MIC Due Diligence Process

Why process matters more in the exempt market

In public markets, many investors focus almost entirely on the security. In exempt markets, process matters more, because information is less standardized, liquidity is policy-based, and product quality varies widely.

Who introduces a MIC, how they are paid, how many products they sell, and how they diligence those products can change your odds of a good decision. MIC Investing is operated by Diversifi Alternative Investments Ltd., a registered Exempt Market Dealer. The firm's educational posture is narrower than a catalogue shelf: fewer approved products, deeper ongoing diligence, willingness to decline offerings that do not meet standards, and emphasis on investor fit before product narrative.

This page explains the process at a practical level. For the full investor checklist curriculum, use Peter's MIC Due Diligence Framework. For a decision-stage comparison tool, use How to Compare Canadian MICs Without Chasing Yield.

What the dealer reviews before a suitability conversation

Before any MIC is discussed as a potential fit, a serious independent review should examine:

• Manager quality, experience, and execution discipline across cycles
• Historical defaults, arrears, collections practice, and loss experience
• Underwriting standards, exception behaviour, and property valuation quality
• Loan-to-value discipline and borrower equity cushion
• First versus subordinate mortgage mix and mandate clarity
• Geographic, property-type, and borrower concentration
• Liquidity terms, redemption policies, gates, and portfolio cash management
• Fee alignment, related-party conflicts, and governance quality
• Reporting quality, audit posture, and investor communication
• Fit with the investor's objectives, account structure, risk tolerance, and liquidity needs

Size, mandate, and portfolio mathematics

Scale alone does not make a MIC suitable. A smaller, tightly underwritten portfolio can be healthier than a larger, opportunistic one. Still, size and composition change concentration risk, cash management, and how redemption pressure behaves in stress.

Review portfolio size and loan count, average and maximum loan size, average and maximum LTV policy, lien priority mix, geographic and property-type concentration, top-loan concentration, cash drag or undeployed capital, and any use of leverage or bank lines. Ask what is explicitly out of mandate. Green flag: mandate is specific and repeatable. Red flag: mandate is poetic, opportunistic about everything, or changes with marketing seasons.

Management agreements, fees, and incentives

Ask who makes underwriting decisions, how long leadership has operated through full cycles, whether principals have meaningful capital alongside investors, how managers are paid (management fees, origination fees, other), when fees can be waived, deferred, or prioritized over investors, and what conflicts exist with related brokerages, servicing entities, or development groups.

Fee opacity and vague ownership maps are diligence problems, not paperwork annoyances. A dealer should be able to explain compensation and conflicts in plain language before you ever see a subscription package.

Liquidity engine and redemption reality

Private MIC shares do not trade like listed equities. Liquidity is a designed machine: notice periods, redemption frequency, caps, gates, suspensions, early redemption fees, and sources of cash such as maturities, undeployed capital, credit facilities, or new subscriptions.

Map that machine before you commit capital. Needing GIC-like access while buying private-fund liquidity is a common mismatch. Educational detail lives in Risk, Liquidity and Labels and the insights article on liquidity and redemption policies.

Credit outcomes, not only distribution history

Distribution continuity is useful information. It is incomplete information. Ask for arrears rates over time, default definitions and history, realized losses and recoveries, enforcement timelines, and how non-performing loans are valued and reported. A portfolio can distribute while problems are quietly accumulating. Professionals look at both tracks: income track and credit track.

Net yield context belongs in that same conversation. Target distributions versus actual historical distributions, fee drag, and cash held undeployed all affect what an investor actually receives. Targets are not promises. Past performance is not indicative of future results.

Where this page sits in the education path

Use this legacy process page as the dealer-facing overview of how Diversifi filters offerings. Use the Learn hub checklist when you want the full question list. Use analyzing and comparing MICs when you are already comparing two or more names and need a decision matrix rather than a definition.

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