Canada to End 30% Stake Limit for Pension Fund Investments
(Bloomberg) -- Prime Minister Justin Trudeau’s government is set to end a rule that currently limits Canadian pension fund stakes to 30% of entities, as part of a plan to spur more domestic investment.
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“At a time of rising economic nationalism, the fight for capital has never been more fierce,” Finance Minister Chrystia Freeland said in a statement on Friday.
“Canada needs to fight harder than ever for capital, including facilitating and supporting the investment of Canadian capital here at home. This is key to the future prosperity of all Canadians.”
The change will impact federally regulated pension plans, but the government said it will also consult with provinces on the treatment of provincially regulated plans.
The government said it’s also “unlocking” up to C$45 billion ($31.6 billion) in loan and equity investments for artificial intelligence data centers. Seven pension funds have expressed interest in working with the government, it said.
In the broad set of measures, there are also plans to launch a fourth round of the Venture Capital Catalyst Initiative, including C$1 billion in funding in 2025-26, which will have “more enticing terms for pension funds and other institutional investors.”
Freeland also announced that the government would provide up to an aggregate C$1 billion to invest in “mid-cap growth companies,” which would be “structured to be concessional” and equal 25% of net new private investments.
It’s also looking at lowering the 90% threshold that currently limits municipal-owned utility corporations from allowing more than 10% private sector ownership, which the government says would allow pension funds “to acquire a higher ownership share in these entities,” and pointed to electricity utilities as an example.
The announcements come at a time when there’s a debate in the country about how to solve weak productivity and soft business investment. The initial public offerings market in Canada has been largely frozen for the past two years, and non residential business investment in the northern nation lags the US as a percentage of the economy.
Freeland said she’ll also examine ways to encourage investment in airports, including “potential changes to airport authority ground leases.”
In April, former Bank of Canada Governor Stephen Poloz was tasked with assessing how to “catalyze” the country’s pension funds to invest more in the country. The removal of the 30% limit for pensions was floated as one of the moves the government would be exploring.