The Canadian Medical Discoveries Fund, one of the country's largest labour-sponsored funds, was sold yesterday, the latest consolidation deal in the troubled asset class.
Impax Capital Corp., a two-year-old private Toronto company, has agreed to acquire all the shares of Medical Discoveries Management Corp. MDMC is the manager of two versions of the $255-million Canadian Medical Discoveries Fund. The funds have about 80,000 unitholders and hold investments in about 60 early stage biotech and medical companies. Terms of the deal were not released.
A 30-per-cent tax break made labour-sponsored funds a popular asset class about 10 years ago. Under the guidance of chairman Cal Stiller, the Canadian Medical Discoveries Fund grew rapidly with assets under management reaching $375-million in 2000.
But returns have been dismal for the tech-heavy asset class. The Medical Discoveries fund has lost an annual average of about 2.3 per cent since its inception in 1994. Compounding concerns is the Ontario government's plan to end its 15-per-cent tax credit for the fund class in 2011.
"We're optimistic people," said Steven Hawkins, Impax president, in an interview. "Somebody has got to take care of the funds. We're capable people and want to keep the management of these funds going."
A flurry of recent deals has shrunk the number of players in the labour-sponsored fund business. GrowthWorks Capital Ltd. of Vancouver is the leading consolidator and now manages about $850-million in assets from coast to coast.
© 2007 The Globe and Mail. All rights reserved.
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