 | This article needs additional citations for verification .(May 2015) |
The Crocus Investment Fund was a Manitoba-based Canadian Labour Sponsored Venture Capital Corporation. In its first four years after incorporation, the fund raised $50 million. In 2005, it was placed in receivership following investigations by Manitoba Securities Commission and the Manitoba's Auditor General.
Labour sponsored funds offered federal and provincial tax credits to investors and were mandated to invest the majority of their investment assets in small and medium-sized businesses in the province in which they were created. [1] The Crocus Investment Fund was modeled after the Quebec Solidarity Fund and created by an act of the Manitoba Legislature in 1991. [2] The original legislation required 60% of fund assets to be invested in qualified Manitoba businesses and 15% to be invested in qualified reserves. [3] [ better source needed ] The Crocus Fund had a special mandate to promote employee ownership and employee participation in corporate governance and management. [4]
In the early years, investors received tax credits of 20% from the federal government and 20% from the provincial government. In its first four years, the Crocus Fund raised $50 million and made investments in nine Manitoba businesses. [5] To facilitate worker ownership, the Crocus Fund developed a mechanism for facilitating worker buyouts. Under this mechanism, shares were purchased by the fund and sold to a worker trust in exchange for a security interest in the company. This vehicle was derived from American ESOPs. In September 1995, Buhler Industries became the first Canadian enterprise to receive a capital infusion using this mechanism. [6]
One of the fund's early successes was a $4.6 million investment in the Angus Reid Group. [7] In March 2000, Angus Reid, Canada's largest polling firm, was sold to IPSOS, a Paris-based market research company for $100 million. Reid had been privately owned by its employees and other investors, including the Crocus Fund. [8] Prior to the IPSOS acquisition, employees held 31% of the company and the Crocus Fund held 21%. [9]
By 2001, the Crocus Fund had more than $200 million in investment assets from 30,000 investors and had invested $137 million in 60 companies, resulting in the creation of 9,644 jobs. [10] As well, in a first for employee ownership in North America, the Crocus Fund led the development of a University-based management training program for employee owned companies. [10] By 2002, more than 3,500 of the 11,000 jobs created, maintained or saved in the Crocus Fund investee companies were held by employee owners. [11]
One of the challenges the Crocus Fund faced as it matured were the amendments to the investment pacing requirements imposed by the Government of Manitoba. The province of Ontario created investment pacing requirements which required labour sponsored investment funds to invest 70% of money raised in any year in eligible Ontario businesses within 22 months. The Government of Manitoba passed similar legislation. [12]
The Ontario legislation recognized that the asset base for investment needed to be net of any funds redeemed by shareholders and needed to exclude investment losses from the base calculation. The Manitoba legislation recognized neither, effectively requiring the fund to invest money it did not have. This created a problem in that when redemptions started, the pacing requirements would ultimately have put the fund into a financial bind. [13] The Crocus Fund had lobbied the Government of Manitoba from the late 1990s to make the necessary changes to the legislation. The proposed changes were consistent with the rules for labour sponsored funds in other provinces. [13]
Investigative reporter Dan Lett further noted that just weeks before the fund voluntarily ceased trading, the government was going to change the legislation to soften the pacing requirements. "What is significant about this is that in the wake of the Crocus collapse, Premier Doer and [Finance Minister] Selinger have always proudly proclaimed they never changed the legislation. They just failed to mention they would have, had the fund not imploded". [13]
Investors in the fund received significant federal and provincial tax credits. In exchange for those tax credits, they could not redeem their shares for a fixed period of time. [13] As the fund matured, redemptions increased, which limited the amount of capital available to be invested. In the meantime, successful investee companies required additional investment capital to continue to grow. Unless another local source of capital could be found, these companies would either stop growing or would need to seek funding from outside the province of Manitoba, increasing the risk of non-local control. In response, the Crocus Fund began developing a new capital pool, called the "Superfund". Superfund was to be a pool of hundreds of millions of dollars in new capital formed by contributions from the province's largest public sector pension plans and Crown corporation investment funds. [14] By the fall of 2004, there were signs that it was going to become a reality. [14] A local investment council, a creation of the Premier's Economic Advisory Committee, wanted to create a new capital pool with contributions by the six big public pension plans and Crown corporation investment funds. Although it was not a slam dunk Crocus would manage this fund, the local investment council was, by the fall of 2004, drafting a plan to issue a request for purple for a third-party manager. [14] In order to make Superfund a reality, Crocus Fund chief executive Sherman Kreiner needed to bulk up the fund's management team. [14] Two senior managers were hired.
