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Mutual Fund News

For a few funds, it truly was a lost decade

swon@globeandmail.com

What are we looking for?

Dogs of the past decade.

It pays to do a reality check of fund performance because not every fund manages to produce profits for investors over the long haul. Many struggling funds will close or merge before reaching their 10th anniversary.

The screen?

We looked at the biggest losers for the 10 years ended Aug. 31. U.S. dollar, segregated, and duplicate versions of funds were excluded.

What did we find?

Several venture-capital funds spilling red ink.

VenGrowth II Investment, had an annual average loss of 13.9 per cent over 10 years, while VenGrowth Investment shed 8.8 per cent a year, and New Generation Biotech Equity, 10.2 per cent.

But this trio, more commonly known as labour-sponsored funds, has now bitten the dust. They, along with VenGrowth III Investment, VenGrowth Traditional Industries and VenGrowth Advanced Life Sciences, all merged this month into Covington Fund II, which is run by Covington Capital Corp.

Labour funds have had a tough time raising money after the Ontario government reduced, then eliminated its tax credit for these investments. Federal credits are still available for these funds, which require an eight-year hold to compensate for the risk in investing in early-stage private companies.

VenGrowth Asset Management Inc. tried to sell its funds to Covington last fall, but faced a proxy fight from rival GrowthWorks Ltd. VenGrowth shareholders last month voted for a deal offered by Covington Capital, which acquired New Generation Biotech Equity several years ago.

Covington Fund II now has $350-million in assets versus $50-million before the merger. That means that investors in some VenGrowth funds, where redemptions had been halted, will be able to redeem more of their cash over the next several years as monies are raised from selling investments or companies going public, said Scott Clark, managing partner with Covington Capital.

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DOGS OF THE PAST DECADE TO AUG. 31, 2011

(Aug. 31)Latest(Aug. 31)(Aug. 31)Calendar year % return
Fund nameCategoryAssets ($-mil)MER10-yr % rtnYTD % rtn2010200920082007200620052004200320022001
VenGrowth II Investment Fund Inc.Retail Venture Capital100.24.79-13.9-21.5 -27.9-22.0-24.1-12.6-2.4-4.0-5.1-8.3-4.9-0.2
Manulife Global AdvantageFinancial Svcs.Equity16.03.00-10.5-7.2-7.529.9-57.4-23.522.26.26.06.1-35.9-28.5
New Generation Biotech Equity-IRetail Venture Capital9.57.18-10.2-7.5-32.8-7.6-10.7-5.1-20.0-5.7-3.113.4-16.2n/a
VenGrowth Invst Fund Inc. Cl A SrERetail Venture Capital32.24.17-8.8-4.843.4-32.1-37.0-9.66.1-3.9-10.5-2.9-16.5-25.5
Manulife ValueU.S. Equity54.62.51-7.6-8.37.812.4-42.0-28.622.6-2.0-1.0-1.1-20.0-6.8
Manulife American AdvantageFinancial Svcs. Equity21.02.88-6.8-14.20.628.8-45.9-21.912.38.7-4.73.1-17.5-9.3
Renaissance US Equity GrowthNorth American Equity28.02.73-6.5-7.013.910.1-37.8-9.52.32.0-3.03.2-30.2-11.4
TD International Value-IInternational Equity644.32.55-6.4-13.9-3.210.7-40.0-14.422.34.46.88.2-24.1-23.3
Scotia U.S. Blue ChipU.S. Equity26.52.69-6.3-5.24.0-3.7-27.1-7.98.50.0-1.1-4.3-23.8-12.7
Meritas U.S. EquityU.S. Equity8.82.87-6.1-5.74.27.4-27.8-16.99.5-1.4-1.7-3.3-21.1n/a
RBC Life Science & TechnologyU.S. Equity84.92.15-5.9-6.511.626.3-29.30.5-1.8-3.0-9.216.6-48.0-31.4
AGF Japan ClassJapanese Equity15.33.24-5.8-11.18.3-13.2-21.0-23.02.417.06.513.5-16.5-27.9
BMO Global Science and TechnologyU.S. Equity34.52.50-5.8-4.73.420.0-25.0-12.6-6.34.6-0.44.8-34.9-27.2
Mackenzie Cundill Global Div-T5Glbl Sml/MdCp Equity32.32.53-5.7-23.27.822.8-39.5-13.820.36.21.85.2-23.0-14.8
HSBC U.S. Equity-IU.S. Equity36.02.40-5.6-8.58.79.1-30.0-11.511.00.9-1.72.1-27.8-11.1
S&P/TSX Total Return8.1-3.517.635.1-33.09.817.324.114.526.7-12.4-12.6
MSCI World ($ Cdn)-0.5-5.26.811.8-26.1-7.120.66.67.39.4-20.2-11.4
S&P 500 Composite ($ Cdn)-3.8-3.57.25.5-23.8-12.213.6-0.21.53.4-24.0-7.7
Source: Globe Investor, Bloomberg

© 2007 The Globe and Mail. All rights reserved.

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