Lysander's Canso Fund to Become ActivETF in Strategic Market Shift

TORONTO, ON – March 26, 2026 – Lysander Funds Limited announced a significant strategic move today, proposing the conversion of its Canso Credit Income Fund (TSX: PBY.UN) from a closed-end investment fund into an actively managed exchange-traded fund (ETF). The new entity, to be named the "Lysander-Canso Credit Income ActivETF," aims to provide investors with greater liquidity and trading efficiency, reflecting a powerful trend reshaping the Canadian investment landscape.

The proposal will be put to a vote at a special meeting of unitholders around June 4, 2026. If approved, the conversion is expected to take place on or about July 28, 2026. In a sign of its commitment to the new structure, Lysander has confirmed it will bear all costs associated with the conversion process.

Riding the Wave of Canada's Active ETF Boom

Lysander's decision is not happening in a vacuum. It represents a calculated entry into one of the most dynamic segments of the Canadian financial market: actively managed ETFs. Canada has emerged as a global leader in this space, with active strategies accounting for 24% of the country's total ETF assets—a figure that dwarfs the 8% in the United States and 2% in Europe and Asia.

The growth has been explosive. The Canadian ETF market's assets under management (AUM) surged to $519 billion by the end of 2024, with inflows hitting a record $76 billion. Active ETFs were the primary engine of this expansion, attracting $42 billion in flows in the year leading up to March 2025 and reaching C$178 billion in total assets. The momentum continues, with active strategies representing a remarkable 70% of all new ETFs launched in 2024.

This shift is driven by investor demand for products that combine the benefits of traditional active management—the potential to outperform the market—with the structural advantages of ETFs, namely lower costs, intra-day tradability, greater transparency, and improved tax efficiency compared to conventional mutual funds. By converting the Canso Credit Income Fund, Lysander is positioning the product to directly compete in this burgeoning arena and appeal to a new generation of investors.

Unpacking the 'Alternative' Designation

A key element of the proposed conversion is the fund's reclassification as an "alternative mutual fund" under Canada's National Instrument 81-102. This designation provides the fund's managers with a significantly broader toolkit than is available to conventional mutual funds, enabling more sophisticated and flexible investment strategies.

Under this framework, the Lysander-Canso Credit Income ActivETF will be permitted to engage in activities such as increased use of derivatives for both hedging and non-hedging purposes, greater ability to sell securities short, and the capacity to borrow cash for investment leverage. These strategies are designed to help the fund generate positive returns in various market conditions, potentially profiting from both rising and falling asset prices, and to offer diversification benefits within a broader portfolio.

While these tools offer the potential for enhanced returns and risk management, they also introduce a higher level of complexity and potential for volatility. The ability to use leverage and short selling, for example, can amplify both gains and losses. This classification signals that the new ActivETF is intended for investors who understand and are comfortable with these advanced strategies, seeking absolute returns that are less correlated with the broader market's direction.

A Strategic Bet on Liquidity and Growth

For existing unitholders of the Canso Credit Income Fund, the conversion from a closed-end fund structure to an ETF offers a clear and immediate benefit: enhanced liquidity. Closed-end funds trade a fixed number of units on an exchange and can often trade at a significant discount or premium to their net asset value (NAV). ETFs, by contrast, utilize a unique creation and redemption mechanism with authorized participants that helps keep the market price closely aligned with the fund's NAV.

This structural change will allow investors to buy and sell shares throughout the trading day at prices that more accurately reflect the value of the underlying assets, eliminating the NAV discount risk that can plague closed-end funds. By covering all conversion costs, Lysander is effectively making a strategic investment in the fund's future, betting that the enhanced structure will not only benefit current unitholders but also attract new capital and increase the fund's overall AUM.

The move to an "ActivETF" is a direct appeal to the growing investor segment that believes in a manager's ability to navigate complex credit markets, especially in a volatile economic environment. Fixed-income ETFs proved their diversification mettle in 2025, holding their value as equity markets fluctuated, and the demand for actively managed credit strategies remains strong. Lysander's proposal is a clear signal of its intent to compete aggressively in this space.

Implications for Investors and the Path Forward

The transition to an ETF structure will bring several practical changes for investors. While the management information circular, to be sent to unitholders of record as of April 21, 2026, will provide definitive details, some general implications are clear. Fee structures are often more competitive in the ETF space, though alternative funds can sometimes carry performance fees tied to their success. The tax efficiency of the ETF wrapper is another significant advantage, as the secondary market trading typical of ETFs results in fewer taxable capital gains distributions for unitholders.

The proposed conversion of the Canso Credit Income Fund is more than a simple structural change; it is a strategic repositioning that aligns the fund with the most powerful currents in modern asset management. By embracing the active ETF model and the flexibility of the alternative fund designation, Lysander is equipping the fund with the tools to compete effectively in Canada's sophisticated and rapidly evolving investment market. The outcome of the unitholder vote in June will determine the next chapter for the fund, potentially unlocking new opportunities for growth and liquidity.