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Labour-sponsored venture capital corporation
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 idea behind LSVCCs was first proposed in the Canadian province of Quebec in 1982. The province was in the midst of a recession and the lack of capital in small and mid-sized companies had caused numerous bankruptcies.
In response, the Quebec Federation of Labour proposed a Solidarity Fund at a provincial economic summit conference in 1982 to help the province create a locally controlled healthy and sustainable economy. The intention was to attract venture capital to smaller Quebec firms.
This new type of fund slowly began to spread across the rest of Canada during the 1980s. But it wasn't until the late 1990s that LSVCCs became truly noteworthy outside Quebec, thanks in equal part to generous tax breaks from federal and provincial governments and attractive returns to investors. So far in the 2000s, returns have been less impressive, due in part to the bursting of the technology bubble. Returns for LSVCCs have generally been stagnant. Speculation about the reasons for low returns point to risky ventures, inexperienced fund managers, lack of requirement to generate positive returns to be competitive, and government intervention.
Labour-sponsored venture capital corporations, as the name suggests, must be "sponsored" by a labour union. This sponsor is able to appoint members to the fund's board of directors (but not the investee's board of directors).
LSVCC funds invest primarily in small and medium-sized private companies who require funding to sustain and increase growth. The emergence of the LSVCC industry stems from the idea that the growth of these firms will stimulate the Canadian economy and create jobs.
The money investors put into these firms is a form of venture capital. These firms are just starting out and generally aren't listed on a stock exchange such as the Toronto Stock Exchange. LSVCCs offer an asset class that is normally not accessible through conventional investment vehicles. These companies have potential for substantial growth and high returns down the line if they succeed and are generally chosen precisely for that growth potential.
In an LSVCC, as in any mutual fund, investors' money is distributed among a number of businesses. However, because the companies invested in by LSVCCs may be new and are likely small, many don't have much of a track record and can be risky investments by themselves. Ideally, an LSVCC can reduce that risk by diversifying their portfolio of assets.
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Labour-sponsored venture capital corporation
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 idea behind LSVCCs was first proposed in the Canadian province of Quebec in 1982. The province was in the midst of a recession and the lack of capital in small and mid-sized companies had caused numerous bankruptcies.
In response, the Quebec Federation of Labour proposed a Solidarity Fund at a provincial economic summit conference in 1982 to help the province create a locally controlled healthy and sustainable economy. The intention was to attract venture capital to smaller Quebec firms.
This new type of fund slowly began to spread across the rest of Canada during the 1980s. But it wasn't until the late 1990s that LSVCCs became truly noteworthy outside Quebec, thanks in equal part to generous tax breaks from federal and provincial governments and attractive returns to investors. So far in the 2000s, returns have been less impressive, due in part to the bursting of the technology bubble. Returns for LSVCCs have generally been stagnant. Speculation about the reasons for low returns point to risky ventures, inexperienced fund managers, lack of requirement to generate positive returns to be competitive, and government intervention.
Labour-sponsored venture capital corporations, as the name suggests, must be "sponsored" by a labour union. This sponsor is able to appoint members to the fund's board of directors (but not the investee's board of directors).
LSVCC funds invest primarily in small and medium-sized private companies who require funding to sustain and increase growth. The emergence of the LSVCC industry stems from the idea that the growth of these firms will stimulate the Canadian economy and create jobs.
The money investors put into these firms is a form of venture capital. These firms are just starting out and generally aren't listed on a stock exchange such as the Toronto Stock Exchange. LSVCCs offer an asset class that is normally not accessible through conventional investment vehicles. These companies have potential for substantial growth and high returns down the line if they succeed and are generally chosen precisely for that growth potential.
In an LSVCC, as in any mutual fund, investors' money is distributed among a number of businesses. However, because the companies invested in by LSVCCs may be new and are likely small, many don't have much of a track record and can be risky investments by themselves. Ideally, an LSVCC can reduce that risk by diversifying their portfolio of assets.