Canadian Venture Stats Top Dow Jones

Let’s see how big the waves from this news will be (or not).

For years now, audiences at venture capital conferences have sat there while Limited Partner panelists have advised that Canadian venture capital returns “suck”. There was a time when I bothered to engage on this, pointing out in the Q+A periods that on a relative basis, that wasn’t actually true. And you’ve read here about the facts of venture’s outperformance over many investment horizons (see prior post “VC returns trump all” June 2-09). And even if the point was accepted, investors would always say the results were for U.S. Venture Capital firms, and that their Canadian brethren performed much worse.

Well, those days are over should Thomson Financial’s new figures get any traction. According to Thomson, the 5 year gross performance results for 64 Canadian Captive / Evergreen and Retail funds were positive, and according to MyYahoo!, exceeded the Dow Jones:

Canadian Captive / Evergreen and Retail funds: 3yr (-0.1), 5yr (+1.5)

Dow Jones 30: 3yr (-27.4%), 5yr (-1.02%)

The S+P 500 performed even worse than the Dow. Even with a losing three year figure, the Pooled Average for VC (Cumulative-since-inception Net Returns) was +2.2% while the top quartile earned 5.4%. The CVCA hasn’t yet released the current figures for the Private Independent funds, but since retail venture capital was so maligned — and they’d make up the lion’s share of the 64 funds that contributed data to this exercise — the argument should only get stronger.

The next time someone that a podium and pronounces how bad Canadian VC returns have been, and Labour Funds in particular, remind them that the public markets have generated far worse figures, and no one is trying to euthanize the mutual fund industry.

MRM