It has all sounded so benign, a campaign of influence that has relied on nudges instead of demands, on conditional verbs rather than declarative statements.  

Finance Minister Chrystia Freeland’s fall economic statement said the federal government is interested in working “collaboratively” with the country’s pension funds to funnel more money into the economy. 

In an open letter to the country’s finance ministers, the corporate illuminati assembled by investment house Letko Brosseau picked up the thread, saying the Canada Pension Plan Investment Board and the other members of the internationally renowned “Maple 8” shouldn’t “fear,” but should instead “embrace with enthusiasm the challenge of investing in Canada.” 

One of those to whom the letter was addressed, Ontario Finance Minister Peter Bethlenfalvy, received it warmly enough, telling The Globe and Mail that “we agree that Canadian pension funds should invest more at home.”  

It is not benign. It is more a gathering of the clans for a raid on some of the realm’s best stores of treasure. The raiders argue the pension funds are using our money to make others rich, and if they would spend more of that money at home, our increasingly urgent productivity problem wouldn’t be so acute. It’s a seductive argument, but one that’s too simplistic. 

When the World Bank commissioned a report in 2017 on what made Canada’s pension funds special, the authors concluded that “singularity of purpose is critical,” giving them a laser focus on “delivering retirement security for plan members.” Politicians in the 1990s agreed that public pension funds should be left alone to fulfill that mission without input from parliament and provincial legislatures. The independence of fund managers might not have been sacrosanct, but it was close. 

That World Bank report warned the pensions against confusing international adulation with accountability. “As they grow, Canadian funds are likely to face increasing scrutiny and thus need to continuously demonstrate value for money,” wrote the authors, among them Mahmood Nanji, who was at the time an associate deputy minister at the Ontario finance ministry. “Continuing to build trust with governments, key stakeholders, and the public and maintaining strong accountability, transparency, and ethics measures will be crucial in responding to this scrutiny.”

Oddly, the scrutiny has nothing to do with the effectiveness at which they have carried out their missions. The New Zealand Superannuation Fund was the only big pension fund or sovereign wealth fund that outperformed CPP Investments between 2013 and 2022, according to one ranking that also placed PSP Investments, British Columbia Investment Management Corporation, Ontario Teachers’ Pension Plan, Healthcare of Ontario Pension Plan, the Caisse de dépôt et placement du Québec and OMERS among the top 20. 

Rather, the pension funds are being portrayed as traitors to their country. The Letko Brosseau group said in its letter that the eight largest pension funds “have more invested in China (roughly $88B) than they do in Canadian public and private equities (roughly $81B).”  

The Canadian venture capitalist Matt Roberts, co-founder of CMD Capital, wrote a nearly 8,000-word Substack essay last month on the debate that takes the side of the raiders, arguing the decision in the early 2000s to let CPP Investments invest wherever it wanted came at the “expense of Canada’s productivity growth and capital availability for businesses.” He said the country’s biggest investment fund’s commitment to Canadian venture is less now (in inflation-adjusted terms) than it was at the time of the change, contributing to a relative scarcity of capital that explains why Crown agencies such as Business Development Bank of Canada and Export Development Canada have become such dominant players in the venture market. 

“But honestly—nobody cares, it seems,” Roberts wrote. “This has been the case for over 15 years. It is not news.” 

There’s something else that happened roughly 15 years ago, a thing that by most accounts was a boon to the venture business: zero interest rates, which inflated asset prices in the years following the Great Recession and lowered the opportunity cost of taking a flier on investors who promised to find the next Google or Facebook. But in Canada, we were more interested in speculating on houses than betting on the next big things in technology. 

There’s only so much money in any economy. In order for one person to invest, someone else needs to save. In the 1970s and 1980s, public debt crowded out private investment: a rational investor will take the risk-free asset (the bond of a reliable sovereign borrower) over the risky one. As Alberta Central chief economist Charles St-Arnaud showed in a report this week, it’s households that are now gobbling up most of the available capital thanks to the country’s mortgage binge over the past dozen years. 

So while the U.S. was plowing money into companies that in turn spent heavily on productive capital, Canada used the low-rate era to plow money into unproductive housing. The percentage of Canadian gross domestic product that is used on machinery and equipment and intellectual property is about the same as what’s spent on home renovations and transfer costs. 

“To solve productivity and support investment, measures will need to be put in place to ensure that businesses have access to the financing required to increase their level of investment,” St-Arnaud concluded. “Falling short will lead to continued chronic underperformance in Canada’s productivity.” 

Raiding the pension funds would be one way of crowding in some productive investment. But at what cost? 

Missing from the Letko Brosseau letter and the Roberts essay is anything about the adequacy of Canada’s retirement system to deal with an aging population. Canada ranks only 12th in the latest Mercer CFA Institute Global Pension Index, not what you’d expect from a country with so many world-beating public pension funds. That’s because many Canadians lack access to a company-sponsored pension plan and households save too little. Some 5.9 million people made RRSP contributions in 2019, compared with 6.3 million in 2000, when the median contribution was $2,700, according to research by Deloitte. In 2000 dollars, the median contribution in 2019 was $2,298, implying savers were at best standing still. “Our retirement system is pretty weak,” Nanji, who is now a fellow at the Ivey Business School’s Lawrence National Centre for Policy and Management, said in an interview. “Over the next 10 years, we really need to enhance our CPP program.”

Directing the CPP Investments and any of the other public pension plans to do anything but maximize returns would be the opposite of enhancement. If politicians, Canadian companies and venture capitalists want a share of our savings, the better bet for everyone is to force them to earn it. 

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.