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The government will close down its $750 million Applied Research Fund,  ending a failed experiment in  high-technology venture capitalism lasting more than a decade.
The  fund will abandon new investments from March,  although it will continue to function until its assets are transferred to another fund and its contracts with two private fund managers run out in 2007 and 2008. 
Innovation and Technology Commissioner Anthony Wong  Sik-kei  blamed the decision on 'unsatisfactory performance' at the fund, which he said had been set up on a flawed premise. 
'The government should not compete with the market,' he said. 'When the market can [support start-ups] by itself, it's time for the government to withdraw.' 
The fund's managers, Techpacific Capital and Walden International, did not return calls seeking comment.
The fund posted   losses of  $217 million on  investments of $452 million, or a negative 48 per cent return, the Innovation and Technology Commission said. 
An auditor's report in May last year said out of 50 investment projects, 32 were in the red, and 18 had lost at least 90 per cent of their capital. The fund burned through  $103 million in operating costs.
Launched in 1993 with an initial outlay of  $250 million,  the fund's capital was increased to $750 million in 1998, when the government transferred management to the private sector. But the fund managers fared little better.
 'The fund invested in internet start-ups just before the technology bubble burst,' Mr Wong said.
The commission will now seek to transfer the remaining $400 million in fund assets to the  $5 billion Innovation Technology Fund (ITF), which will allocate research funds to 13 technology areas, including vehicle parts, supply chain management and textiles. 
The ITF was itself the subject of a public consultation last year following a report  to the Legislative Council in May detailing a dismal rate of return from investments in technology seed projects. 
The report said only 15 per cent of research projects had received patents, while just 157 out of 349  projects were rated as useful or having benefit to related industries.
Democratic Party legislator Sin Chung-kai,  representing the information technology constituency, yesterday said he would support the transfer of the remaining assets of the applied research fund  to the ITF, but warned against the solution becoming a precedent.



$750m tech fund to close after losing millions