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Number Cruncher

For a few funds, it truly was a lost decade Add to ...

What are we looking for?

Dogs of the past decade.

It pays to do a reality check of fund performance because not every fund manages to produce profits for investors over the long haul. Many struggling funds will close or merge before reaching their 10th anniversary.

The screen

We looked at the biggest losers for the 10 years ended Aug. 31. U.S. dollar, segregated, and duplicate versions of funds were excluded.

What did we find?

Several venture-capital funds spilling red ink.

VenGrowth II Investment, had an annual average loss of 13.9 per cent over 10 years, while VenGrowth Investment shed 8.8 per cent a year, and New Generation Biotech Equity, 10.2 per cent.

But this trio, more commonly known as labour-sponsored funds, has now bitten the dust. They, along with VenGrowth III Investment, VenGrowth Traditional Industries and VenGrowth Advanced Life Sciences, all merged this month into Covington Fund II, which is run by Covington Capital Corp.

Labour funds have had a tough time raising money after the Ontario government reduced, then eliminated its tax credit for these investments. Federal credits are still available for these funds, which require an eight-year hold to compensate for the risk in investing in early-stage private companies.

VenGrowth Asset Management Inc. tried to sell its funds to Covington last fall, but faced a proxy fight from rival GrowthWorks Ltd. VenGrowth shareholders last month voted for a deal offered by Covington Capital, which acquired New Generation Biotech Equity several years ago.

Covington Fund II now has $350-million in assets versus $50-million before the merger. That means that investors in some VenGrowth funds, where redemptions had been halted, will be able to redeem more of their cash over the next several years as monies are raised from selling investments or companies going public, said Scott Clark, managing partner with Covington Capital.

Other big money-losers include Manulife Global Advantage, which shed 10.5 per cent annually, and Manulife American Advantage, which has lost 6.8 per cent. These financial services funds, once run by AIC Ltd. before being sold to Manulife Financial Corp., were hit hard during the 2008 credit crisis.

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