Executive Summary

This research report was prepared to assist the CLMPC's Task Force on Access to Capital, which has examined issues pertaining to the financing of Canadian high value- added investment. CLMPC research into labour-sponsored investment funds reflects original, detailed study of these relatively new actors in Canada's financial system.

Selected facts and figures

• At the end of the 1980s, the funds accounted for less than 10 percent of venture capital under management. By 1994, labour-sponsored investment funds collectively managed 33.3 percent of all institutional venture capital. By late 1995, assets held by the funds, in aggregate, rose to over $2.0 billion. Furthermore, they are responsible for 15 percent of the total number of venture investments and 28 percent of the dollars invested in the market (1994);
• by the end of 1995, fund investment projects totalled 228 valued at almost $823 million. This reflects an increase in the number of those labour- sponsored funds actively investing since the year's beginning (from seven to eleven) as well as investment dollars commited (up by over $240 million);
• In 1995, the funds had attracted the savings of 378,600 individual Canadians - 51 percent of whom were organized workers affiliated with sponsoring union bodies;
• At the beginning of 1995, the two largest funds - the Fonds de solidarité des travailleurs du Québec with $1.3 billion in assets and Working Ventures with $500 million - were the first and second largest venture capital institutions in Canada respectively;
• Since the late 1980s, the funds have been a pre-eminent source of new venture capital - in 1994, 53% of $1 billion in new capital raised for the venture market was acquired by labour-sponsored funds;
• Total federal tax revenues foregone due to the tax credit are estimated at more than $140 million in 1995 (a more precise calculation would have to estimate the cost of fund-inspired deposits into RRSPs). Two cost-benefit analyses done in 1994-95 show that government recovers its expenditure on labour- sponsored funds within approximately three to four years;
• According to a 1994 Québec study, the Fonds de solidarité was directly responsible for creating or preserving over 15,000 jobs in 167 enterprises in 1993 and stimulating $1 billion in additional value-added. The employment universe of the portfolio of Working Ventures reached 5,600 in late 1995.