The Canadian system of labor-sponsored investment funds was featured in the Summer 1995 issue of Owners at Work as a means to anchor capital in our communities. These funds, organized at the provincial level, are mutual funds which accept the Canadian equivalent of our Individual Retirement Accounts (IRAs) from individuals and pool them for investments exclusively in local industry in the province.

The first, and largest, of these Canadian funds is the Quebec Solidarity Fund, which was set up in 1984 by the Quebec Federation of Labor as a response to the deep recession of the early 1980s. The Province of Quebec provided a tax credit in addition to the IRA-style tax deduction to encourage local investment; the Canadian Federal government subsequently also added a tax credit. Since 1984, the Quebec Solidarity Fund has grown to some $1.7 billion invested by about 300,000 Quebec shareholders -- 65% of them union members. (Quebec has a population of under 6 million, a little more than half that of Ohio.) The Quebec Fund, like the newer funds in Manitoba, British Columbia, and Ontario, invests exclusively in the local economy.

These funds have become a major source of venture capital in Canada, accounting for more than $3 billion of the $6 billion Canadian venture capital market. They are extraordinarily broad based: about 500,000 Canadians have invested an average of $6,000 each in them to insure local reinvestment.

Last summer's Owners at Work profiled the Crocus Fund in Manitoba in an article by Crocus CEO Sherman Kreiner. Crocus is a new fund, set up by the Manitoba Federation of Labor in 1993. OAW talked to Kreiner to find out how Crocus has done.

"Our fourth annual investment drive was a real success," Kreiner told OAW. "We raised $22 million. That brought us to a four year total of $50 million from 12,000 shareholders. We've invested $14 million in debt and equity placements in 9 Manitoba firms. I expect we'll invest another $15 million in Manitoba companies during the coming year."

"A large portion of these firms have outgrown the capital sources that are easily available to entrepreneurs and family-owned businesses but are too small to tap the public market," says Kreiner. Moreover, in some cases, the family owners are anxious to take some of their equity out of the company.

The alternative for these companies, all too typically, is to sell to larger competitors outside of Manitoba, who, Kreiner fears, will ultimately move the jobs out. Sound familiar?

Crocus uses an "ethical screen" on worker health and safety, employee participation, and environment issues to select firms which qualify for investment. This is not altruism. "Ethical screens improve performance," Kreiner says bluntly.

Crocus has a special preference for employee ownership, and several of its investments have been in helping firms make the transition from family to employee ownership or in firms using employee ownership to expand. It also requires that the firms it places investments in join a CEO roundtable -- inspired by Ohio's Employee-Owned Network -- that features regular programs dealing with employee participation.

Like the other labor-sponsored investment funds in Canada, Crocus also invests in local and provincial bonds which finance building local infrastructure.

What is particularly impressive about the Crocus Fund is that it has raised $50 million for local investment in four years in a province with only one million inhabitants.

If they can do it in Manitoba, why can't we do the same in Cleveland? Or in Cincinnati, Toledo, the Mahoning Valley, Akron, Dayton or any of the other Ohio local economies which have been victims of disinvestment?