* Ex CPPIB boss Wiseman says fund can be catalyst for growth
* Fund worth C$500 mln initially, could rise to C$1 bln
* Similar UK fund has proved successful
* Fund will take minority stakes and invest over long-term
* Pension funds could also invest -CIBC CEO (Adds comments from former CPPIB CEO Mark Wiseman)
By Matt Scuffham and Alastair Sharp
TORONTO, March 9 (Reuters) - Canada's major banks and insurers said on Thursday they planned to create a fund to invest up to C$1 billion ($740 million) in small but growing Canadian firms, part of measures to boost economic growth.
The fund has been set up to bridge a gap in lending to companies that have already begun trading but are looking for additional investment to increase their operations. It is one of a number of recommendations to stimulate Canada's economy made by advisers to Finance Minister Bill Morneau.
"These are high-performing firms and these firms are going to create high-quality jobs in Canada," said Mark Wiseman, the former chief executive of the CPPIB, Canada's biggest public pension fund, who sits on Morneau's Advisory Council.
"What the business growth fund will do is catalyse them," he added in an interview. "If they get through that phase of their development, they'll be able to continue to grow by accessing more traditional sources of financing."
The fund is expected to have an initial capital commitment of more than C$500 million. Initial participants will include the country's six major banks, as well as insurance companies, although a range of financial institutions will be able to invest in the fund when it is formed.
A similar entity has proved successful in Britain, having been set up in 2011 with 2.5 billion pounds of funding by the UK's five biggest banks. It has so far invested more than 1 billion pounds in over 160 companies and was the seventh-busiest private investor in the world in 2016, based on deals completed.
Victor Dodig, chief executive of Canadian Imperial Bank of Commerce, who was one of the earliest supporters of the initiative and played a prominent role in setting up the fund, said it could expand beyond C$1 billion.
"I'm pretty confident that the first initial tranche is necessary, and then from that we will find out how much more is needed," he said in an interview. "What we wanted to do is get things going. Part of this is getting traction."
Dodig said Canada's biggest pension funds could also invest.
The fund will take minority stakes in companies across different sectors, with typical investments ranging between C$3 million and C$20 million per company. Businesses will also have access to a mentorship network.
"Canada's very good at start-ups; our challenge is in growing them to a certain size," said Hendrik Brakel, senior director for economic, financial and tax policy at the Canadian Chamber of Commerce, which represents Canadian businesses.
Royal Bank of Canada Chief Executive Dave McKay said the fund will meet a demand by smaller businesses for "patient capital," investing in companies for several years to help them weather short-term economic headwinds and generate long-term growth.
"Most importantly, they're looking for support and advice and mentorship to help them navigate the growth challenges that so many companies face," he said.
The fund will be managed independently, with a board made up of independent directors and representatives from initial investors. It plans to have a leadership team in place to start deploying capital within the next year.
Finance Minister Morneau said the initiative "will help ambitious Canadian companies get the capital they need to grow and succeed globally." ($1 = 1.3514 Canadian dollars) (Additional reporting by Leah Schnurr; editing by Jonathan Oatis and Dan Grebler)