David Levi has stamina.
The mutual fund executive's vacation time revolves around running marathons -- Chicago, Niagara Falls or Israel. Mountain climbing is on this week's agenda as he takes time out to tackle Mount Kilimanjaro in Tanzania.
The 50-year-old's resilience has been put to the test by the labour-sponsored fund (LSF) industry. Since 1992, he has overseen Vancouver's Working Opportunities Fund and now, as president and chief executive officer of GrowthWorks Capital Ltd., is the LSF industry's leading consolidator. When the smoke clears on a series of deals, Mr. Levi will be in charge of an $850-million empire with investments in about 200 companies from coast to coast.
It's a bold bet on the asset class. While investors get a handsome 30 per cent tax break, returns in LSFs, which invest largely in small, private tech-focused firms, have ranged from mediocre to lousy. For the period ended July 31, the Working Opportunities Balanced Series One Fund has lost an annual average of 8.2 per cent over five years but has returned an annual average of 3.9 per cent over 10 years.
Mr. Levi believes its a perfect time to "go big or go home." Provincial legislation has stymied further growth in British Columbia so GrowthWorks has gone east. In 2002, it snapped up Ontario's ailing Working Ventures Services Inc. The purchase of WV's portfolio has led to further deal-making in the Maritimes and Ontario, the biggest and most diffuse market for LSFs. Additional acquisitions have not been ruled out, including the purchase of Winnipeg's Crocus Investment Fund, an LSF that's the subject of a criminal probe by the RCMP.
"When you have something new . . . there's always a myriad of players that go in and there's always two or three strong ones that emerge. We hope obviously to be the leader," Mr. Levi said.
Much of the past three years have been spent overhauling the Working Ventures portfolio. The "badly damaged" brand name was dumped in favour of the GrowthWorks name, Mr. Levi said. More complex was the decision to exit some $75-million in investments and sink another $60-million into new businesses.
Small investments in early-stage companies provide the biggest bang for the buck and "if we do make a mistake, we are able to limit our losses," Mr. Levi said. The firm's list of successes includes Angiotech Pharmaceuticals Inc., OctigaBay Systems Corp. and HotHaus Technologies Inc., all of British Columbia's Lower Mainland. While an investment team scours Canada for new opportunities at bargain prices, the firm has been busy trimming fees and tweaking its product lineup.
There are some signs the worst is over. U.S. venture capital firms are investing in tech on the cheap, driving up valuations and reducing the potential investment pool. Meanwhile, the success of search engine Google Inc. has renewed interest in the initial public offering market. It's good news for Canada's $9-billion LSF sector and GrowthWorks in particular, Mr. Levi said. "We expect the companies that we have been building will now see valuation increases because of a recovering marketplace."
Hockin may stay longer at IFICHold off posting the invites to Tom Hockin's farewell bash.
There's some speculation the head of the Investment Funds Institute of Canada will be staying put, perhaps until the end of the year. Earlier this year, Mr. Hockin, IFIC's president and chief executive officer since 1994, announced plans to retire in October following the fund association's annual September shindig in Toronto.
A search committee to find a new CEO was struck in May. The hunt went into high gear this summer, not the ideal time to begin an executive search. Several prospects tapped by the committee are mulling over their options. Search firm Russell Reynolds Associates, meanwhile, wants interested candidates to apply by Sept. 12.
IFIC's search crew is working towards the October deadline but there is the option of Mr. Hockin staying until a successor is found. The former federal minister has no immediate retirement plans and is amenable to staying on if needed.
While Mr. Hockin's tenure gets mixed reviews, there's much agreement IFIC is a tough outfit to run. He is the public voice of the industry and must reconcile a long list of competing interests, including the big banks, insurers, fund dealers and independent firms.
Fund finds of the summer
This summer's surprisingly strong fund sales have prompted the industry to bring a slew of new products to market. Here's a sampling of recent offerings:
On Aug. 16., Guardian Group of Funds Ltd. launched the GGOF Floating Rate Income Fund, a product designed to benefit from rising interest rates. No doubt GGOF is hoping to capture some of the heat generated by the pioneering Trimark Floating Rate Income Fund. The eight-month old fund has raked in $301-million.
Fidelity Investments Canada Ltd. plans to file a preliminary prospectus for a new series of life-cycle funds. Nine funds will be offered, each structured with a specific investment horizon, from five to 40 years. Earlier this summer, three fund companies -- CIBC Asset Management Inc., Ethical Funds Co. and Scotia Securities Inc. -- launched their own life-cycle funds.
On Aug. 15, the fund arm of the Toronto-Dominion Bank filed a preliminary prospectus for the TD Income Trust Capital Yield Fund. The fund will make monthly distributions and boosts the bank's slender offerings in the asset class.
© 2007 The Globe and Mail. All rights reserved.
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