Fonds de solidarité FTQ

Patient Capital Focused on Growth of Quebec’s Economy

Launched in 1983, Fonds de solidarité FTQ celebrates 30 years in business this year. Abiding by its strategy, the Fonds currently manages an investment portfolio of more than $8.8 billion, with 2,200 partner companies and almost 600,000 investors – RRSP contributors who besides a reasonable return receive an outstanding tax credit by investing in a labour-sponsored fund. The Fonds focuses on investing in smaller and medium-sized businesses across all sectors of the Quebec economy. The Fonds has developed a vast investment network of 85 local funds, 16 regional funds and over 70 specialized funds across Quebec.

The Quebec Federation of Workers (Fédération des travailleurs et travailleuses du Québec; FTQ) created the Fonds de solidarité FTQ (“Fonds”) following the economic crisis of the early 1980s with a vision of creating a development capital fund that would invest and participate in the Quebec economy. Today, the Fonds represents the largest labour sponsored fund in Canada, providing development capital to businesses with the main overriding mission to further the economic development of Quebec.

The FTQ based the Fonds upon the solidarity of the Quebec workers. Workers, both unionized and non-unionized, invest in the Fonds de solidarité FTQ’s RRSP program, and these funds are invested back into the Quebec economy in general, and SMEs in particular, creating a cycle that supports the local business growth and development. The Fonds also invests in companies from outside Quebec, but only in as much as there are economic benefits for Quebec. In this way the Fonds creates investment and business networks, and attracts business to Quebec.

The Canadian Business Journal discussed the Fond’s unique market position with Gaétan Morin, Senior Vice-President, Corporate Development and Investment.

“We were born out of the crisis of 1983. This was a difficult situation. At this time the FTQ worked on a solution to the economic downturn of the time: the Fonds de solidarité FTQ, a fund dedicated to invest in the equity of local companies and rebalance the financial situation of high debt and high interest rates, especially the manufacturing sector.”

Socially Responsible Investments

The Fonds provides patient capital to more than 2,200 partner companies – Quebec entrepreneurs – helping grow Quebec business and, in return, the business provides quality employment opportunities to Quebecers. When investing, the Fonds looks and focuses on returns beyond the short-term, creating investment deals focused on local economic growth. Besides the long-term approach, the Fonds abides by its code of ethics, focusing on sustainable economic development and supporting its partner companies, even offering business training geared to help partner companies further their growth and ensure their financial health.

“Over the years we have seen several crises – the recession of the early 1990s, the dot-com bubble of the early part of the century, and of course the 2008 financial crisis. Through the years, we have acquired valuable experience in helping companies confront difficult economic times. We are known to be supportive in these situations, because we focus on the long-term vision. Yes we focus on good investment returns for our shareholders, but we are focused on the long-term and the development of our partner companies.”

To assure quality investments, the Fonds employs investment professionals specialized in industry sectors present in the Quebec economy. As an example, Morin discussed Quebec’s lumber sector. According to Morin, the lumber sector has been in a tough spot since 2006, but the Fonds’ specialists were well familiar with the sector’s dynamics. The group recognized that the sector was simply passing through the regular downturn of the economic cycle. While other investment firms continue to shun from the sector to this day, the Fonds invested in several lumber industry ventures, seeking out best managed lumber companies – companies whose management team offered a solid vision of the sector’s future in the next decade. Today, the Fonds’ lumber investments in these sound businesses have started to turn profits. “This approach is good for the shareholders as well as the companies. We are partners with excellent companies and we are able to help these companies to go farther. We also prepare them to be more competitive and offer more value-added products and services once the following business cycle downturn appears. We have this knowledge of each Quebec sector, so we can invest in companies that will still be around in the next 10 or 20 years.”

Besides working with companies, the Fonds is also capable of attracting and creating new business niches in Quebec. For example, on request from the Government of Quebec, the Fonds worked to attract biotechnology companies through biotech investment. “It is difficult to invest in the biotech sector during difficult times, because medical technology is notorious for long development cycles and trials due to regulations,” says Morin.

Foreign investment represents one of the strategies that Fonds employs in order to attract industries such as biotech. To attract this investment, the Fonds invests abroad, in the U.S. or Europe, but under the condition that the money will return in the form of investment in the Quebec biotech sector. “For example, we have invested $20 million in a U.S. fund, but we required this fund to reinvest the same amount in the Quebec biotech sector. This approach helps us to create a worldwide investor and professional network,” says Morin.

The Fonds invests directly and indirectly with the philosophy of a long-term prosperous investment that benefits its shareholders, its business partners, and Quebec. With its expertise and scope spanning back three decades, the Fonds keeps its thumb on the pulse of the Quebec economy, monitoring major industries in order to remain relevant and profitable through effective investment strategies. “What I like about us is that we were here 30 years ago, and we expect to be here 30 years from now, supporting, helping and nurturing entrepreneurs to help and develop their business.”