Ottawa removes investment cap for Canadian pension funds

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Canadian pension funds will no longer be restricted to a cap of 30 per cent control of companies they invest in and the federal government is working with the institutional investors and domestic airports to “explore measures for further pension fund investment on airport lands.”

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Deputy prime minister Chrystia Freeland made the announcements — part of sweeping measures that could total $47 billion in government money and incentives to encourage more pension investment in Canada — at a news conference Friday in Toronto. She said more details would be provided in Monday’s fall economic statement.

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“We are making it easier for pension funds to acquire controlling stakes in Canadian entities,” Freeland said. “Currently Canadian pension funds are restricted from owning more than 30 per cent of a Canadian entity. We’re going to change that.”

She said the series of changes and new measures that will affect the country’s largest pensions were made following a report from former Bank of Canada governor Stephen Poloz, who she tasked in the spring with finding ways to encourage more domestic investments by the Canadian funds, which collectively control $3 trillion.

“Canadian pension funds have… some of the world’s best investment expertise. They are envied around the world,” Freeland said at the news conference at the Toronto Stock Exchange.

The campaign to get more pension money invested domestically began in 2023 after fierce lobbying in Ottawa, but drew pushback from large pension funds whose executives argued that their diversification geographically and by asset class is what resulted in their enviable returns.

Pension officials also argued that Canada had not freed up large infrastructure assets, such as airports and ports, which are a type of investment favoured by large institutional investors around the world including Canadian pensions.

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But Freeland kept pushing forward, and last spring’s appointment of Poloz to lead a task force to explore the issues seemed to ease friction with the pension funds.

“We are fighting for capital. We need to own the podium and say Canada is a great place to invest… and we are determined to get our share,” Freeland said at the news conference where she announced other measures including tax credits and incentives, plus $2 billion in additional government money to encourage public-private investment to spur growth of Canadian startups and mid-sized companies.

Another leg of the plan is to create a program that will provide up to $45 billion in loans and equity and involve “working with pension funds developing AI data centres,” Freeland said.

A senior pension source said Friday that there appeared to be no downside in the pre-announced measures, but declined to comment publicly before seeing the full detail in the government’s fall economic statement on Monday.

Freeland said Poloz had come up with “smart, creative ideas” to generate more opportunities for pensions funds to boost their investments in Canada and make that easier for them to do. But she also framed the measures announced Friday, in part, as a response to the re-election of Donald Trump as president of the United States.

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“We have to be candid about the reality of the incoming U.S. administration,” she said. “This is an administration which openly has a strategy of creating economic uncertainty outside the U.S. — as a strategy to discourage investment anywhere other than the United States.”

She said she will have more to say about her government’s response during Monday’s economic update.

“Canada is going to fight for Canada,” Freeland said. “Our government is fighting for Canadian jobs, our government is fighting for capital.”

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