Ottawa is appointing former Bank of Canada governor Stephen Poloz to lead a new federal working group that will look at ways of encouraging Canadian pension funds to invest more in the country, especially in areas such as digital infrastructure and airports.
The working group is being created to “explore how to catalyze greater domestic investment opportunities for Canadian pension funds,” the government announced in itsbudget document released Tuesday, and Mr. Poloz will be supported by Finance Minister Chrystia Freeland, with participation from pension leaders.
The review will focus on priority areas that include investment in digital infrastructure, artificial intelligence, physical infrastructure, airport facilities, venture capital to back startup and early-stage companies, as well as building more new homes. There is a particular emphasis on airports – an asset that pension fund leaders have long said would interest them if governments opened them up to private investment.
And the group has been asked to consider whether Canada should lift a rule that restricts pension funds from holding more than 30 per cent of the voting shares in a company, which is considered archaic by some and is already circumvented by some large funds.
The working group is Ottawa’s answer to a debate that flared up in recent months about whether Canada’s largest pension funds, which collectively manage more than $2-trillion of assets, are investing sufficiently in their home country. Senior business leaders, including chief executive officers from some of Canada’s largest companies, have pressed Ms. Freelandand her provincial counterparts to change the rules governing pension funds, as a way of nudging them to put more of their members’ dollars into Canadian investments. But current and former pension fund leaders have strongly pushed back, arguing that the funds must keep their freedom and independence to invest as they see fit, to ensure they can pay sustainable pensions to their members into the future.
Ms. Freeland and Ontario Finance Minister Peter Bethlenfalvy have both signalled a desire to boost pension funds’ domestic investments, and the budget measures announced Tuesday echo previous pledges made in the federal government’s fall economic statement.
But by framing the working group as “working with pension plans,” and focusing on unlocking investment opportunities that align with pension funds’ duties to invest in the best interests of their members, Ottawa appears to be taking a conciliatory approach.
“It appears to us, based on what we’re seeing in the budget, that they have it right,” said Michel Leduc, global head of public affairs and communications at the Canada Pension Plan Investment Board. “If you want to bring all the right people to the table, you’ve got to demonstrate a level of openness, and I think that’s what they’re doing.”
In Mr. Poloz, the government has chosen a respected intermediary to lead the process. The economist and former central banker, who now works as a special adviser for law firm Osler, Hoskin & Harcourt LLP, commands respect from a broad swath of Canada’s business leaders. After a career spent in Ottawa’s senior ranks, he has a deep understanding of the broad forces that shape the country’s economic performance. And his experience leading the Bank of Canada – an institution that fiercely guards its independence – is likely to give some comfort to pension fund executives who are set on preserving their autonomy.
The proposed scope of the working group does not mention more drastic options, which could have included rewriting legislation to add an explicit focus on economic development to public pension funds’ mandates, or changing investment rules to treat investments in Canada differently from ones made abroad. Those types of changes, which are supported by some business leaders, could be hard for Ottawa to make. They would require buy-in from provinces in most cases.
While nearly all of Canada’s largest pension funds have mandates to focus on getting the best investment returns for pensioners while managing risks, Quebec’s Caisse de dépôt et placement du Québec – which manages a $434-billion investment portfolio – has a dual mandate that includes contributing to Quebec’s economic development. In past statements, Ms. Freeland’s office has praised the Caisse’s track record of delivering returns and adding to Quebec’s economy. The latest budget measures appear to steer away from imposing such a dual mandate on other funds.
“A key measure of success will be: Does it create new and better opportunities at scale? Does it lower various forms of risk relative to other markets? Because it’s all about risk-adjusted returns,” CPPIB’s Mr. Leduc said of the budget announcement.
To attract new investment capital to airports, including from pension funds, the budget says the Minister of Transport plans to release a policy statement this summer that highlights “existing flexibilities” in the governance of the national airports system.
The government also plans to make the breakdown of how much Canada’s pension funds invest in Canada and abroad more transparent. The budget says Ottawa will empower the country’s federal financial regulator, the Office of the Superintendent of Financial Institutions, to publicly disclose a standard set of information on large federally regulated pension plans. It would show the proportion of assets invested in each country, broken down by types of assets – for example, stocks, bonds, real estate or infrastructure – in each jurisdiction.
That could help fill gaps where plans don’t already publish that much detail, and Ottawa is pledging to work with provinces and territories to create similar disclosure rules for the large plans they regulate, which would be crucial to creating a consistent standard.
The budget document also sharpens the mandates for the Business Development Bank of Canada and Export Development Canada, two Crown agencies where the government has previously promised to review operations. Ottawa is directing the Business Development Bank of Canada to ramp up financing “for promising new and high-growth businesses,” and to redirect more of its venture capital investments to “emerging and higher-risk sectors to help attract more private capital.”
The government also says in the budget that Export Development Canada should tweak its risk management policies to allow it to take more chances, and create a special envelope of money to enable riskier investments when the agency issupporting exporters in key areas for Canada, because they are expanding into “highly competitive markets.”
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.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
