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Canada’s liquid alternatives market could grow to more than $20 billion over the next five years, a white paper from Scotiabank says.

As more products become available in 2019 following CSA reforms, Scotiabank looked at the potential market. The paper said the U.S. liquid alts market grew to approximately US$225 billion in 2017 after regulatory changes there in 2013.

It arrived at the $20 billion figure for Canada after comparing those numbers and the market size.

This will provide “a significant opportunity” for mutual fund manufacturers, the paper says. Scotiabank forecasts organic market growth and “a shift, or ‘reallocation,’ of assets under management from both existing mutual funds and hedge funds.”

CSA is currently in phase two of a three-part reform plan for liquid alternative products that began in 2012.

The first phase focused on clarifying and codifying the rules for mutual funds, money market funds, ETFs and closed-end funds, while the second will introduce liquid alts for 2019.

Read: CSA publishes final rule for alternative mutual funds

The mutual fund industry’s reaction has been positive, the paper says, with most of those who’ve submitted comment letters to CSA “encouraging further liberalization of the investment restrictions on alternative funds in National Instrument 81-102.”

Major changes to investment fund regulation will include leverage being permitted for liquid alts, whereas it was limited for traditional funds before. As well, the limits around short selling, borrowing and derivatives will be expanded.

Read the full paper for more on how liquid alts may be added to product shelves and the roles of prime brokers.