An innovative new investment fund that lends capital to growing businesses in Canada has been listed on the Bermuda Stock Exchange.

The Anaplans Institutional Insured Credit Receivables Fund Ltd partners with credit insurers to insure the loans, affording some protection of investors’ assets.

The fund has been set up by Sylvain Lamoureux, executive director of Anaplans Asset Management (Bermuda) Ltd.

Mr Lamoureux, who hails from Canada, said he had decided five years ago to domicile the fund in Bermuda. The fund’s structure — it was previously set up as a cell of a segregated accounts company — caused headaches with its BSX listing, as SAC cells are not considered individual legal entities.

In April, after taking some advice from James McKirdy, the BSX’s chief compliance officer, the fund restructured as a stand-alone entity. Hence, a five-year-old problem was solved in the space of four months.

Mr Lamoureux said the insured corporate loan fund product had been available in Canada, but he wanted to find a way to open it up to investors farther afield.

“We couldn’t sell it outside Canada — and Canada only represents about 3 per cent of the world’s capitalisation,” Mr Lamoureux said in an interview. “We had to find a jurisdiction from where we could sell this to the rest of the world.”

Cayman and Bermuda were the front-runners, as both jurisdictions had signed tax information exchange agreements with Canada, leading to “designated treaty country” status from the Canadian Government. That meant dividends could be repatriated to Canada, tax-free.

Mr Lamoureux went to Cayman in April 2013 on a fact-finding mission and Bermuda two months later, when he met Greg Wojciechowski, chief executive officer of the Bermuda Stock Exchange.

“Greg told me that if you list your fund on the BSX, it will be eligible for RSP [registered retirement savings plan] in Canada,” Mr Lamoureux recalled. “This meant that not only could I sell to the world, but I could also sell it back in Canada.”

Three law firms confirmed this view and that sealed Mr Lamoureux’s preference for Bermuda.

Alternative lending of the kind offered by Anaplans is growing slowly in Canada, driven by the difficulty which growing companies have in borrowing from Canadian banks.

“I would be lying if I told you there was a lot of demand,” Mr Lamoureux said. “You know why? Because they don’t know about it.

“It’s a breath of fresh air for the borrowers, who can access funding without going to the bank, and it’s a breath of fresh air for lenders, because they can invest in securities that give them good returns from a fixed-income ladder.”

Mr Lamoureux estimated that the factoring industry has grown to be worth about C$10 billion to C$15 billion. Factoring is a financial transaction that involves a business selling its accounts receivable to a third party at a discount. In the case of Anaplans, partner credit insurers insure the bulk of these sales, but they also impose a cap on how much the fund can lend to a particular company. As Mr Lamoureux puts it: “The credit insurers call the shots.”

The Anaplans fund’s “fixed-income ladder” offers investors a 6 per cent yield on a one-year investment, 7 per cent for two years, 8 per cent for three, 9 per cent for four and 10 per cent for five-year duration.

Only qualified investors can participate in Bermuda — those with net assets of at least $1 million — or accredited investors in Canada and elsewhere and the minimum subscription is $100,000. Since its launch in April, the fund has grown to about $6 million and is lending to six businesses.

The fund limits its lending to $1 million to any one company and Mr Lamoureux is wary of taking in money faster than he can put it to work. Huge investments from institutions would not be appropriate, for now at least. The 55-year-old funds industry veteran is experienced enough to know what can happen when growth is hurried.

The fund works with strategic partners to be able to participate in larger loans and to spread its risks.

“Working with our strategic partners, we will lend 50 per cent and they will lend 50 per cent. It’s about diversification of portfolio and diversification of risk,” Mr Lamoureux said.

“Also if we have a lending opportunity and we don’t have the money in the fund to do it, then our strategic partners can help fund more of it until we raise the money, rather than frustrate the brokers who are bringing us the lending business.”

Mr Lamoureux, who moved to Bermuda three years ago and is a member of Sandys Rotary Club, would like to persuade more securities issuers to take advantage of what Bermuda has to offer.

The BSX listing brings “a level of confidence” to his fund, he said. “If you abide by the listing requirements, you’re stepping into the major league. It’s a good exchange, it’s well regulated and recognised.”

The quality of professional services on island is another advantage for the fund, according to Keith Mahon, non-executive director of the fund.

“Our ethos was to have all Bermudian-based third-party service providers: so it started with legal counsel, the administrator, the corporate secretary, the listing sponsor and being on the BSX. It was important to us to embrace the jurisdiction wholly and kept everything within Bermuda.

“So when we get to the next step, for example a different product for which we can take $10 million from an institutional investor, then we can sit around a table and strategise with the best-of-breed here on island, so we can be structured to take the business to the next level.”

Mr Lamoureux refers to the BSX’s Mr McKirdy as “an encyclopaedia on legs” after he rapidly solved the fund’s initial difficulty in listing.

Mr McKirdy explained that the Anaplans fund listing had been structured in a similar way to some insurance-linked securities programmes with their tranches of notes as subclass listings.

The fund, he said, has 20 main classes listed — ten from income and ten from profit growth.

If an individual wanted to invest in the two-year income product fund, saying they had a requirement to invest in a listed security, the fund creates a subclass specific to that investment.

“Because the main class is listed, then the subclass can be listed underneath it and that would take probably no more than two business days to achieve,” Mr McKirdy explained.

“So once the fund presents more subclasses to the exchange, then we can have them listed and meet all their investors’ requirements in a short period of time.

“The work that was done at the listing, which took about three weeks to achieve, made sure that we got it right first time and that we gave the listing of additional securities ultimate flexibility.”

Mr Wojciechowski welcomed Anaplans’ listing. “Seeing a fund structure fitting into an innovative new area of business fits very nicely with what we want to achieve in being thought of as an innovative exchange,” he said.