The following are ten salient characteristics of labour-sponsored investment funds. Along with a description of each of these is some evidence of the relative success of the funds in addressing public and private requirements. Such evidence draws predominantly on the performance of the Fonds de solidarité given its comparatively long history and evolution.
The key to the exponential asset growth of labour-sponsored investment funds is no secret. Much has been made of the fact that funds benefit from generous indirect — or tax-delivered — and direct financial assistance from government. This has been a cause of considerable criticism of the funds and government in an era of fiscal restraint and deficit/debt reduction. This remains an issue which legislators may be addressing. As was earlier indicated, comment on the size of the tax preference is not an objective of this paper.
It is useful to recollect the stated reasons why governments in Canada elected to support labour-sponsored funds at the outset. Of course, motivations differ among jurisdictions, but as was mentioned earlier, diverse political administrations identified public utility in the concept. The funds have been seen, for example, as a means of strengthening the national venture capital market and provincial/regional sub-markets. They are expected to address alleged gaps in financing for the small business sector and others on the demand side. In all cases, it was hoped they would produce tangible economic rewards, such as jobs. And in most cases, funds were supposed to facilitate a new role for unions and workers in the economy.
These are just a few reasons — others will be referred to in succeeding sections. What is material in this discussion is that while decisions are made at arms-length from government, labour-sponsored funds must, by definition, always remain relevant and accountable to public policy concerns. To ensure responsiveness, Canadian governments have crafted detailed regulations, standards, milestones and restrictions about investment and related matters in legislative frameworks. It is imperative that funds act within these frameworks. Indeed, it is arguable that, so far as government tax expenditure programs go, labour-sponsored funds function under fairly explicit and enforceable guidelines.