Ottawa is courting Canada’s pension funds and should be asking more of them

Prime Minister Mark Carney spent last month telling the world that Canada is open for investment. The harder question is whether Canada’s own money is.

At the Investment Summit last month, the Prime Minister unveiled nearly $500 billion in new commitments and a line built for the cameras. “Canada is building big. Build with us,” he said. His co-hosts were not foreign investors. They were the managers of the Canada Pension Plan and the federal public service pension plan, two funds Parliament created.

That detail says a lot about how this government sees the funds, as partners to court rather than capital to direct.

The courting worked, up to a point. The Canada Pension Plan’s investment arm and Brookfield launched a $50-billion Maple Fund for critical infrastructure. The public service plan added $25 billion in Canadian investment, and Ontario Teachers’ pledged another $10 billion. For a government that has staked its mandate on building things, ports and power lines make for good announcements. They do far less for the Canadian companies trying to grow into global ones, which is where the productivity problem sits.

The Canadian Shield Institute released a report last week looking at how Canada’s largest pension funds invest at home. The eight biggest, often called the Maple 8, manage $2.7 trillion. What they hold in Canada leans toward bonds and real estate, which are fairly safe bets.

That should worry Ottawa, because it undercuts much of what the government says it wants. Sovereign artificial intelligence and a domestic defence industry both depend on Canadian companies growing here. When those companies cannot find growth capital at home, they raise it abroad or sell. Earlier this year, Canadian quantum computing company Xanadu went public in a US$3.6-billion deal. Much of the value it creates from here will belong to foreign shareholders.

To better support Canada’s fastest-growing companies, the Canadian Shield Institute proposed a phased, 10-year mandate requiring the funds to put 3 percent of assets into Canadian growth companies. That works out to about $7 billion a year, roughly all the venture capital invested in Canada in 2025. Canada has done something like this before. Until 2005, the Foreign Property Rule capped how much pension funds could hold outside the country at 30 per cent.

Carney has ruled out a mandate. He says Ottawa should not “direct or compel” the funds and should instead “create the conditions where those institutions want to invest.” That is the instinct of a former central banker, and a defensible one. The Maple model is admired because politicians keep their hands off it, and few things would alarm a retired nurse more than learning her pension now has an industrial strategy.

But the choice is not between a mandate and doing nothing. Ottawa writes the rules these funds operate under, has a hand in choosing the boards of the federal ones and just co-hosted a summit with two of them. The leverage already exists. What is missing is a clear ask, such as public reporting on how much each fund puts into Canadian growth companies or co-investment vehicles that pair pension money with federal capital.

The summit gave Carney a headline number. What it did not give him is much evidence that his approach is reaching the companies that need it. Next to a $50 billion infrastructure fund, the clearest pledges to Canadian technology were a $4 billion venture fund from Radical Ventures and $1.5 billion from RBC. Neither came from a pension fund.

Carney is betting he can get there by asking nicely. Whether he still believes that when the November budget lands is an open question.