Posts

Showing posts from September, 2007

Still looking for an alternative for LSIFs

Continuing on LSIFs ...

Some background: LSIFs operate like VC funds except that they raise money from individuals (or "retail investors") instead of institutions. They have been a popular option for Ontarians at RRSP time, since -- in addition to the usual benefits of putting money into an RRSP -- LSIFs have also offered a 15% federal tax credit and a 15% provincial tax credit. They began in Quebec and federal tax credits were introduced in 1987. Four years later, Ontario tax credits were added under Bob Rae's government.

The funds ended up coming under attack from the left and the right, from sources as diverse as Buzz Hargrove and the C.D. Howe Institute. Within the investment community, the most common complaints were that LSIFs delivered poor returns while spending a high percentage of the invested funds on management fees.

Dalton McGuinty's government declared a moratorium on LSIFs in 2004, saying it would review the program to see if LSIFs were still "an app…

LSIF critic spins tales for Fraser, Howe instututes

The Fraser Institute just published a report on labour-sposored investment funds (LSIFs) that is almost identical to a report published earlier this year by the C.D. Howe Institute. And with good reason: both papers have the same lead author -- Douglas Cumming.

Cumming doesn't think much of LSIFs and thinks governments in Canada at provincial and federal levels should discontinue the tax credits provided to LSIF investors. Ontario has already announced that it is phasing out the LSIF tax credit.

There are legitimate criticisms that can be made of LSIFs, but for years Cumming has been augmenting these bona fide critiques with ideologically-driven spin on what is often dubious data to begin with.

Reports from Howe and Fraser are usually so driven by ideology that you rarely have to read past the title to know what they're going to say. That's particularly true for these reports, since Cumming has been distributing different versions of the same report for the last seven years.…

How much funding for Canadian startups?

How much money have investors poured into Canadian startup companies so far in 2007? You may think you've read that number recently, but you haven't. The actual answer is "nobody knows." Of course, no one likes that response, so they go count the things they can count and then pretend they know the answer. It's like the old joke about the guy looking for his car keys under the street light -- "this isn't where I lost them, but the light's so much better here."

Whenever you read about the aggregate level of venture capital investment, the main source of that information is news releases and other voluntary disclosures, either from the company receiving the funds or their investors. There are also securities commission filings for some investments -- some funds have to put their financial information on SEDAR and, in Ontario, many deals will will be listed in the OSC Bulletin. But most investors are not required to make any public disclosure. They …