Ontario Finance Minister Peter Bethlenfalvy wants Canada’s pension funds to invest more domestically, but that shouldn’t mean interfering with their mandates, he told The Logic. 

“I’m not keen on prescriptive directives to invest more in Canada,” Bethlenfalvy said in an editorial board meeting with The Logic on Monday. “I’m always going to push for them to do more in Canada,” he said, “but it’s got to be because they see the opportunities in Canada.” 

Pension funds face growing pressure to buy more stakes in Canadian assets. Doing so, proponents say, would help boost the economy at a time when many are calling Canada’s weak productivity a crisis. 

Business leaders are divided on how to encourage more domestic investment from Canada’s largest pension funds. While some favour mandates requiring a certain share of their portfolios be invested at home, others say domestic investment rules could compromise pensions’ responsibilities to maximize returns for retirees whose money they manage. 

“Pension funds have a fiduciary responsibility,” said Bethlenfalvy, who held senior ranks in the financial services sector before joining politics. “They’ve demonstrated a track record of investing on behalf of their members, and they’ve done a good job.” 

Most pension fund managers in Canada have a single mandate to maximize returns for contributors. The Caisse de dépôt et placement du Québec is one exception. The fund manager has a dual mandate to maximize returns for pensioners while also stimulating Quebec’s economy. 

Rather than mandates, Bethenfalvy said governments should “set the conditions to make it more attractive to invest in Canada.” 

Bethlenfalvy’s federal counterpart, Finance Minister Chrystia Freeland, tapped former Bank of Canada governor Stephen Poloz in April to identify what those conditions might be. 

The Ontario minister said he’s shared his recommendations with Poloz for his consultation. Poloz has also said he wants to avoid a prescription solution for attracting pension investments, favouring “carrots, not sticks.” 

Fund managers have long said privatizing publicly owned infrastructure is one way to encourage investment. The federal government said in its latest budget that it would explore allowing private investments in airports, for example. The Logic reported in September that asset management giant Brookfield was in talks with Canada’s pension managers to create a $50-million fund to invest domestically, including in privatized public assets. 

Ontario Premier Doug Ford has criticized former governments for selling public assets including power utility Hydro One and toll road Highway 407, calling them bad deals for taxpayers. 

Privatizing government-owned infrastructure isn’t on the table in Ontario, Bethlenfalvy told The Logic. Instead, the government plans to build new public projects with co-investments from pension funds and other institutional investors through its Building Ontario Fund. The provincial government announced the fund in its 2023 fall economic statement with an initial $3 billion to invest in affordable housing, long-term care, energy and transportation assets. 

The fund hasn’t started investing—the government just appointed Michael Fedchyshyn as its inaugural CEO last month. But the goal, said Bethlenfalvy, is “to build more in Ontario, faster and that might not otherwise get built,” he said, “to bring transactions that are attractive to pension funds and other investors.”