Fund managers must raise $3 private for every $1 public, and bids close January 2027
Pension funds and other institutional investors are being courted as limited partners in a $700m federal fund-of-funds stream, with expressions of interest from managers closing at noon Pacific time on January 21, 2027.
In its news release announcing the call issued last Thursday in Toronto, Innovation, Science and Economic Development Canada (ISED) said the Fund-of-Funds stream is the largest of three under the Venture and Growth Capital Catalyst Initiative (Growth VCCI), a $1bn program announced in Budget 2025 that provides funding on a cash basis starting in 2026-2027.
A $200m Life Sciences stream and a $100m Emerging Manager stream make up the balance.
ISED states the $700m will leverage at least an additional $2.1bn from private capital investors such as pension funds and other institutional investors, and lists risk sharing, enhanced exposure to performance and an opportunity to invest at scale among the features offered to them.
The call for expressions of interest defines a Qualified Fund-of-funds Manager as any manager of non-public capital dealing at arm’s length with any federal, provincial, territory or local government, and names pension funds among those that can qualify as applicants in their own right.
Private Capital under the program likewise includes pension fund capital, and foreign capital counts as private.
Per the call document, applicants must be seeking to raise a fund-of-funds of at least $150m and must meet at least one of four indicators of market experience.
- An institutional investor that will commit private capital beyond the general partner commitment
- A letter of intent from at least one institutional investor
- Experience raising a fund-of-funds of at least $100m that has had pension fund or other institutional investor capital
- At least one general partner who has managed a fund of at least $100m
Selected managers must raise $3 from private capital investors for every $1 of public capital.
Public and private capital is to be called at a 50:50 ratio, which the call document notes doubles the public pro rata participation that would otherwise be 25 percent at a three-to-one leverage ratio, and results in public capital being fully called before private capital.
The waterfall returns private capital with a 7 percent internal rate of return, then public capital with a 2 percent internal rate of return, then a general partner catch-up of earned carried interest, then pro-rata distribution on a committed capital ratio of 75 percent private to 25 percent public, subject to general partner carry.
Public capital investors are not eligible for management fee discounts.
At least 60 percent of fund investments must go into Qualified Canadian venture capital funds, with a maximum of 30 percent into Qualified Non-Canadian venture capital funds and 40 percent into Qualified Canadian Funds.
Up to 30 percent of total fund size may be allocated to direct investments, of which at least 90 percent must go to Canadian-Based Companies.
First close is the lesser of $150m or at least 50 percent of target fund size, expected within 18 months of confirmation of federal investment.
The Business Development Bank of Canada (BDC) will act as limited partner for the federal government and manage negotiation of limited partnership agreements, a role that follows federal efforts to draw domestic pension capital into Canadian assets.
Mélanie Joly, Minister of Industry and Minister responsible for Canada Economic Development for Quebec Regions, also unveiled Canada’s Early and Growth Stage Investment Strategy, a $750m plan split between a $75m Pre-Seed and Seed Investment Stream and a $675m Later and Growth Stage Investment Stream, administered by BDC.
Written feedback on the Later and Growth Stage design is open until 5 pm Pacific time on November 23.
