokesperson for the CFSB told Business Insider that the FSSC is open to suggestions on the potential use of bonds in private-equity investment, but the agency will not comment on individual proposals. “
We hope that this initiative will also serve to foster a more informed and diverse Canadian investment environment, and contribute to an efficient and effective allocation of capital in the Canadian economy.”
A spokesperson for the CFSB told Business Insider that the FSSC is open to suggestions on the potential use of bonds in private-equity investment, but the agency will not comment on individual proposals.
The FSSS has been working with banks and financial institutions on a range of public-private-sector bonds, including for the National Energy Board, which oversees oil and gas pipelines.
The proposed fund would not be a new project for the FSUB, and the group has already approved private-capital investments from several financial institutions.
But it would be the largest private-private investment in Canada since the bank of Canada was established in 1999.
The idea for a bond fund was first floated in 2015 by Canadian financial advisor Richard Brown, who suggested a bond that could be used as collateral to fund an oil pipeline.
In 2018, Brown was hired by a private equity firm, Drexel Hamilton Partners, to advise on the development of the fund.