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Big stocks boost returns at venture capital funds

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

How retail venture capital funds are faring this year as stock markets rebound.

These investments - commonly known as labour-sponsored investment funds - have been marketed on their federal and provincial tax credits. Ontario, however, plans to phase out its credits by the 2013 RRSP season.

TODAY'S SEARCH

We checked the year-to-date returns to screen the 15 best and worst performers. We excluded duplicate versions, and funds that have not reported a return for the first 11 months of 2009.

WHAT DID WE FIND?

Two of the three top funds focus on publicly traded companies. Horizons Advantaged Equity is at the top with a 30-per-cent return, while Dynamic Venture Opportunities is third with a 17-per-cent gain.

In 2005, Ontario changed its rules to allow funds to invest in publicly traded firms under certain circumstances within the venture capital portion (representing 60 per cent of new dollars raised). The balance can be invested in anything from stocks to bonds.

Horizons Advantaged Equity is co-run by Jim Huang of T.I.P. Wealth Manger Inc., who runs the venture capital side, while Leon Fraser & Associates Inc. manages the rest. This fund was formed in 2006 from the merger of Impax Venture Income, formerly DGC Entertainment Ventures, and Impax Venture Fund.

This fund had a rough ride last year, shedding 40 per cent. "We are vulnerable to public market downswings, but we are currently benefiting from the upswing," Mr. Huang said.

Some of his winners have included names like Guestlogix Inc., Bio-Extraction Inc. and Centamin Egypt Ltd. Larger names include EnCana Corp, and Canadian National Railway.

Ray Benzinger of Goodman & Co. has been running Dynamic Venture Opportunities since 1996. Some of his winners this year have included SXC Health Solutions Corp., TeraGo Inc. as well as Bank of Nova Scotia and Toronto-Dominion Bank.

Labour investment funds focused on public companies don't have the liquidity issues faced by some of their peers.

VenGrowth Asset Management Inc. recently halted redemptions in its VenGrowth Advanced Life Sciences Fund, because it has been unable to sell its investments to a strategic buyer or exit through an initial public offering (IPO). This fund has lost 14 per cent so far this year.

Last December, it stopped redemptions in VenGrowth Investment, which shed 31 per cent this year, and VenGrowth II, off 19 per cent. Investors can only redeem once a year from proceeds of a sale or IPO. "Market volatility has basically just shut down the exit market," VenGrowth spokesman David Ferguson said recently.

