Quebecers can’t be sure where the roughly $1.5 billion that the government has invested in funds in recent years has gone. This lack of transparency shocks governance experts.
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The Department of Commerce, headed by Pierre Fitzgibbon, not only invests billions of dollars directly in hundreds of companies each year, but also entrusts increasing amounts of money to various funds.
The government discloses any investment of at least $25,000 in a company. On the other hand, he flatly refuses to say where the funds put his money.
“Regarding the list of companies in which these funds have invested and the amounts involved, it turns out that this information cannot be shared with you for reasons of confidentiality,” Investissement Québec (IQ) writes to the Journal in response to an access request for information.
“There is a big governance problem here,” complains Saidatou Dicko, professor of accounting at UQAM.
Saidatou Dicko, Professor at ESG UQAM. Photo from the UQAM website
“As this is public money, there needs to be some traceability and transparency,” she adds.
More than 1000 companies
All the government wanted to tell the Journal is that the $1 billion invested in funds since 2014 has ended up in more than 1,000 companies and that the annual fees paid to managers 2 .5% of the committed capital can reach about $25 million.
Most government-sponsored funds list the companies they have invested in on their website—in some cases, these are non-Quebec companies. However, it is impossible to know which transactions Quebec financed.
Some funds flatly refused to provide the Journal with a list of companies in which they have invested. This is especially true for Evol and the Quebec Business Transfer Fund (FTEQ), but managed by IQ.
“In order to protect the confidentiality of information on the financial situation of companies that have benefited from the FTEQ, such a list must not be disclosed,” said a spokesman for the Ministry of Economy, Jean-Pierre D’Auteuil.
At Evol, we cite “business strategy reasons” for refusing to provide a list of loans granted to companies.
“Taxpayers have a right to know. The government cannot simply use an intermediary to hide the nature of its investments. Information must flow. For what? Because the money belongs to the people, not to the politicians,” claims Richard Leblanc, professor of governance at York University in Toronto.
Richard Leblanc photo from York University website
A fund of funds
Monitoring state investments is even more difficult in the case of some $320 million that Quebec and IQ have entrusted to Teralys Capital. This Montreal company does not invest directly in companies but invests in other funds.
“It would be my pleasure to provide you with this list [des entreprises ayant bénéficié de fonds publics]but unfortunately we have confidentiality agreements with the various portfolio managers,” argues Jacques Bernier, Senior Partner at Teralys.
Jacques Bernier Photo from Teralys Capital website
According to Mr Leblanc, funds and companies that receive public money do not have a valid argument for denying transparency.
“If you are a private company and receive even $1 in public funding, you lose the right to complete confidentiality. If you don’t want that, don’t take government money,” he said.
Ms. Dicko wonders why Quebec isn’t more sophisticated.
“What decision-making powers does the government have over these funds? In other words, do you give money and shut up, or do you have the right to ask questions about governance, operations, and transparency? She says.
“If you want to be a CEO, you shouldn’t be in politics. As a politician, you have to take responsibility. That’s something that people in the business world don’t always understand,” concludes Richard Leblanc.
Principal commitments in funds (Québec Department of Economy and Investments)
Teraly’s $320 million
Novacap $190M
National Bank $100M SME Growth Fund
Cycle Capital $100 million
$100 million Eureka fund