What are we looking for?
Retail venture capital funds that have made a profit over eight years.
We chose this period because investors need to hold these securities – also known as labour-sponsored investment funds – for eight years to get federal and provincial tax credits.
The screen
Among 20 funds that have survived, we looked the eight best and eight worst performers to the end of Jan. 31. Fund mergers have reduced the count over the years. For instance, Covington Capital Corp. acquired several VenGrowth funds last year, and merged them into its offerings.
What did we find?
Seven out of 20 funds made some money although one of them was really in break-even territory.
Covington Venture Fund IV (formerly known as New Millennium Venture Fund - Balanced) led the pack with an annualized return of 8.3 per cent. This fund, which is closed to new investors, was formerly run as a balanced fund and owned a zero-coupon bond that matured in 2010.
That bond, along with the acquisition of software maker PlateSpin Ltd., helped returns. Since 2010, the fund has only owned early-stage companies such as publicly listed CounterPath Corp. and privately held WireIE Holdings International Inc., both of which contributed to the 8.2-per-cent gain in January, said Covington managing director Scott Clark.
The worst performer was Lawrence Enterprise I, which shed 10.5 per cent annually. The fund was acquired in 2010 by Aston Hill Financial Inc. when it bought Navina Asset Management. Ravi Sood, who left Navina that same year, had previously run the fund.
Joanne Hruska, a portfolio manager with Aston Hill, has taken over the running of Lawrence Enterprise. She has been adding larger, dividend-paying public companies, and divesting the fund of what she describes as "riskier venture and small-cap investments."
In 2005, Ontario changed the rules to allow venture capital funds to invest in public companies under certain circumstances. At Dec. 31, some of the publicly listed names in Lawrence Enterprise included Provident Energy, Canadian Natural Resources, Canadian Oil Sands and Shaw Communications.
The fund is now 42-per-cent invested in public companies, 46-per-cent in private firms and the rest in cash. "We are not making any new venture investments," she said.