Just like shoppers at the grocery store, Canada’s pension funds are feeling a little uneasy about buying American at the moment.
Driving the news: A number of top Canadian pension funds, including Canada Pension Plan Investment Board (CPPIB), are reconsidering making any new U.S. investments until the country’s political situation stabilizes, according to the Financial Times.
- CPPIB, Canada’s largest pension fund, is reportedly being more cautious about investing in U.S. infrastructure projects — a staple of many Canadian pension funds’ portfolios.
Why it’s happening: The volatility surrounding the White House’s economic agenda has stoked fears that the funds could suddenly lose the tax breaks they got on their U.S. investments.
Why it matters: The hesitation to park any more cash in the U.S. comes as Ottawa is trying to lure a bigger chunk of the pension funds' $3 trillion back to Canada. That push notably includes opening up infrastructure projects that have long been off-limits to pensions.
- The feds are now letting pension funds invest in airports, and are offering up to $15 billion in incentives for AI data centres backed by Canadian pension funds.
- Ottawa has also proposed eliminating a rule that currently restricts pension funds from owning more than 30% of the voting shares in a Canadian company.
Bottom line: Shares in public Canadian companies make up just 4% of Canadian pension funds' holdings, a steep decline from 28% in 2000. Reversing that trend, even partially, could open up a major new source of funding for companies at home.—LA