Mutual Funds that Invest in Private Equity? An Analysis of Labour-Sponsored Investment Funds

Posted: 16 Jun 2008

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Jeffrey G. MacIntosh

University of Toronto - Faculty of Law

Multiple version iconThere are 3 versions of this paper

Date Written: May 2007


This paper considers the structure, governance and performance of a unique class of mutual funds that receives capital only from individuals, and reinvests this contributed capital in private companies, as opposed to traditional mutual funds that invest in publicly traded companies. It considers the particular class of mutual funds known as Canadian Labour-Sponsored Investment Funds (LSIFs). In contrast to expectations, it is shown that LSIFs have artificially low betas, returns that have significantly underperformed industry benchmarks, average management expense ratios greater than 4%, and have collectively accumulated $Can10 billion (£4.3 billion) as at 2005 since their statutory inception in various Canadian jurisdictions in the 1980s and 1990s. It is shown that these incongruous data are directly attributable to the LSIF statutory governance structure.

Keywords: Mutual funds, Venture capital, Government sponsorship, Risk, Return, Fundraising

JEL Classification: G23, G24, G28, G32, G38, K22

Suggested Citation

Cumming, Douglas J. and Macintosh, Jeffrey G., Mutual Funds that Invest in Private Equity? An Analysis of Labour-Sponsored Investment Funds (May 2007). Cambridge Journal of Economics, Vol. 31, Issue 3, pp. 445-487, 2007, Available at SSRN: or

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States


Jeffrey G. Macintosh

University of Toronto - Faculty of Law ( email )

78 and 84 Queen's Park
Toronto, Ontario M5S 2C5
416-978-5795 (Phone)
416-978-2648 (Fax)

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