One of the enterprises OMERS has backed in its growth on the TSE from small-cap to blue chip is Linamar Machine, an auto parts manufacturer.

Naturally, OMERS and other pension funds utilize a multi-faceted strategy for investing in small-caps to make the most of continuous direct and indirect intermediation by various investors/agents and cyclical trade-offs in stock performance. For OMERS, additional reasons for operating in-house include cost- effectiveness, more capacity for active corporate governance, where necessary, and an improved network for acquiring intelligence concerning broad security price and trading developments in exchanges.^{Endnote 97}

The in-house money management institution BIMCOR also conducts a pool for dedicated small-cap stock- picking on behalf of the Bell Canada or BCE group of pension plans. In this case, however, the approximately $200 million allocated to this pool constitutes the full extent of BIMCOR's investment in this sub-class of public equity (or approximately 2 percent of total pension assets). This represents a highly focussed effort to obtaining optimal risk-adjusted returns from small-caps in the long-term, making the best possible use of expertise of personnel situated inside. Like OMERS, BIMCOR relies on the enhanced value-adding potential yielded internally by exercising close management, direct control and maintaining lower comparative cost structures.

The dedicated pool of BIMCOR got underway in the late 1980s, assuming a value strategy and related investment techniques that, like OMERS, also account for growth-related movements in stock prices. Micro/small caps are also targeted, to an upper limit of around $500 million, and found predominantly among listings on the TSE and ME. Because of the emphasis given to picking undervalued stocks wherever they may be discovered, small-cap investee firms in the portfolios of both BIMCOR and OMERS reflect quite broad diversification by industry.^{Endnote 98}

(2) Indirect pension participation

Use of external specialty small-cap managers on Canadian public securities exchanges has risen in the past few years, commensurate with intensified pension demand. Unfortunately, there is probably insufficient current supply of growth and value investors with a supplementary expertise in small-cap stocks in Canada to accommodate this demand, evidenced in the recent closing for business of several externally-managed pools. Van Berkom and Associates (Montreal, Quebec), for instance, was forced to turn away around $500 million in pension money in 1997.^{Endnote 99}

At $1.2 billion in 1998, Van Berkom's is one of Canada's largest independent pools specializing in small-cap stocks. Since 1984, this pool has operated with a growth investment mandate, concentrating on listed firms at an early stage of expansion through season offerings on Canadian exchanges and with revenues that range from $50-750 million. Van Berkom maintains a continuous monitor of low-capitalization stock issues beginning at a minimum of about $50 million, half of which comprise the portfolio at any one time. Small-cap investee firms come from various traditional or non-traditional industries, though many have been located in emerging, technology-intensive sectors, such as Gennum Corporation (an electronics and semiconductor firm) and JDS Fitel (a fibre-optics firm). Indeed, several firms in the Van Berkom portfolio can be identified as former venture-backed SMEs.

As a specialty investor in high-growth small-caps, Van Berkom aims to find business listed on the TSE or ME that is clearly positioned to benefit from prevailing economic trends. Approximately 80 percent of data collection and analysis are conducted internally. Van Berkom also performs the due diligence on prospective portfolio candidates among small-cap enterprises, based on forecasted earnings and other information relevant to determining rates of expansion. On occasion, external advice is solicited from experts on such matters as industry-specific developments (e.g., emerging high technology firms). Once Van Berkom invests, regular contact is maintained with business owners, managers and other informants (e.g., customers, and suppliers), for the purposes of performance monitoring.

The Van Berkom pool is predominantly pension-supplied. Participants include the public sector plans associated with Alberta Treasury's IMD and British Columbia's OCIO, as well as those of Avenor, Université Laval, McGill University, Ontario Hydro and Via Rail Canada. Pension funds contribute to the pool for periods of up to five years.^{Endnote 100}