CC&L Refines Alternative Funds, Capping Two and Closing One

TORONTO, ON – March 11, 2026 – Connor, Clark & Lunn Funds Inc. (CC&L Funds) announced a significant strategic realignment of its alternative investment offerings today, implementing a limited closure on two of its successful market neutral funds while simultaneously moving to terminate its global long-short fund.

The firm will enact a "soft cap" on its CC&L Global Market Neutral Fund and CC&L Global Market Neutral II Fund, effective at the close of business on March 13, 2026. This move will restrict new investors from purchasing units. In a separate action, the firm will terminate the CC&L Global Long Short Fund, with the process expected to conclude on or about May 14, 2026.

These concurrent decisions highlight a disciplined approach to portfolio management, reflecting a broader trend among asset managers to protect the capacity of successful strategies while pruning products that no longer align with market demand or performance expectations.

A Tale of Two Strategies: Capacity and Curation

The divergent paths for these funds underscore the different challenges and life cycles of specialized investment products. The decision to soft-cap the two Global Market Neutral funds is being positioned as a measure to protect existing unitholders.

"The decision to limit new investments in the Funds has been made to preserve the integrity of their respective investment strategies and to maximize the return potential for existing investors," the Manager stated in its official press release.

Industry analysts note that such a move, known as a "soft cap," is often a sign of a strategy's success. As funds grow in assets under management (AUM), it can become increasingly difficult for managers to execute their strategy effectively without adversely impacting market prices, a phenomenon known as "asset bloat." By limiting new inflows, CC&L aims to ensure its portfolio managers can remain nimble and continue to generate the "alpha," or outperformance, that investors seek. The CC&L Global Market Neutral Fund and its successor have AUM of approximately $188.87 million and $249.32 million, respectively. Both are designed to deliver positive returns with low correlation to broader equity markets, a goal they have largely met. For instance, the CC&L Global Market Neutral Fund has demonstrated a beta near zero and a negative correlation to the S&P/TSX index, proving its value as a portfolio diversifier.

In contrast, the termination of the CC&L Global Long Short Fund signals a different strategic calculus. The firm cited a desire to ensure its "product lineup remains aligned with investor preferences, needs and long-term goals." While the fund has delivered positive multi-year returns, its recent year-to-date performance was negative, and its AUM of approximately $34.37 million is considerably smaller than the market neutral funds being capped. Terminating funds with smaller asset bases can be an economic decision, as they may become inefficient to operate. This action follows a similar move in late 2025 when CC&L Funds terminated another market neutral product, suggesting a consistent and active curation of its fund family.

The Evolving Landscape of Liquid Alternatives

CC&L's announcement comes amid a period of significant growth and evolution in the Canadian alternative investment market. Since regulators amended National Instrument 81-102 in 2019, the path has been cleared for "alternative mutual funds," or "liquid alts," making strategies once reserved for institutional and high-net-worth clients accessible to a broader retail audience.

These funds employ sophisticated strategies to achieve their objectives. A market neutral strategy, like that used by the capped CC&L funds, seeks to generate returns regardless of the market's direction by balancing long positions in undervalued securities with short positions in overvalued ones. The primary goal is to neutralize market risk and profit from stock-picking skill. These funds are prized for their low volatility and low correlation to traditional stock and bond portfolios.

A long-short strategy, employed by the fund being terminated, also takes both long and short positions but often maintains a net directional exposure to the market. While still aiming to reduce volatility and enhance risk-adjusted returns compared to a long-only equity fund, its performance can be more influenced by broader market trends.

The growing appetite for these products is driven by investors' search for diversification and downside protection in an increasingly uncertain economic environment. With over $30 billion now invested in Canadian liquid alts, the space has become highly competitive. CC&L's decision to refine its lineup can be seen as a strategic response to this dynamic landscape, focusing its resources on its most successful and scalable strategies while shedding those that may have fallen out of favor with investors or failed to gather sufficient assets.

Navigating the Changes: What This Means for Investors

The implications of today's announcement differ significantly depending on the fund an investor holds.

For current unitholders in the CC&L Global Market Neutral and CC&L Global Market Neutral II funds, the news is largely positive. Their investment is now in a more exclusive product, protected from the potential performance drag of excessive asset growth. The Manager confirmed that existing investors will still be able to make additional purchases, particularly those with systematic purchase plans or those held within discretionary managed accounts established before the March 13 deadline. However, new investors looking for a similar strategy will now have to look elsewhere.

The situation is more urgent for investors in the CC&L Global Long Short Fund. As of March 11, the fund is closed to all new purchases. Existing unitholders have a window until May 14, 2026, to either redeem their units for cash or switch them into another CC&L fund.

Those who do not take action by the deadline will have their holdings automatically redeemed at the fund's final net asset value per unit. This forced redemption is a disposition for tax purposes and could trigger a capital gain or loss, which must be reported. Unitholders are strongly encouraged to consult with their financial advisors to discuss the tax implications and evaluate their reinvestment options, whether within the CC&L family of funds or with another provider.

This strategic pivot by Connor, Clark & Lunn, an award-winning manager with over $112 billion in assets under its parent company, underscores the active management required not only within a fund's portfolio but across a firm's entire product suite. As the market for alternative investments continues to mature in Canada, such refinements are likely to become a more common feature of the investment landscape.