Ex-Ensis boss preaches patience after redemptions suspended

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This article was published 03/02/2012 (5196 days ago), so information in it may no longer be current.

THE former head of the Ensis Growth Fund isn’t sweating the recent decision by GrowthWorks Canadian Fund to suspend redemptions to thousands of Manitoba unitholders.

Bill Watchorn, the president and CEO of Ensis until it was sold to GrowthWorks in November 2007, said such a strategy is not uncommon in the venture capital world where the goal is to sell positions in up-and-coming firms at the peak of the market.

“I’m still an investor (in GrowthWorks). I’m not perturbed about it. I’m going to let them maximize value,” he said.

“You want to pick your timing for investment exits. It’s not unusual to suspend redemptions while you position your investments for maximum value.”

GrowthWorks is still waiting to hear back from regulators whether its “redemption management plan” — in which investors could redeem their funds either semi-annually or annually up to some capped amount — has been approved.

The company said its hand was forced by a downturn in the markets for mergers and acquisitions and initial public offerings in the second half of 2011.

Watchorn said if he and his former team were still running Ensis and found themselves in the same position, they wouldn’t do anything differently.

“If we didn’t want to firesale our investments, we would suspend redemptions,” he said, noting he hasn’t been involved with GrowthWorks for several years.

Tim Lee, Toronto-based chief investment officer for venture capital at GrowthWorks Capital Ltd., said the structure of its proposed plan would ensure the cash it needs to pay out in redemptions doesn’t exceed what it’s able to bring in through exiting companies in its portfolio.

He said most venture capital funds fulfilsd their mandates in 10 to 15 years. In 2002, the Canadian Fund took over a fund called Working Ventures, which was 10 years old at the time.

“This is consistent with the venture capital model. (The Canadian Fund) is at the end of its lifespan and we’re focused on returning capital to shareholders,” he said.

“This should be viewed very differently from a fund that is in wind down or liquidation mode. (With the latter), you have a complete disregard for value optimization. You’re just working against the clock.”

About 10,000 Manitobans have money in the Canadian Fund thanks to investing in Ensis years ago. The company estimates each account has an average of $10,000 in it.

Watchorn was quick to counter any comparisons with the now-defunct Crocus Investment Fund, which ceased trading in Manitoba more than seven years ago amid serious concerns of overly-inflated values of the holdings in its portfolio. It was eventually wound down amid a class-action lawsuit and a scathing report from the auditor general.

“I don’t think that analogy is correct. When we sold our fund, (GrowthWorks) merged it into a larger pool in Ontario and Saskatchewan that spread the risk out even more. That was better for investors,” he said.

The Canadian Fund has a net asset value of about $200 million, down from $350 million two years ago.

geoff.kirbyson@freepress.mb.ca