Canadian Pension Funds Advocate for Infrastructure Investments

In a strategic shift, chief executives from Canada’s largest pension funds are rallying to convince the federal and provincial governments to divest key infrastructure assets, including airports. This plea comes just days before a federal budget aimed at bolstering the nation’s sovereignty is expected to be unveiled.

A Call for Infrastructure Investment

For years, Canada’s pension funds have expressed frustration over a perceived scarcity of significant infrastructure investment opportunities. Leaders in the sector argue that government entities at all levels are sitting on valuable assets that could attract institutional investors if offered for sale.

The Message to Government Officials

During a recent meeting organized by the Economic Club of Canada in Toronto, Gordon Fyfe, CEO of British Columbia Investment Management Corp., emphasized the potential benefits of asset sales. He stated, “Look at your balance sheet and sell assets,” positioning this move as a way to enhance fiscal capacity for new investments.

Fyfe pointed to various infrastructure assets, such as airports, hydroelectric plants, and transport routes like highways, that would appeal to large investment entities managing billions in assets. These existing assets offer stable cash flows and steady returns—ideal for pension funds looking to fulfill their obligations.

The Rationale Behind Selling Government Assets

“With the current government deficits, why wouldn’t they sell some of those assets?” Fyfe continued. He highlighted that such a decision could allow governments to balance their finances while ensuring the assets remain in Canada. The competitive bidding among pension funds would likely yield favorable prices for the government.

He argued that the proceeds from the sale could be invested in new projects that would typically involve higher risks, which pension funds might avoid.

Expertise in Infrastructure Management

Deborah Orida, CEO of the Public Sector Pension Investment Board (PSP Investments), reiterated the potential for Canadian pension funds to excel in infrastructure management. Through its AviAlliance subsidiary, PSP Investments already operates seven airports across Germany, Scotland, and Greece.

“We have expertise, and we’d love to apply it to our country,” she stated, expressing optimism regarding the government’s interest in this proposition.

A Unified Voice for Greater Investment

At the Toronto event, Orida and three other pension fund CEOs—including Blake Hutcheson from Ontario Municipal Employees Retirement System (OMERS) and Annesley Wallace from the Healthcare of Ontario Pension Plan (HOOPP)—conveyed a collective desire to increase domestic investment.

“There’s no issue with that at all, but don’t ask us to buy more public equities,” Fyfe added, clarifying the type of investments they seek.

The pressure for Canada’s pension funds, which manage a staggering $2.5 trillion, to invest more domestically is mounting. Each of the eight largest pension fund managers has between 12% and 50% of their total assets invested in Canadian ventures, yet they argue that it’s a supply issue rather than a lack of demand for investment.

Overcoming Perceptions of Ownership

Hutcheson noted that critics often overlook that the problem lies with asset availability rather than reluctance on the part of pension funds. “It’s okay for a Canadian pension fund to own a bridge, port, or airport,” he remarked, underscoring a need for government recognition of this straightforward fact.

Risks of Government Intervention

While the push for leveraging pension fund capital grows, both Orida and Fyfe expressed concerns regarding potential government overreach into the independence of pension funds. “Interference keeps me up at night,” Fyfe admitted, cautioning against policies that could coerce funds into supporting government initiatives rather than focusing on member benefits.

Orida stressed the importance of maintaining independence, highlighting the successful collaboration between Ottawa and PSP Investments in managing the $15 billion Canada Growth Fund. Initially met with skepticism, this partnership has since committed to investments amounting to $4.75 billion in new projects.

The Path Ahead

As government deficits continue to rise, pension fund leaders are hopeful that their advocacy will yield fruitful discussions about the future of Canada’s infrastructure. They aim to position pension funds as essential partners in building a stronger economy while ensuring the stability required for members’ retirement needs.

In conclusion, the dialogue surrounding the role of pension funds in Canadian infrastructure investment is not just about financial returns. It’s about ensuring that the funds can continue to operate effectively while contributing to national growth—a balancing act that benefits all stakeholders involved.