If Grant Kook has his way, there will be two labour-sponsored investment funds vying for the wallets of Manitoba investors this RRSP season.

The CEO and chairman of Regina-based Golden Oppor-tunities Fund Inc. says his team is working “really hard” to jump through the regulatory hoops currently in front of them. He hopes to be through the final hoop by the beginning of October, clearing the way for the LSIF to enter the Manitoba market.

“We see tremendous opportunity with companies in Manitoba in biotech, life sciences, aerospace, IT and manufacturing,” he says. “There has been a shortage of venture capital in Manitoba [for several years] and we see tremendous opportunities in going there to fill the void for capital that those companies need to grow.”

Golden Opportunities is a $130-million LSIF that raised $25 million in new money during the 2008 RRSP season. Over its 10-year run, it has made investments in more than 100 companies. Today, it has holdings in more than 40 firms across 11 industry sectors in Saskatchewan.

Assuming Golden Opportunities gets regulatory approval, it will join what could be described as a new/old LSIF in Manitoba. Earlier this year, ENSIS Growth Fund, managed by Winnipeg-based ENSIS Management Inc., was merged with GrowthWorks Canadian Fund, which is sponsored by Vancouver-based GrowthWorks Capital Ltd. Previously operating in Ontario and Saskatchewan, GrowthWorks Canadian Fund will be available to Manitobans this year.

Kook believes it’s a natural extension for Golden Opportunities to move eastward.

“Manitoba is a neighbour province, there are similarities in many of the sectors and there’s the same work ethic,” he says. “There’s a lot of common ground.”

But Kook realizes expanding successfully won’t be easy, especially considering the lingering hangover of the Crocus Investment Fund debacle, the weak market overall for LSIFs and the ongoing crisis in global equity markets.

Crocus, once the darling of the venture-capital scene in Manitoba, ceased trading in December 2004 amid serious concerns about the valuations of companies in its portfolio. It was subsequently placed into receivership and never returned to the market. Deloitte & Touche LLP, Crocus’s court-appointed receiver, has been systematically selling off the fund’s assets ever since. Crocus unitholders are hopeful they’ll finally receive about $6 a share from the beleaguered fund sometime this fall. The value of Crocus shares peaked at $15.39 in 2000.

“We’re certainly going to speak about our track record and our investment philosophy,” Kook says. “There will certainly be questions about the fundamentals [of Golden Opportunities’ balance sheet], and we’re going to be happy to answer them. We’re under no illusions. We’ll have to come in and show our good governance and prudence. We believe that the market is worth the effort in Manitoba.”

Dan Hallett, president of Windsor, Ont.-based Dan Hallett & Associates Inc., says Golden Opportunities has been one of the better performers in a tepid sector. “Relative to that class during that time period, [Golden Opportunities’ performance] is relatively good for what has been a pretty awful class of funds,” he says. Golden Opportunities has returned 0.6% a year for the past three years to Aug. 31, and 4% annually since March 1999.

Hallett says the LSIF market has been in decline for the past five years or so, mostly because performance has been “bad.”

Further hampering matters are Ontario’s plans to eliminate its tax credit for consumers investing in LSIFs in the 2012 tax year and thereafter. Says Hallett: “That puts a big dent in the numbers across the country.”

The challenge is to rebuild a market in Manitoba that was virtually non-existent last year. ENSIS’s net sales were essentially zero in the 2008 RRSP season, a year after having net redemptions of $1 million. It was just eight years ago that ENSIS and Crocus combined to bring in more than $51 million.

Scott Stewart, an investment executive in ScotiaMcLeod Inc. ’s Winnipeg branch, thinks LSIFs will be in for a rough ride this year, particularly with the current turmoil in traditional markets and long memories of Crocus: “I’m willing to bet the appetite for risk has greatly diminished. I believe [Golden Opportunities] will have a hard time attracting capital.”

However, Stewart adds, the tax credits associated with LSIFs will be too attractive for a certain segment of investors to pass up.

@page_break@In general, investors in LSIFs benefit from a 15% provincial tax credit and a 15% federal tax credit on investments of up to $5,000. IE