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Investment grade managed duration Income Fund completes its IPO, the first IPO by a closed end fund using the innovative UTF structure

Fasken
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Overview

Client

Confidential Clients

Investment Grade Managed Duration Income Fund completed its initial public offering of units at $10 per unit in August 2015 raising over $30 million of proceeds. The Fund’s investment objectives are to (i) provide unitholders with a stable stream of monthly distributions; (ii) preserve the net asset value per unit; and (iii) reduce the risk of rising interest rates by managing portfolio duration, by investing primarily in U.S. and Canadian dollar denominated investment grade preferred securities. Purpose Investments Inc. is the manager of the Fund, with Nuveen Asset Management, LLC acting as investment advisor with respect to the US portion of the portfolio. The Fund uses the innovativeUnit Traded Fund (UTF) structure which has been developed to accomplish two goals, namely (a) to enable the Fund to invest virtually all of the gross proceeds from the sale of its units in its investment portfolio, and (b) to encourage the Fund’s Class T Units to trade in the market at a price not less than 98.50% of their net asset value throughout the life of the Fund. Using the Unit Traded Fund structure, the Fund was not responsible for paying any of the compensation to the selling agents relating to the IPO and did not bear expenses relating to the IPO greater than 0.50% of the gross proceeds from the offering. As a result, the net asset value of the Fund’s units immediately after closing of the offering was $9.95. Fasken Martineau advised the issuer and the syndicate of agents, with a team that included John Kruk, Jean-Pierre Chamberland, François Brais, Jonathan Halwagi and Benjamin Somers (investment funds and capital markets) and Mitchell Thaw (tax).

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