There isn’t any disclosure that is going to satisfy Crocus Investment Fund investors right now. Trading is halted. People want answers. In some cases, people want to take their money and run, regardless of loss.

The problem isn’t necessarily poor fund returns. The fund, since inception, has invested in companies that weren’t publicly-traded and were in need of long-term equity financing (and some debt financing). But investing in labor-sponsored investment funds is high-risk business. It is speculative. The very fact that the federal and provincial governments provide an additional 30% (it used to be 40%) tax credit should be proof-positive that the funds are far from low-risk. If it was low-risk, the governments wouldn’t be giving the tax credits.

In fact, the current eight-year maturity period is definitely too short for investing in labor-sponsored investment funds. It is no wonder that investors are dissatisfied. Eight years isn’t enough time for private equity capital to turn a long-term sustainable profit that can provide external cash-flow to investor equity funds. Anyone expecting a positive eight-year turnaround, even with tax credits, isn’t being realistic given the high-risk nature of the investment.

The halt in Crocus Fund trading should be a time for investors to reassess their personal risk tolerance, their need for diversification, and their general understanding of investment choices (and the actual risks they truly do represent) rather than a time for knee-jerk reactions to media reports.

D’Arcy Barker is a Chartered Financial Planner and Registered Employee Benefits Consultant- www.barkermoney.com

E-mail: ReduceYourTaxes@barkermoney.com