Amid the 'Buy Canadian' fervor, a surprising revelation has emerged: Canada's top pension funds remain heavily invested in the U.S., despite growing concerns over trade wars and sovereignty threats. This raises an intriguing question: Why are these funds, which should be safeguarding the retirement of Canadians, so heavily invested across the border?
The Canada Pension Plan (CPP), the largest of its kind, recently announced a record-breaking $780.7 billion in assets, with a whopping 47% of its investments in the U.S., compared to a mere 13% in Canada. This trend has persisted since President Trump's re-election, according to the third-quarter results.
But here's where it gets controversial: the CPP's U.S. assets have been steadily growing since 2005, when Ottawa removed restrictions on foreign holdings in Canadian pensions. Today, the CPP has $366 billion invested in the U.S., compared to just $98 billion in Canada.
And this is the part most people miss: the CPP is not alone. The 'Maple Eight,' Canada's biggest pension funds, collectively hold a trillion dollars in U.S. assets. For instance, OMERS, the Ontario Municipal Employees Retirement System, has 55% of its portfolio in American investments, while the PSP, the Public Service Pension, has 40.5%.
Only three of the Maple Eight have more Canadian assets than American: the Healthcare of Ontario Pension Plan, the Ontario Teachers' Pension Plan, and the Alberta Investment Management Corp.
When asked about this, Michel Leduc, a CPP spokesperson, acknowledged the growing concerns over geopolitical risks. However, he emphasized the long-term nature of their investments.
"We are not swayed by current events or economic cycles. We monitor turmoil carefully to avoid excessive risks," Leduc said.
Leduc further clarified that the CPP's U.S. holdings are actually below the average when compared to global investment diversification measures like the MSCI World Index and the Financial Times Stock Exchange 100.
"All these global indices have 65% U.S. content. So, 47% is well below the average," he explained.
This has sparked calls for more domestic investment. Daniel Brosseau, president of Letko Brosseau Global Investment Management, argues that pension funds have a broader impact on the economy.
"They influence wages, wealth, and economic activity in Canada through their investments," he said.
In 2024, Brosseau co-wrote a letter, signed by 90 investment leaders, urging Ottawa to create incentives for the Maple Eight to invest more domestically.
"We have $3 trillion that can be invested in Canada," Brosseau said.
Sen. Clément Gignac, an economist, believes the uncertain environment in the U.S. and new investment opportunities in Canada are prompting a re-evaluation of U.S. holdings.
"The risk-return profile of the U.S. has shifted, and Canadian pension funds are re-evaluating their exposure," Gignac said.
The finance minister, François-Philippe Champagne, recently met with managers of the Maple Eight funds to discuss new ventures and encourage domestic investment. However, the government has not taken steps to regulate or force 'Buy Canadian' investments, as was the case before 2005.
"At this stage, the big pension funds have realized the interest of investing in Canada," Champagne said.
Keith Ambachtsheer, from the International Center for Pension Management, fought to remove foreign investment caps. He's not surprised by the large U.S. holdings, given the size and stability of the U.S. market.
"The good news is, our returns over the last 10-20 years have been pretty good," Ambachtsheer said.
The CPP reported an average 8.4% annualized return over the last decade, despite recent geopolitical tensions.
Several of the Maple Eight funds declined to comment, but those who did stressed their interest in low-risk, long-term investments, particularly in infrastructure and utilities.
"We're looking for predictable, long-term sources of returns," said Michel Leduc of the CPP.
So, while the 'Buy Canadian' movement gains momentum, the question remains: Should Canada's pension funds prioritize domestic investments, or continue their global diversification strategy? What do you think? We'd love to hear your thoughts in the comments!
