OMERS Plans to Establish $180 Million Venture Capital Fund

(October 4, 2011) — The Ontario Municipal Employees Retirement System (OMERS) is set to launch a $180-million venture capital fund, an out-of-character move by the more risk-averse Canadian scheme. 

John Ruffolo, the chief executive officer of OMERS Ventures, told the Globe and Mail that he predicts that the pension can outperform traditional venture capital and private equity players focused in Canada and selected US cities. “It’s far more effective if you’re involved in your own backyard,” Ruffolo told the Business News Network. Sectors of interest for venture capital will include technology, media, telecommunications, clean technology and life sciences, with a focus on North America, the Canadian scheme noted.

“We believe our program for investing in venture capital will result in a win-win scenario,” said Jacques Demers, President and CEO of OMERS Strategic Investments (OSI) in a statement outlining the launch of OMERS’ venture capital investment arm. “Strong, long-term investments in this asset class will help us continue to deliver on the pension promise for our members, while also encouraging the development of a vibrant and successful Canadian knowledge economy.”

According to a statement from the Canadian pension, Canada’s venture capital industry has suffered from a lack of resources and funding since the technology boom and bust over 10 years ago. “This means many promising companies are unable to reach the next level of success,” the statement asserted. “The right combination of capital, mentoring and guidance enables strong, young companies to become even more successful,” Ruffolo said. “With our experienced investment team, accomplished advisory board and pool of patient, long-term capital, OMERS Ventures is an ideal partner.”

Additionally, the fund has put together a board of advisers for the venture capital initiative that includes Jim Fletcher, the co-founder of Chrysalix Energy Venture Capital, billionaire entrepreneur Terry Matthews, the chairman of Mitel Networks Corp, and Canaccord Genuity Corp. chairman David Kassie.

Meanwhile, in the United States, venture capital performance has continued on a gradual upward trajectory as of the first quarter of 2011, according to a July study by Cambridge Associates. The firm found that as of March 31, the 10-year return was -0.1%, compared to a return of -2% as of Dec. 31 and -4.6% as of Sept. 30. The figures showed that the returns were fueled by the performance of venture capital investments over the past year, which had seen 18.5% returns as of March 31, compared to 13.5% as of Dec. 31 and 8.2% as of Sept. 30.

According to the consulting firm, the improvements were witnessed across all time horizons, with the exception of the 15-year numbers. “The quarter marks the second consecutive one in which there were double digit returns for the one-year horizon and modest improvements in the three-, five-, and ten-year performance numbers,” a release on the returns noted. Venture capital returns outperformed the public indices in the one-, five-, 15- and 20-year horizons.