Prime Minister Justin Trudeau, left, and Deputy Prime Minister and Minister of Finance Chrystia Freeland make their way to the House of Commons to present the Fall Economic Statement on Parliament Hill in Ottawa, on Nov. 21.Spencer Colby/The Canadian Press
Ottawa wants Canadian pension funds to invest a larger share of their assets in Canada and is promising measures to make it a more attractive option, as advocates for raising domestic investment have clashed with pension managers intent on guarding their independence.
The federal government pledged in its fall economic statement on Tuesday to “work collaboratively” with Canadian pension funds to create an environment that encourages them to put more of the trillions of dollars of assets they collectively manage to work domestically.
Ottawa gave few details about how it plans to do that. But its decision to add pension investment to its priorities comes after lobbying from investment industry professionals who argue pension funds have underinvested in Canadian public markets, sapping precious capital from the country.
That has put pension fund managers on guard. Some are warning against heavy-handed measures that could undermine their discretion to seek the best returns for pensioners wherever they can find them, and to manage risks from overconcentration in any particular market.
On Wednesday, an executive at the Canada Pension Plan Investment Board (CPPIB), which has 14 per cent of the $576-billion in assets in Canada, said the fund would welcome broad policy measures to make the country more competitive at attracting long-term capital.
“Countries are competing for that,” said Michel Leduc, CPPIB’s global head of public affairs and communications, in an interview. “You’ve got to fish where the fish are. You’ve got to make it attractive to them. … [Canada is] already an attractive place to invest. How do we make it even more so?”
Others are more wary of Ottawa’s intentions. Alberta Investment Management Corp. (AIMCo) chief executive officer Evan Siddall said a key element of Canada’s pension fund model “is independence from political influence of any kind, or even the perception of it,” in an e-mailed statement.
AIMCo, which manages $146-billion for the province and has 43 per cent of its investments in Canada, is pursuing large-scale infrastructure investments around the world, he said. If Canada’s government opened up similar assets that it owns to private investment, it “would be a constructive demonstration of Ottawa’s desire to increase pension fund investments in Canada.”
In late September, Mr. Siddall used a speech to confront calls for more domestic investment from Canadian pension funds with a blunt warning: “The pension savings of Canadians is not our nation’s piggy bank,” he told an audience at the Canadian Club Toronto.
The government said Tuesday it will “explore” removing a rule that caps Canadian pension funds’ investments in most corporations at 30 per cent of voting shares, to make it easier for them to take large, controlling stakes. And it called for pension funds to more consistently report how their investments are spread across countries and asset types – details several of the largest plans already disclose.
Among the most vocal advocates for boosting Canadian pension-fund investment in domestic stock markets is Peter Letko, the veteran fund manager who co-founded Montreal-based Letko Brosseau & Associates. He has lobbied federal and provincial officials with presentations that show publicly traded Canadian stocks make up just 4 per cent of Canadian pension funds’ total assets, down from 23 per cent in 1990, according to the Pension Investment Association of Canada.
Some of those dollars have since moved abroad. But pension funds have also shifted more assets out of publicly traded stocks and bonds and into private assets such as real estate, infrastructure, private equity and private loans.
Ottawa’s announcement is “just the first step” toward increasing pension-fund investment in the country and “there is work to be done,” Mr. Letko said in an interview.
Pension funds have had “some general conversations” with Ottawa, Mr. Leduc said, but are awaiting details about how specific policies could be tweaked to make domestic more investment “commercially viable.”
“We’re not concerned about any heavy-handedness” from federal officials, he said.
On Tuesday morning, Healthcare of Ontario Pension Plan (HOOPP) chief investment officer Michael Wissell said in a statement that, “all else being equal, we prefer to invest in Canada when the risk and reward are appropriate.”
About $60-billion of HOOPP’s $104-billion in assets are already invested in Canada, Mr. Wissell said, but diversifying its portfolio across different countries “helps mitigate risk” and “enhance returns.”
Many pension-fund leaders are quietly worried that adding more exposure to Canada would increase concentration risks, as the future solvency of plans is already correlated to the country’s demographics, economic growth and immigration policies, among other factors.
“We want to be exposed to a whole bunch of markets,” CPPIB’s Mr. Leduc said.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
