Hands Off My Pension! That Includes You, Chrystia Freeland
The comments below are an edited and abridged synopsis of an article by Joe Oliver
Recently, 92 prominent senior executives, investment managers and individual investors signed an open letter to the federal and provincial ministers of finance expressing concern with the decline in Canadian investments by pension funds and the effect on the Canadian economy. Public and private Canadian equity investments are down to about 1/10th of the total of more than $3 trillion in total pension assets.
Since pension funds receive government sponsorship and tax assistance, Government can regulate how this savings regime operates. It supports amending the rules to encourage pension funds to invest more in Canada, without specifying how this should be done or to what extent.
Finance Minister Chrystia Freeland said the federal government will work collaboratively with Canadian pension funds to encourage and identify investments in Canada.
Many of the signatories have skin in the game. New capital investment could bolster stock prices and reduce the cost of equity capital for companies they own or manage. Pension fund managers predictably hold a contrary view.
Joe discusses government policies that have eroded corporate productivity, profitability and growth and made returns less attractive; the fact that Canada’s real GDP per capita is stagnant and its prospects are the worst among 38 wealthy countries over the next 40 years; and the public does not want governments playing politics with their pensions.
We shouldn’t tamper with the independence of the CPPIB in pursuing its mandate of achieving a maximum return without undue risk of loss. A dual mandate can create a slippery slope that leads to political meddling in investment decisions, directly or through disincentives of one kind or another.
“We know that in pursuing industrial policies governments are better at picking losers than winners. Imagine an investment committee comprised of Justin Trudeau, Steven Guilbeault and Jagmeet Singh. Viewer discretion is advised.”