FUNDS REPORTER
Investors are out of luck if they expect to get their money back soon from the VenGrowth Advanced Life Sciences retail venture capital fund.
VenGrowth Asset Management Inc. yesterday halted weekly redemptions yesterday in its $197-million fund because it has been unable to sell its investments to a strategic buyer or exit through an initial public offering (IPO).
It means that investors who stashed money in this fund to get tax credits - when it was launched eight years ago before the registered retirement savings plan (RRSP) season - have to wait until investments can be sold. (Eight years is the holding period to get the tax credits.) Investors will now gradually get money back in the form of an annual distribution.
"The issue is that market volatility has basically just shut down the exit market for private companies," David Ferguson, managing general partner at VenGrowth, said in an interview. "There hasn't been a Canadian life sciences company that has gone public since October, 2007."
VenGrowth Life Sciences Fund has posted an average annual loss of 3.5 per cent in the five years ended Oct. 31, and an average annual loss of 3.3 per cent since inception.
The Toronto-based private equity firm is taking the same route it took last December when it stopped redemptions in its VenGrowth I and VenGrowth II funds.
Retail venture capital, commonly known as labour-sponsored investment funds, have had a tough time raising money because Ontario plans to phase out the tax credits.