While such support to informed and more fluid supply-and-demand networking and matchmaking may not be as pervasive in Canadian markets, it does exist here. One example is Orenda Corporate Finance, an advisor to medium-sized and larger enterprises seeking private debt and equity placements. To this end, it gathers packages and distributes critical business data to potential investors and, in some instances, also assists clients in deal-making. Orenda has also introduced a few start-ups and early stage developments to venture backing, as it did in the case of Clearnet Communications (the cellular telecommunications firm) and OMERS in 1993.Endnote 158 Sharwood and Company is another key advisor-agent that has been similarly active in facilitating middle market expansions, management buyouts, mergers and acquisitions as well as matches requiring venture capital, both angel and institutional.Endnote 159
Recently, concerns have been raised about issues of government taxation and tax policy as inadvertent obstructions to pension investment diversification. For instance, senior Canadian pension managers have pointed to the tax definition of limited partnerships that views such partnerships as foreign property unless otherwise specified. Ensuing disincentives may also exist for potential non-resident suppliers. It is argued that the combination of these and other tax strictures undermine a key mechanism for pooling and investing pension assets in assorted private capital markets. Other tax-related concerns include how best to establish practical incentives for pension participation, including debate over the federal three-for-one rule's impact in the 1980s (see Pension Funds and Venture Investing), and possible lifting of the federal ceiling imposed on pension disbursements abroad (20 percent of total assets).Endnote 160
A total of 33 percent of PIAC respondents rated this barrier as important (24 percent) or very important (9 percent).
Very few PIAC respondents commented on this barrier or provided illustrations of what they felt were the negative implications of certain public policies, and especially tax policy, for the role of pension funds in private investment activity. Some argued that government was irrelevant in this area. There was also little feedback on the specific example provided in the tax treatment of limited partnerships. This does not by any means diminish the significance of this topic in a discussion of barriers, but instead probably suggests its fairly technical nature. As well, it is likely that only a few pension managers are contending directly with related questions at present.
Senior managing fiduciaries are currently calling for an overhaul of federal tax specifications governing limited partnership arrangements relevant to both the middle and venture capital markets. In fact, PIAC has recently suggested changes to the federal Department of Finance.Endnote 161
PIAC has also urged removal of the 20 percent foreign content limit, alleging that it has cost billions of dollars in lost revenues to pension funds at a time when economic globalization prescribes the necessity of investment freedom. Keith Ambachtsheer has stated his belief that if the ceiling was lifted, Canadian institutional investment overseas would probably settle naturally at a level around 30 percent.Endnote 162 Gradual removal of the ceiling was recommended in 1998 by the Standing Senate Committee on Banking, Trade and Commerce.Endnote 163 Some other observers oppose the ceiling's elimination, arguing that domestic priorities (e.g., SMEw financing, community economic development) would suffer. In this camp, some have proposed eventual introduction of additional freedoms, so long as these are matched with additional requirements for productive investment at home.