TORONTO, ONTARIO: FEBRUARY 09, 2012 - Bay Street in Toronto, Ontario is seen here Thursday Feb. 9, 2012. (Tim Fraser for The Globe and Mail) (For ROB story by n/a)Tim Fraser/The Globe and Mail
Lawrence Enterprise Fund Inc., the investment fund started years ago by prominent Bay St. personality Jack Lawrence, has suspended redemptions.
The fund's board of directors said in a release that the slow economy fostered a "lack of a market for many of the venture investments in the fund." The company pointed to the sleepy initial public offering climate, as well as the lack of mergers and acquisitions as the cornerstone of its problem.
Lawrence Enterprises said Tuesday evening that too many redemptions could force the company to sell some of the fund' s remaining assets at deep discounts that would further erode the value of the portfolio. No timeline was given on the duration of the halt.
But it's not the only fund having trouble in this tough climate. The asset-weighted Scotiabank Canadian Hedge Fund Index fell about 5 per cent through 2012 despite the S&P/TSX composite index's gains. Falling prices for commodities, which make up some of the fund's investments, were a real sore spot for money managers in Canada in 2012.
Lawrence Enterprises is also at the disadvantage of being a labour-sponsored investment funds at a time Ontario's provincial tax credits for these funds have been phased out. According to a company circular, the fund is no longer fundraising annually.
Redemptions were first halted in Lawrence Enterprises back in 2008. The fund, which used to be called Lawrence Partners, was originally controlled by Lawrence Asset Management – a subsidiary of an investment firm started by Jack Lawrence in 1996.
Mr. Lawrence took the fund public eight years ago, and at first, investors saw great returns for a couple of years. But the fund ran into problems in the financial crisis, when in September 2008 the fund took a huge loss of over 80 per cent – a loss from which it has never recovered. A redemption halt was issued and the fund restructured.
Mr. Lawrence died in a 2009 plane crash.
Management of the Lawrence Partners has changed a few times since then, and in mid-December Cambridge Asset Management Inc. took it on. Larry Guy, chief executive officer of Cambridge said, "the suspension is intended to prevent any near and mid-term liquidity challenges, help achieve optimal exit values for portfolio companies once market conditions improve and ensure the proceeds generated from those exits are returned to all shareholders in a timely fashion."