In September, 2004, the two new managers proposed a major write-down of the portfolio. This was immediately followed by a restructuring proposal for an independent management company that would oversee the investment portfolio, hire all existing staff (except the current CEO) and earn money from commissions based a share of the increase in value of the assets of the fund. The Fund's CEO was deeply opposed to the creation of an independent management company because it would essentially divert profits away from shareholders to a third party manager. [14] "I believed that a real or perceived conflict of interest would result from the creation of a management company," Kreiner said in an affidavit, "involving officers were also recommending a devaluation of shares weeks before the management company proposal." [14]
Disagreements among the senior managers regarding valuation of the portfolio resulted in a series of decisions by the board of directors which removed each of them from their management positions over a three-month period. A new CEO was hired in early December. His first act was to voluntarily cease trading in order to sort out the valuation issues. Investigations by the Manitoba Securities Commission and the Province's Auditor General were undertaken through the Spring of 2005. The Securities Commission indicated that it would not consider a new prospectus from Crocus if the same Board was involved. [14]
A new Board was recruited. The new board wrote a letter to the Provincial Industry Minister asking for the province's support for several important, deal-breaking issues. The two main issues were help in getting additional insurance for the board of directors and amending the Crocus Act to ease pacing and cash reserve requirements. The Province abstained, the directors resigned and the Fund was placed in receivership. [14]
At the end of its more than a year-long investigation of the Crocus Fund, the lead investigator for the Winnipeg Free Press, Dan Lett, concluded that "Crocus was too healthy to kill." [15] The fund's former CEO, Sherman Kreiner, subsequently sued the Provincial Auditor General to attempt to compel it to change its investigative practices. Kreiner alleged that the investigation was conducted in bad faith, that many of those named in the report were denied the opportunity to view it before it was released, that he and others were not interviewed until immediately prior to the report being released, suggesting the Auditor General came to its conclusions before interviewing all of the principals. [16]
The OAG claimed legislative immunity to legal action, but Kreiner won two court decisions upholding his right to sue. Kreiner spent $250,000 in his legal action and abandoned the suit when it became clear it would require an additional $250,000 to go to trial. However, prior to abandoning the lawsuit, Kreiner's lawyers submitted a list of changes they wanted to see in the Auditor General's investigative practices. These included fully informing subjects of the nature of the investigation, ensuring timely interviews and giving those named the opportunity to see and respond to findings before an investigation is closed and final report released. The Auditor General has made many of these changes in its investigative practices. [16]
In his assessment of the legal proceeding, Winnipeg Free Press investigative report Dan Lett concluded:
History will show that Kreiner’s lawsuit was abandoned, and his allegations against [Auditor General] Singleton remain unproven. History will also show that [then Auditor General] Bellringer made changes that would have, if the Crocus investigation was held today, resulted in a fairer, more accountable and more complete examination of the Crocus debacle. Some victories are unqualified. Some are merely moral victories. But in this case, a victory is a victory even if it comes too late for those initially named in the report. [16]
In 2005, Kreiner became Managing Director of the University of Winnipeg Community Renewal Corporation, the development arm of the University of Winnipeg.
Private equity (PE) is capital stock in a private company that does not offer stock to the general public. In the field of finance, private equity is offered instead to specialized investment funds and limited partnerships that take an active role in the management and structuring of the companies. In casual usage, "private equity" can refer to these investment firms rather than the companies that they invest in.
Venture capital (VC) is a form of private equity financing provided by firms or funds to startup, early-stage, and emerging companies, that have been deemed to have high growth potential or that have demonstrated high growth in terms of number of employees, annual revenue, scale of operations, etc. Venture capital firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake. Venture capitalists take on the risk of financing start-ups in the hopes that some of the companies they support will become successful. Because startups face high uncertainty, VC investments have high rates of failure. Start-ups are usually based on an innovative technology or business model and they are often from high technology industries, such as information technology (IT), clean technology or biotechnology.
Gary Albert Doer is a former Canadian politician and diplomat from Winnipeg, Manitoba, Canada. He served as Canada's ambassador to the United States from 19 October 2009, to 3 March 2016. Doer previously served as the 20th premier of Manitoba from 1999 to 2009, leading a New Democratic Party government.
Fidelity Investments, formerly known as Fidelity Management & Research (FMR), is an American multinational financial services corporation based in Boston, Massachusetts. Established in 1946, the company is one of the largest asset managers in the world, with $5.4 trillion in assets under management, and $14.1 trillion in assets under administration, as of June 2024, Fidelity Investments operates a brokerage firm, manages a large family of mutual funds, provides fund distribution and investment advice, retirement services, index funds, wealth management, securities execution and clearance, asset custody, and life insurance.
Stuart Murray is a former politician from Manitoba, Canada. He served as leader of the Progressive Conservative Party of Manitoba and leader of the opposition in the Manitoba legislature from 2000 to 2006. From 2006 until 2009, Murray was the President and Chief Executive Officer of the St. Boniface Hospital Research Foundation. He subsequently served as director and chief executive officer of the Canadian Museum for Human Rights from 2009 to 2014.
Jim Rondeau is a former politician in Manitoba, Canada. He served as a member of the Legislative Assembly of Manitoba from 1999 to 2016, and served as cabinet minister in the provincial governments of Gary Doer and Greg Selinger from 2003 to 2013. Rondeau is a member of the New Democratic Party. Rondeau did not seek re-election in the 2016 Manitoba election.
