Many fund shareholders are also participating in capital markets for the first time. For instance, approximately, 45 percent of all shareholders said that their investment in the Fonds de solidarité was also their first use of an RRSP (this was true for around 50 percent of FTQ-affiliated shareholders).Endnote 54 It should be emphasized here that labour-sponsored funds tend to encourage subscription only as a supplement to a person's formal pension and retirement savings arrangements. In other words, they do not - as a matter of policy - recommend shareholding as a main source of post-retirement income.
CLMPC research notes that there are important economic by-products of encouraging fund participation among non-traditional individual investors. As was discussed earlier, one is the unprecedented flow of personal savings - and especially, retirement savings - towards the national venture capital market. Another benefit is enhancement of the Canadian savings rate which has experienced decline as compared with other industrialized countries in recent years. This happens insofar as individuals begin saving, or top-up their savings, through fund shareholding, as illustrated by the Fonds de solidarité.
Labour-sponsored investment funds strive to ensure market returns on overall liquid and illiquid portfolio holdings which are important to common shareholders - and institutional shareholders, where they exist. Some fund directors and officers describe capital appreciation as the overriding aim that helps realize other economic and social ends. Certainly, other aspects of fund mandates cannot be attained in its absence.
CLMPC research concludes that the rates of returns of labour-sponsored funds must be considered in the context of venture capital investing which is long-term in nature, high risk, and as liable to fail as to succeed. As such, investments do not yield the high short-term profits that may be desirable elsewhere in the world of finance. Like other venture capital institutions, the funds tend to back projects which provide returns commensurate with assumed costs and risks (though these are also offset by government financial incentives). Earnings do not normally come in the form of dividends or interest, but through strong equity appreciation over time and capital gains once shares are disposed. These returns are passed on to individual shareholders.
The necessity of good returns has led labour-sponsored funds to recruit and hire venture and finance professionals with proven knowledge and expertise to manage assets and portfolios and to recommend diverse transactions according to market precepts. To ensure the continuing viability of deals, such professionals must also be equipped with mentoring skills of value to developing investee firms. An Ontario investment counselling agency recently gave a favourable rating to the quality of management teams in some funds, including the Integrated Growth Fund, the Vengrowth Investment Fund and Working Ventures.Endnote 55