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Institutional investors will focus on global and emerging equities and bonds over the next three years as they recover from the current financial downturn, according to a recent report from Scottish specialist investment management firm Martin Currie. The same report finds that hedge funds, infrastructure and real estate are secondary options. At the bottom of investors’ list was distressed debt and liability-driven investments.

Chief executive of the Centre for Research in Employment and Technology in Europe (CREATE), Amin Rajan said that the message to take from the report is the desire to get back to basics.

More than half of the respondents (54%) said they wanted a value-for-money fee structure that aligns managers The surveyed investors also stressed the need in asset managers to make to land mandates in the future.

The survey also found that investors want a more strategic relationship with their managers with investment firms demonstrating a more long-term understanding of investors’ needs. Thirty-five percent of respondents said their managers’ ability to articulate clients’ needs, regular professional rapport and the ability to deliver appropriate solutions was important to them.

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Canada’s venture capital in crisis

A report released by Canada’s Venture Capital and Private Equity Association has found that activity in Canada’s venture capital market continued to fall in the first quarter of 2009. This trend is consistent with the slowdown that appeared throughout 2008. Across the country, a total of $275 million was invested, down 25% from the $367 million invested during the same period one year ago.

According to Gregory Smith, President of the CVCA, “Venture capital is the lifeblood of Canada’s industries of tomorrow and the shortage of venture capital will have a profound impact on our ability to take a leadership role in those industries ranging from information technologies to cleantech upon which a prosperous future depends.

The number of domestic firms securing venture funding also decreased. Between January and March, companies financed totaled 102, which is also one-quarter fewer than the 136 companies financed the year before.

The 2009 trends also showed a sustained emphasis of smaller venture capital deal sizes. The average amount invested per firm was $2.7 million, or the same average recorded for Q1 2008.

“We are at a crisis point in Canada’s venture industry. The data conclusively demonstrates that there is a venture capital financing ‘gap’ in Canada and this means Canada’s ability to drive innovation will weaken and we will see the overall economy suffer,” Smith said.

In response, the CVCA has proposed a commercialization support program to help address the venture industry trends and to increase the availability of venture capital for high-growth small businesses.

This program calls for the federal and provincial governments to establish and grow fund of funds structures, make improvements to the SR&ED tax credit program, improve the incentives for corporations to invest in venture capital funds, and actively promote investment in Canadian venture capital funds as part of the offset agreements that are negotiated with major government contractors.

To succeed, Smith said, “We need to work with governments to ensure all potential sources of venture capital dollars are available for Canadian companies, from institutional investors to retail and angle investors, from domestic investors to foreign investors.”

(05/12/09)