Labour-sponsored venture capital funds

[dakota]

Okay...I clicked on "Sell" just for the hell of it and got the symbol CIG 900 and found out I'm down 38% Wonderfull!!

PS I just read your post DanH and now I know why I only own that one mutual fund

[uhoh]

Okay...I clicked on "Sell" just for the hell of it and got the symbol CIG 900 and found out I'm down 38% Wonderfull!!

I got a statement in today's mail from Vengrowth (I think it was) and had to smile when looking at the summary - they took my initial purchase of 5000 and then subtracted my 1500 tax credit, thereby showing my loss as 78$ and not as 1578$ (let alone, not having had a gain in all these years).

This one comes due in 08.

[dakota]

I got a statement in today's mail from Vengrowth

You're lucky, I haven't had a statement for several years

[mikester]

Wow, this is taking me back. Thanks for the info Dan - Triax Growth fund was the original fund I invested in back in 1996 and 99 I thinks. I remember being drawn in by the professionalism of it all, the big tax credit, the fancy brochures...they also had some hotshot Altimira manager looking after it, or maybe it was their cage supervisor, I forget. It's now part of the Covington Venture Fund Inc. Sr I fund which is on quite a tear - PLUS 1.14% for that last three months. I haven't even bothered selling it because I own so little now. I also have some VenGrowth crap as well which I have to wait until next year to sell so I plan to sell it all at the same time.

Some other things I recall are that Triax had a huge cash position for the longest time (not long enough apparently) and then had a big rise around 1999,2000 with the tech bubble. I think it went up to around $25 or so (from $10 in 1996) which of course is when I bought some more. Pretty heady stuff.

[Jo Anne]

Triax Growth Fund

I don't think I've ever actually admitted this in this forum, but we bought $5k of that when it first came out. I mentally wrote it off quite a while ago, though it appears to still be worth $1,800 or so.

It's still sitting all by itself in an Altamira account; I should probably transfer it to Husband's main brokerage account.

[mikester]

Thank you Jo Anne for sharing that with us...it really does help to let it all out....

I'm hoping when I finally cash out (of LSIFs) that maybe I'll have a little closure ceremony where I can burn the final redemption receipts (and maybe dance naked around the fire?) and be done with the whole thing.

[andrew]

From Morningstar

Code: Select all

Category:     Retail Venture Capital
2001     2002     2003     2004     2005     2006
-2.7     -8.2     14.1     7.6     10.0     12.2

Code: Select all

Category:     Canadian Equity
2001     2002     2003     2004     2005     2006
-6.2     -13.1     21.2     12.1     20.2     13.7

This is before tax credits. I would go back further if I could.

It doesn't look so lopsided to me. If I had listened to reports like these then I never would have bought Japan, Emerging markets, Resources, or Gold when I did. Of course, they don't make fun of these any more. I haven't read the term 'submerging markets' in quite a few years now.

When people want to buy, they will find any rationale to do so, the same as when they want to sell.

That's why we are supposed to have plans and to stick to them.

[adrian2]

From Morningstar

Code: Select all

Category:     Retail Venture Capital
2001     2002     2003     2004     2005     2006
-2.7     -8.2     14.1     7.6     10.0     12.2

Code: Select all

Category:     Canadian Equity
2001     2002     2003     2004     2005     2006
-6.2     -13.1     21.2     12.1     20.2     13.7

This is before tax credits. I would go back further if I could.

It doesn't look so lopsided to me.

Are we comparing apples to apples?
Retail Venture Capital ~= Labour sponsored funds, or is it?

On my post upthread on Wed Feb 07, 2007 8:40 am, I gave you a link to a prospectus, from the horse's mouth, where they gave the returns, ending August 2006 as:

Annual compounded returns (ending Aug. 2006):

Code: Select all

          1 year  3 year  5 year  10 year
CMDF      -13.5%  -12.6%   -9.6%   -3.3%
LSIF avg.  -0.9%    0.2%   -4.0%    0.5%

These averages (last line above), and the annual returns you're stating, are too much apart for a few months in time.

