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Mutual Fund News

The ugly truth about labour-sponsored funds

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

Top-performing, labour-sponsored investment funds over the long haul. These investments - now called retail venture funds - were marketed on their long-term potential and juicy tax credits.

TODAY'S SEARCH

We looked at their performance over the decade to the end of 2007 - specifically, average annual returns over one, three, five and 10 years.

SO WHAT DID WE TURN UP?

Ugly returns. Dead funds. Funds reinventing themselves. Many took a hit after the technology bubble burst. And high management fees have taken a big bite from returns.

GrowthWorks Canadian, formerly Working Ventures Canadian Fund, posted an average annual loss of 3 per cent over the decade.

Canadian Medical Discoveries (series I), formed from the merger of the first two original series, fared even worse. It suffered an average annual loss of 6.6 per cent. And VenGrowth Investment Fund Class A (series E) declined an average of 1.1 per cent a year.

Some funds managed to stay in the black. At the lower end was BEST Discoveries, up 1 per cent annually. Dynamic Venture Opportunity (series I) posted a 6.8-per-cent average annual return - the best in the group. Still, they underperformed the 9.8-per-cent average for Canadian small-to-mid-capitalization equity funds.

While Crocus Investment Fund is listed as active, it's on life support. The scandal-ridden fund has been mired in legal woes, and its assets are still being liquidated.

Sportfund merged with Retrocom Growth Fund, which filed for bankruptcy protection in 2006 and proceedings are continuing. And Covington Fund I was wound down last year.

Out of 20 funds, 13 are listed as non-active. Some of them are under new managers, or have merged with other funds.

Triax Growth I merged with the Covington Venture Fund Inc. (series I). York Labour Fund, formerly Centerfire Growth, has become Lawrence Enterprise V Fund.

Impax Venture Income Fund, formerly DGC Entertainment Ventures, merged with Impax Venture Fund to become Horizons Advantaged Equity Fund (series I).

Capital Alliance Ventures, Canadian Science &Technology Growth and First Ontario (which took over Trillium Growth Capital and FESA Enterprise Venture Capital) merged with GrowthWorks Canadian to start a new series. Ensis Growth will soon amalgamate with GrowthWorks Canadian too. Workers Investment Fund has merged with GrowthWorks Atlantic Venture Fund.

When funds start a new life, the performance clock often starts all over again. So much for long-term potential.

Labour-sponsored funds existing in 1998

Net assets% return as of Dec. 2007
Inception(millions)SinceActive/Not activeMERLast
Fund namedateas of Dec. '071-year3-year5-year10-yearinceptionfund as of todayeffectivereported
GrowthWorks Canadian2/8/1990227.4-0.19%2.87%3.76%-2.96%0.12%ActivedateMER
Working Opportunity Balncd Ser 14/1/1992154.9-2.84%-2.48%-1.90%1.62%2.66%Active9/30/20052.63
Crocus Investment Fund3/1/1993Active1/30/20044.04
Dynamic Venture Opport Series I2/28/199461.9-6.52%5.78%5.22%6.79%1.78%Active6/29/20073.99
Impax Venture Income Fund Inc.3/1/1994Not Active
Canadian Medical Discoveries Ser I10/7/1994156.4-19.84%-13.93%-9.93%-6.60%-4.32%Active5/31/20053.71
Trillium Growth Capital Inc.10/25/1994Not Active
Canadian Medical Discoveries12/7/1994Not Active
First Ontario LSIF Ltd.1/31/1995Not Active
Covington Fund I2/28/1995Not Active
Capital Alliance Ventures2/28/1995Not Active
Sportfund2/28/1995Not Active
FESA Enterprise Venture Capital3/1/1995Not Active
VenGrowth Invst Fund Inc. Cl A SrE3/1/199595.7-9.57%-2.70%-4.35%-1.12%0.58%Active8/31/20074.17
Retrocom Growth4/13/1995Not Active
Triax Growth-I1/10/1996Not Active
Canadian Science & Tech Growth12/2/1996Not Active
B.E.S.T. Discoveries I12/31/199656.920.32%6.59%1.38%0.97%0.70%Active9/28/20075.72
Workers Investment Fund Inc.1/10/1997Not Active
York Labour Fund Inc3/1/1997Not Active
ENSIS Growth Fund Inc.1/5/199896.02.15%-3.13%-2.13%-2.10%Active10/29/20044.95
Avg Return - Canadian Small-Mid Cap Equity Fund 7.23% 12.46% 16.95% 9.78%
Median Return - Canadian Small -Mid Cap Equity Fund 8.02% 11.61% 16.24% 10.47%
BMO Nesbitt Burns Cdn Small Cap Index 2.01% 12.51% 18.33% 9.68%

Note: The list does not include the Quebec Solidarity Fund because it is valued semi-annually and data is incomplete.

SOURCE: GLOBEFUND

© 2007 The Globe and Mail. All rights reserved.

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