I’ve been doing a little ‘back of the napkin’ calculation I’d like to share with you. My sources at the annual Bilderberg meeting, where such matters are regularly discussed, have told me I’m pretty close to the mark. The implications are sobering. Hopefully the work being done to address the issue will leave you feeling encouraged, maybe even inspired.
So here’s the math. I’ve taken the total assets managed out of the modest office I share with Lori here in the Comox Valley, and multiplied it by the total number of investment offices in the area. I come up with at least $750 million, which is my estimate of the long term savings and retirement investments of our region’s citizens. It is stashed away in bank GICs, loaned to the federal government when we buy their bonds, used to purchase dividend paying stock in Canadian companies, or invested in any of a vast number of global equity funds.
It is a simple matter for a depositor here in town to take a share position in the latest hot American or Chinese IPO, or to purchase a fund holding shares of companies in Russia, India or Brazil. This money, the savings of our local citizenry, the money used to fund your retirement, or your children’s’ education, has found its way into the furthest recesses of an increasingly integrated global economy.
So here is the issue we face. Virtually every single one of these $750 million has left town and been invested elsewhere. You can own shares in the global economy, but not the local one, for only scraps of this wealth stays here to provide patient investment resources. There is no such thing as a “Comox Valley Growth and Income Fund” or a “Vancouver Island Venture Capital Corporation” that is available to the investing public. At least not yet.
If just 2 or 3% of this $750 million was channeled towards our own Community Investment Fund, or CIF, that would be a whole lot of money that could be used to nurture the Comox Valley economy. What if such an investment was RRSP-eligible, and provided a substantial tax credit from the provincial government? You may be surprised to learn that a fund of this nature is not without precedent in Canada.
Perhaps the best example of a Canadian CIF can be found in Cape Breton, Nova Scotia, where New Dawn Holdings Limited is the oldest Community Development Corporation in Canada.
They are managers of New Dawn Community Investments Ltd.,a company that enables investors to “grow their money while also growing the community in which they live and work.” By effectively pooling money with their neighbours, Nova Scotian investors can invest in a local business that has been in Cape Breton for more than30 years creating jobs and supporting economic growth.
An investment in New Dawn is RRSP eligible and provides a 35% provincial tax credit to residents of Nova Scotia. Since 2004, they have invested several million dollars in Cape Breton businesses.
There are other similar initiatives taking root in Canada. Here in BC, Vancity Credit Union has developed their Resilient Capital Program, which gathers investors who can contribute $50,000 or more into a multimillion dollar pool. The investment offers GIC-like terms and rates of return, while the proceeds are directed towards community business ventures.
Now, thanks in large part to the efforts of the Community Social Planning Council of Greater Victoria, we have an opportunity in the Comox Valley to participate in the launch of a regionally-based investment fund. There are still legal and regulatory hurdles to overcome, but after 15 years in the investment business I can tell you that the desire for such an option amongst local investors is palpable.
Such a fund might provide capital for affordable housing development or co-housing projects in the Comox Valley, both of which have traditionally found it difficult to access conventional mortgage financing from the banks.
It might provide financing, subject to the approval of a locally-based investment management team, to any number of regional businesses that seek capital for start up or expansion. In keeping with the concept of ‘triple bottom line’ accounting, the investment mandate could be formulated to achieve social and environmental returns in addition to financial ones.
And a CIF could certainly look at acquiring some of the local forest lands that are currently being parcelled and sold-off as residential, rural and recreational real estate. The benefits of keeping our local forest lands in a sustainable and productive state should be quite clear.
In fact, insurance companies (Manulife Financial), and public pension managers (BC Investment Management Corporation) are two of the largest owners of Vancouver Island forest lands, allowing them to neatly match off their long term liabilities with predictable long term assets. Why shouldn’t the wider Comox Valley public have a similar investment opportunity?
In my experience in this industry, the concept of repatriating some of the investment capital that leaves our community every year is as compelling and logical as it gets. It is a model that should resonate with every corner of the political spectrum. How often can public policy claim the same non-partisan support?
The possibilities are many, and include a greater degree of local economic diversification, an opportunity to disconnect from global economic turmoil, a more patient approach towards how our investment capital is employed, and a chance to leverage our investments to achieve additional social and environmental benefits for the community.
The opinions expressed herein are solely those of the author, and do not represent a solicitation to purchase or sell any securities, whether specifically mentioned or implied. Do not act on the basis of any of this material without first consulting with your own professional advisors. Portfolio Strategies Securities Inc. has no comment on the accuracy or efficacy of any program mentioned or suggested.