[brucecohen]

From Morningstar

Code: Select all

Category:     Retail Venture Capital
2001     2002     2003     2004     2005     2006
-2.7     -8.2     14.1     7.6     10.0     12.2

Code: Select all

Category:     Canadian Equity
2001     2002     2003     2004     2005     2006
-6.2     -13.1     21.2     12.1     20.2     13.7

This is before tax credits. I would go back further if I could.

Did you get that from morningstar.ca or morningstar.com?

m-star.com covers funds sold in the US. I couldn't find an LSIF benchmark in either m-star.ca or PALTrak. "Retail venture fund" is not a conventional Cdn label.

The 12.2% you got for 2006 can't apply to the Canadian LSIF market. According to PALTrak, only 8 of 80 funds had returns above 12.2% and their total assets under mgmt came to $261.2 million. 3 of the 8 were different series of the same fund -- BESt Discoveries. Two more were series of Dynamic Venture Opportunities. And 2 were series of VentureLink Financial Services. The remaining 72 ranged from 12.0% down to -28.0%. 32 of the 80 funds were negative. Returns for the five largest funds ranged from 3.5% down to -10.7%. Only 2 of the to-five were positive: WOF Balanced I (3.5%) and GrowthWorks Canadian (2.9%). The largest -- Vengrowth II -- lost 2.4%.

I also checked the returns for 2003 and again found the 14.1% you got couldn't apply to the Canadian LSIF market. According to PALTrak, only 2 of 33 funds posted more than a 14.1% return that year -- two series of Front Street Growth Fund. Neither one was particularly large in assets under mgmt. The other 33 ranged from 13.4% to -18.9%. In fact, just over one-third were negative.

Also, as noted earlier because so many LSIFs have been merged, historical benchmark returns for Canadian LSIFs are meaningless unless they adjust for survivor bias.

[andrew]

From Morningstar.ca

http://www.morningstar.ca/globalhome/Qu ... fundid=426

See the comparison to Canadian Medical Discoveries. I'm not really interested in debating the finer merits of Morningstar's (Canadian) benchmark to someone else's. They thought it was valid. If you want to find a reason to slag these, then you will, so slag away.

Is it valid? I don't know, but I doubt that it would get any similar general level of support here if an external writer made the same claims via the same methodology for say US vs Canadian stocks, or any 2 other more accepted classes. There are many such comparisons that can be made such as where Japan would be a consistent 20 year loser, for example. Is one valid but not the other? Postings have suggested as much. I have to question the validity of this thinking and uneven conclusions.

[mikester]

Andrew for crying out loud - of all the things to try and defend - don't fall on the LSIFs sword, there is nothing good about that asset class...NOTHING!

Japan, Emerging Markets...they all have their good & bad periods, oh and those funds are not managed by crooks which might help a bit, LSIFs have only one period and it's bad. They sucked and they will eventually disappear and we'll never ever talk of them again.

[andrew]

Sure, now Japan and Emerging Markets have benefits to be seen. Do a search on Japan or Emerging/submerging markets or gold or Resources. These have all been reviled at points in time also.

[andrew]

Andrew for crying out loud - of all the things to try and defend - don't fall on the LSIFs sword, there is nothing good about that asset class...NOTHING!

Japan, Emerging Markets...they all have their good & bad periods, oh and those funds are not managed by crooks which might help a bit, LSIFs have only one period and it's bad. They sucked and they will eventually disappear and we'll never ever talk of them again.

This doesn't exactly seem like an argument based in calm, rational perspective. Studies don't generally support the merits of investing with emotions or biased hindsight.

Enough for me. No one's mind will be changed and I've at least tried to make a point.

[dakota]

Andrew wrote

Enough for me. No one's mind will be changed and I've at least tried to make a point.

dakota wrote

Okay...I clicked on "Sell" just for the hell of it and got the symbol CIG 900 and found out I'm down 38% Wonderfull!!

That is my point.

[adrian2]

Sure, now Japan and Emerging Markets have benefits to be seen. Do a search on Japan or Emerging/submerging markets or gold or Resources. These have all been reviled at points in time also.

My first objection to LSIF's is their astronomical MER's, which more than negate any tax credits.

My second objection is their link to unions, whose interests are pretty much opposed to shareholders.

