Canada's National Pension Fund Should Invest in Canada, Not Tax Havens

Strategic Insights -

Canada's national pension fund, CPP Investments, has been accused of shying away from investing in Canada, with only 12% of its assets invested domestically, down from 55% in 2007. CCP Investments CEO John Graham defends the decision, citing the fund's mandate to achieve a maximum rate of return without undue risk of loss. However, critics argue that the fund should be using its massive investment power to benefit Canada and Canadians.

Key Takeaways:

  • CPP Investments has decreased its domestic investments from 55% in 2007 to less than 12% in 2024.
  • The fund owns 50% of the Hwy. 407 toll route, but the trend of investing in domestic assets is clear.
  • CEO John Graham defends the decision, stating that 12% exposure to Canadian assets is still on the high side and that the fund invests four times more than Canada's global economic weight.
  • Graham argues that reducing investments in Canada is part of "careful diversification" to maximize returns.
  • Michel Leduc, global head of public affairs and communications at CPP Investments, stated that pension contributions exist solely to pay pension benefits and that using the fund to pursue social policy priorities was ruled out.
  • Introducing a dual mandate, like the Caisse de dépôt et placement du Québec (CDPQ), could benefit Canada and Canadians beyond achieving a maximum rate of return.
  • Other large pension funds, such as the Dutch pension fund ABP, are already allocating a significant portion of their investments to social causes.

Statistics:

  • 55% of CPP Investments' assets were invested domestically in 2007.
  • Less than 12% of the fund's assets are invested in Canada in 2024.
  • CPP Investments invests four times more than Canada's global economic weight.
  • Canada makes up around 3% of global GDP.
  • The $750-million stake CPP Investments obtained in 2017 in the Apollo IX fund, a private equity fund domiciled in tax havens, invested 21.5% of its assets in the casinos and gaming industry.
  • CPP Investments reported committing $2.9 billion to an infrastructure play in Italy.
  • Canada's chief actuary estimates that the fund will remain in excellent financial condition for the next 75 years if it generates 6.2% in annual returns.

Sources:

  • The Globe and Mail
  • CPP Investments 2007 annual report
  • CPP Investments CEO John Graham's annual message
  • Michel Leduc's statement to the author
  • CDPQ
  • ABP
  • Canada's chief actuary