******

Retail Venture Capital Funds to Nov. 30, 2009
(As of Nov. 30)Latest% return (as of Nov. 30)
Fund name Assets ($-mil)MERYTD1-yr3-yr5-yr10-yrInception
Top 15
Horizons Advantaged Equity Sr-I1.99.529.521.9-6.5
Covington Fund II5.722.628.51.22.6-1.2
Dynamic Venture Opport Series I4.016.716.1-7.8-0.40.30.4
VentureLink Financial Serv Innov I55.05.111.62.7-5.6-0.10.4
Covington Venture Fund VII-CapFirst5.110.04.70.1-2.4-2.5
Covington Venture Fd VIII-Cap Prot9.913.01.5
VentureLink Diversified Income I6.35.07.8-5.3-9.3-3.0-1.5
Return on Innovation I86.47.46.95.6-7.3-2.6-2.0
Advantage Venture5.23.72.9-5.5-5.6-3.9
Covington Venture Fund IV-New Mille4.33.74.015.89.94.9
Front Street Energy Gwth Fund Ser-I7.23.41.6-18.6-5.04.2
Working Opp Commercialization 083.12.03.3-1.3
Working Opport Commercialization 052.03.51.91.54.13.2
SaskWorks Venture Fund Inc.5.01.60.97.64.83.0
SaskWorks Resources5.51.20.69.66.8
Bottom 15
VenGrowth Invst Fund Inc. Cl A SrE4.2-30.9-31.9-26.9-16.8-11.7-5.0
Axis Investment Funds Inc. Ser. I2.86.8-29.2-38.6-39.4-28.8-17.7
Lawrence Enterprise I6.4-21.4-22.4-14.2-13.5-8.7
Covington Venture Fund V-New Gen7.4-20.7-19.5-10.3-7.4-4.7
Covington Strategic Capital Fund I3.4-17.9-16.95.04.03.1
VenGrowth II Investment Fund Inc.4.8-17.8-18.8-18.4-12.4-8.3
VenGrowth Traditional Inds Cl-A SrA6.4-15.3-16.1-7.1-3.7-3.4
ENSIS Growth Fund Inc.63.35.0-12.7-13.70.7-2.0-1.8-1.8
GrowthWorks Cdn Fund Ltd. (FOF Tra)12.27.2-12.7-13.6-5.2-5.9
VenGrowth Adv Life Sciences ClA SrA5.5-12.2-13.8-8.4-5.4-3.8
GrowthWorks Canadian116.35.5-10.7-11.6-3.9-1.9-5.8-0.8
British Columbia Discovery-10.0-12.2-6.7-5.2-5.0
Covington Venture Fund Inc. Sr I5.0-9.4-10.6-2.0-3.5
GrowthWorks Cdn Fund GIC Series I0.3-8.3-9.7-9.0
Working Opp Commercialization 063.2-8.3-7.7-1.4-1.4
BMO Nesbitt Burns Cdn Small Cap Index64.374.6-2.95.29.3
NASDAQ Composite ($ Cdn)17.419.4-6.5-1.9-7.4
S&P/TSX Composite Index27.423.5-3.54.94.3
S&P/TSX Completion34.534.3-6.72.04.6
Excludes funds that do not report year-to-date returns for 2009. Source: Globe Investor
Retail Venture Capital Funds to Nov. 30, 2009
(As of Nov. 30)Latest% return (as of Nov. 30)
Fund name Assets ($-mil)MERYTD1-yr3-yr5-yr10-yrInception
Top 15
Horizons Advantaged Equity Sr-I1.99.529.521.9-6.5
Covington Fund II5.722.628.51.22.6-1.2
Dynamic Venture Opport Series I4.016.716.1-7.8-0.40.30.4
VentureLink Financial Serv Innov I55.05.111.62.7-5.6-0.10.4
Covington Venture Fund VII-CapFirst5.110.04.70.1-2.4-2.5
Covington Venture Fd VIII-Cap Prot9.913.01.5
VentureLink Diversified Income I6.35.07.8-5.3-9.3-3.0-1.5
Return on Innovation I86.47.46.95.6-7.3-2.6-2.0
Advantage Venture5.23.72.9-5.5-5.6-3.9
Covington Venture Fund IV-New Mille4.33.74.015.89.94.9
Front Street Energy Gwth Fund Ser-I7.23.41.6-18.6-5.04.2
Working Opp Commercialization 083.12.03.3-1.3
Working Opport Commercialization 052.03.51.91.54.13.2
SaskWorks Venture Fund Inc.5.01.60.97.64.83.0
SaskWorks Resources5.51.20.69.66.8
Bottom 15
VenGrowth Invst Fund Inc. Cl A SrE4.2-30.9-31.9-26.9-16.8-11.7-5.0
Axis Investment Funds Inc. Ser. I2.86.8-29.2-38.6-39.4-28.8-17.7
Lawrence Enterprise I6.4-21.4-22.4-14.2-13.5-8.7
Covington Venture Fund V-New Gen7.4-20.7-19.5-10.3-7.4-4.7
Covington Strategic Capital Fund I3.4-17.9-16.95.04.03.1
VenGrowth II Investment Fund Inc.4.8-17.8-18.8-18.4-12.4-8.3
VenGrowth Traditional Inds Cl-A SrA6.4-15.3-16.1-7.1-3.7-3.4
ENSIS Growth Fund Inc.63.35.0-12.7-13.70.7-2.0-1.8-1.8
GrowthWorks Cdn Fund Ltd. (FOF Tra)12.27.2-12.7-13.6-5.2-5.9
VenGrowth Adv Life Sciences ClA SrA5.5-12.2-13.8-8.4-5.4-3.8
GrowthWorks Canadian116.35.5-10.7-11.6-3.9-1.9-5.8-0.8
British Columbia Discovery-10.0-12.2-6.7-5.2-5.0
Covington Venture Fund Inc. Sr I5.0-9.4-10.6-2.0-3.5
GrowthWorks Cdn Fund GIC Series I0.3-8.3-9.7-9.0
Working Opp Commercialization 063.2-8.3-7.7-1.4-1.4
BMO Nesbitt Burns Cdn Small Cap Index64.374.6-2.95.29.3
NASDAQ Composite ($ Cdn)17.419.4-6.5-1.9-7.4
S&P/TSX Composite Index27.423.5-3.54.94.3
S&P/TSX Completion34.534.3-6.72.04.6
Excludes funds that do not report year-to-date returns for 2009. Source: Globe Investor

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