My last objection is their persistent underperformance, measured against almost any benchmark.

[mikester]

This doesn't exactly seem like an argument based in calm, rational perspective. Studies don't generally support the merits of investing with emotions or biased hindsight.

You got that right!

You're right, emotions and mental baggage shouldn't play a part in investmenting. What I would consider is the number of positive posts in these parts re: LSIFs vs the negative ones. If you still think they are worth investing in then go for it. It might be a great investment.

[Dennis]

LSVF are a prime example of the folly of considering tax breaks as an only or even prime reason to buy a particular security.

[Dennis]

I don't ever remember advisors recommending LSVF as an important part of ANY portfolio, unlike bonds, small caps, gold, resources, and various foreign content. They were ALWAYS sold on the tax break (and the high commission). I've got until next November before I can dump my Vengrowth 2.

[uhoh]

from Morningstar.ca:

Covington I makes 75% payout in wind-up

Covington Fund I confirmed on Feb. 22 that it has completed the first distribution of return of capital to its shareholders in connection with the wind-up of the labour-sponsored venture capital fund. Made earlier in the month, the payout amounted to $5.50 per share.

The proceeds represent about 75% of the current market value of the fund, whose net asset value at the end of January was $7.37. The dissolution of the fund and the distribution of the remaining proceeds are to be completed by the end of this year. The payouts to shareholders are being made in the form of units of CI Money Market.

The process of winding up the money-losing fund follows the sale of substantially all of its venture holdings to Birch Hill Equity Partners Inc., a Toronto private equity firm. The Birch Hill deal and wind-up proposal received the approval of 96% of the votes cast at a shareholder meeting held on Nov. 9.

As of Jan. 31, Covington Fund I has lost an annualized 4.5% over three years and 8.6% over five years. Its 10-year compound annual loss is 4.4%.

On the plus side, as noted in the information circular concerning the wind-up, shareholders will not be required to repay any federal or provincial tax credits. Ordinarily, these credits are repayable if the holding period for labour fund shares is less than eight years.

...and then (for me) there were two - Talvest Medical and Vengrowth.

[uhoh]

There goes another - woke up to find Vengrowth gone - thank heavens!
I have one left - think it's up in Feb.

[uhoh]

well, that's a PITA - turns out the fund company just withdrew our money "by mistake" - hope it doesn't trigger taxes.

[brucecohen]

For those [s]suckers[/s] who don't share uhoh's disillusionment, the Ontario govt's economic statement today sweetened the LSIF [s]bribe[/s] inducement:

On September 30, 2005, following consultations with the LSIF industry, the government established a phase-out of the LSIF tax credit. The timetable of the phase-out allows investors who purchase LSIF shares to receive a provincial tax credit until the end of the 2010 tax year.

The government also introduced amendments to investment requirements and special wind-down rules to provide LSIFs greater flexibility in managing their portfolios.

The government proposes to extend the phase-out of the LSIF tax credit by one year by:
�� maintaining the 15 per cent tax credit rate until the end of the 2009 tax year
�� lowering the rate to 10 per cent for the 2010 tax year
�� lowering the rate to five per cent for the 2011 tax year
�� eliminating the credit for tax years after 2011.

The government also proposes to increase the maximum investment that qualifies for the provincial tax credit from $5,000 to $7,500.

The proposed changes will provide an estimated $38 million in additional financial assistance to the industry over three years. These measures are intended to assist LSIFs in the development of their investment strategies and in providing continuing support to the portfolio of companies in which they have invested.

[mikester]

I share uhoh's disillusionment in a big way!

Worst investment ever.

Mike

[uhoh]

all part of the learning curve

I had no clue about these or some of the other stuff our broker got us in to (I forget what else - thank goodness - got reamed out here and elsewhere for not understanding the various things - but I'm learning )

[bill2009]

LSVF are a prime example of the folly of considering tax breaks as an only or even prime reason to buy a particular security.

I guess so but I'm still not clear on how they've done so badly. I didn't expect much but I didn't expect steady losses. An accounting of all the great social/business good that's resulted would be nice. Then at least we'd get the kiss, even if it's after the other part.