TORONTO (Reuters) - An existing list of 50 top Canadian venture companies could be a springboard to the creation of a bundled investment product that would give investors broad exposure to the country’s small-cap market, the head of the TSX Venture Exchange said on Wednesday.
The Venture Exchange, operated by TMX Group Inc, in its “TSX Venture 50” ranking, highlights the top 10 companies in five major industry categories, including mining, technology and oil and gas. Being on that list typically attracts brokers, analysts, and institutional investors.
While the program is not likely to result in an index product, it could be a way to create an investing product like an exchange-traded fund, said John McCoach, president of TSX Venture Exchange.
“It could be some kind of investment product, possibly, but that would be up to someone else to create that product,” he said.
“We have had some people express some interest in turning it into a product,” McCoach added. “It’s an opportunity for individual investors and even institutional investors to participate in the Venture Exchange in a bundled product as opposed to, right now, they invest by individual company investments.”
An exchange-traded fund, or ETF, is a security that generally tracks the performance of an index. It represents a basket of securities underlying the index, which can be comprised of stocks, bonds or other assets such as commodities.
The TMX ranks its Venture 50 companies based on a formula that includes analyst coverage, return on investment, market cap growth and trading volume.
Top firms must meet certain criteria, as of December 31, 2009, including a market capitalization above C$5 million, been listed for more than one year and have a closing share price above 25 Canadian cents, TMX said.
Byron Lutes, chief executive of Southern Pacific Resource Corp, said an investment style product could offer retail investors a diverse investment opportunity.
“There are so many companies that it can be a bit overwhelming as to which ones are clear leaders,” Lutes said of the broader Venture Exchange.
“It would probably be more for a retail market.”
There are about 2,200 companies on the TSX Venture Exchange About 470 are listed on the S&P/TSX Venture composite index.
Data released this week showed volume on the Venture Exchange was up 90.5 percent on a year-to-date basis. Value was up 300 percent and transactions were up 151.8 percent compared with the same period in 2009, TMX said.
McCoach said TMX executives are aggressively luring investors from China, United States, as well as Australia and Latin America. TMX announced on Wednesday that its Chief Executive Thomas Kloet was in China promoting Canada’s capital markets to investors and to develop ties with the country’s regulators.
Reporting by Jennifer Kwan; editing by Rob Wilson