* Fund worth C$500 mln initially, could rise to C$1 bln
* Similar UK fund has proved successful
* Fund will take minority stakes and invest over long-term
* Pension funds could also invest -CIBC CEO
(Adds comment from RBC CEO, business group)
By Matt Scuffham and Alastair Sharp
TORONTO, March 9 Canada's major banks and
insurers said on Thursday they planned to create a fund to
invest up to C$1 billion ($740 million) in small Canadian
businesses over the next decade to bolster growth.
The fund is expected to have an initial capital commitment
of more than C$500 million. Initial participants will include
the country's six major banks, as well as insurance companies,
although a range of financial institutions will be able to
invest in the fund when it is formed.
Victor Dodig, chief executive of Canadian Imperial Bank of
Commerce, who was one of the earliest supporters of the
initiative and played a prominent role in setting up the fund,
said it could expand beyond C$1 billion.
"I'm pretty confident that the first initial tranche is
necessary and then from that we will find out how much more is
needed," he said in an interview. "What we wanted to do is get
things going. Part of this is getting traction."
Dodig said Canada's biggest pension funds could also invest.
"The pension funds can play a role. They're a vast source of
capital in our country," he said. "They are good investors and
they are sharp investors."
A similar arrangement has proved successful in Britain,
having been set up in 2011 with 2.5 billion pounds of funding by
the UK's five biggest banks. It has so far invested more than 1
billion pounds in over 160 companies and was the seventh-busiest
private investor in the world in 2016, based on deals completed.
The Canadian fund will invest in companies that are looking
to scale up, which firms and experts have said can be a
"Canada's very good at start-ups; our challenge is in
growing them to a certain size," said Hendrik Brakel, senior
director for economic, financial and tax policy at the Canadian
Chamber of Commerce, which represents Canadian businesses.
The funds will take minority stakes in companies across
different sectors, with typical investments ranging between C$3
million and C$20 million per company. Businesses will also have
access to a mentorship network.
RBC Chief Executive Dave McKay said the fund will meet a
demand by smaller businesses for "patient capital," investing in
companies for several years to help them weather short-term
economic headwinds and generate long-term growth.
"Most importantly, they're looking for support and advice
and mentorship to help them navigate the growth challenges that
so many companies face," he said.
The fund will be managed independently, with a board made up
of independent directors and representatives from initial
investors. It plans to have a leadership team in place to start
deploying capital within the next year.
Finance Minister Bill Morneau welcomed the announcement,
saying the initiative "will help ambitious Canadian companies
get the capital they need to grow and succeed globally."
The move follows recommendations from Morneau's economic
growth advisory council last month to create a private
sector-led growth fund for companies.
($1 = 1.3514 Canadian dollars)
(Editing by Jonathan Oatis and Dan Grebler)