Drew Caldwell is a politician in Manitoba, Canada. He was a member of the Legislative Assembly of Manitoba for the constituency of Brandon East from 1999 until 2016, serving as a Cabinet Minister in the governments of Gary Doer and Greg Selinger. Caldwell is a member of the New Democratic Party.
John Loewen is a businessman and politician in Manitoba, Canada. He served in the Legislative Assembly of Manitoba from 1999 to 2005 as a member of the Progressive Conservative Party, and campaigned for the House of Commons of Canada in 2006 and 2008 as a Liberal. He is the nephew of Bill and Shirley Loewen, prominent entrepreneurs and philanthropists in Winnipeg.
Rebecca Catherine Barrett was an American-born Canadian politician. She served as a member of the Legislative Assembly of Manitoba from 1990 to 2003, and was a cabinet minister in the New Democratic Party (NDP) government of Gary Doer from 1999 to 2003.
An institutional investor is an entity that pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked companies, insurers, pension funds, sovereign wealth funds, charities, hedge funds, real estate investment trusts, investment advisors, endowments, and mutual funds. Operating companies which invest excess capital in these types of assets may also be included in the term. Activist institutional investors may also influence corporate governance by exercising voting rights in their investments. In 2019, the world's top 500 asset managers collectively managed $104.4 trillion in Assets under Management (AuM).
The Canada Life Assurance Company, commonly known as Canada Life (Canada-Vie), is an insurance and financial services company with its headquarters in Winnipeg, Manitoba. The current company is the result of the 2020 amalgamation of The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company, along with their holding companies. The company is a wholly owned subsidiary of Great-West Lifeco.
David Iftody was a Romanian Canadian politician. He served in the House of Commons of Canada from 1993 to 2000 as a member of the Liberal Party of Canada, representing the Manitoba riding of Provencher.
A labour-sponsored venture capital corporation(LSVCC), known alternately as labour-sponsored investment fund(LSIF) or simply retail venture capital (RVC), is a fund managed by investment professionals that invests in small to mid-sized Canadian companies. The Canadian federal government and some provincial governments offer tax credits to LSVCC investors to promote the growth of such companies.
The Utah Venture Capital Enhancement Act is a bill passed by the Utah State Legislature in 2003. The purpose of the bill was to increase the amount and diversity of capital funding available to high growth, early stage companies in the state of Utah in an effort to help them grow, prosper and grow up in Utah. Rather than invest directly in these companies, the program is structured to give incentive to high quality professional venture capital and private equity firms, both in and out of the state, to focus more of their investment efforts on Utah entrepreneurs. The Utah Venture Capital Enhancement Act managing director and team evaluates quality venture firms with the assistance of the program's professional investment advisor. Venture funds that receive Utah Venture Capital Enhancement Act investment dollars commit to work closely with Utah companies and entrepreneurs – with the goal of funding promising deals in the state. The Utah Venture Capital Enhancement Act does not require portfolio funds to open a Utah office or commit to invest specific dollar amounts in Utah companies. Rather, the Venture Capital Enhancement Act requires a commitment by funds' senior management to spend considerable time in Utah meeting with companies in the state.
Jon Singleton is a public servant in Manitoba, Canada. He is best known for his high-profile tenure as Auditor General of Manitoba from 1996 to 2006.
Peter Olfert is a Canadian labour leader in Manitoba, Canada. Olfert was president of the Manitoba Government and General Employees’ Union from 1986 to 2010. He has also served as a vice-president of the National Union of Public and General Employees.
Canad Corporation of Manitoba Ltd. is a Winnipeg-based hospitality company. It owns or operates ten hotels in Canada and one in the United States, with all but one of its properties operating under the Canad Inns Destination Centre branding.
The New Zealand Superannuation Fund is a sovereign wealth fund in New Zealand. New Zealand currently provides universal superannuation for people over 65 years of age and the purpose of the Fund is to partially pre-fund the future cost of the New Zealand Superannuation pension, which is expected to increase as a result of New Zealand's ageing population. The fund is a member of the International Forum of Sovereign Wealth Funds and is therefore signed up to the Santiago Principles on best practice in managing sovereign wealth funds.
Fund governance refers to a system of checks and balances and work performed by the governing body (board) of an investment fund to ensure that the fund is operated not only in accordance with law, but also in the best interests of the fund and its investors. The objective of fund governance is to uphold the regulatory principles commonly known as the four pillars of investor protection that are typically promulgated through the investment fund regulation applicable in the jurisdiction of the fund. These principles vary by jurisdiction and in the US, the 1940 Act generally ensure that: (i) The investment fund will be managed in accordance with the fund's investment objectives, (ii) The assets of the investment fund will be kept safe, (iii) When investors redeem they will get their pro rata share of the investment fund's assets, (iv) The investment fund will be managed for the benefit of the fund's shareholders and not its service providers.
Martin Taylor is a British investor and hedge fund manager. He has run several billion dollar funds, focusing on emerging markets. He is also a significant political donor to the Labour Party.