U.S. President Donald Trump’s back-and-forth tariff threats are galvanizing an “invest in Canada” movement that’s prodding pensions to keep more of their cash at home.
The country’s biggest pensions, known as the Maple Eight, oversee roughly C$2.3 trillion ($1.6 trillion), about a quarter of which is invested in Canada, according to Bloomberg calculations. Many Canadian politicians and business people aim to make that portion grow much larger — putting further pressure on the country’s pension model.
For decades, Canada’s revolutionary pension model has won worldwide acclaim for its independent governance, in-house management and sophisticated staff that can spot investments that will pay off for workers in the long run. The well-heeled executives of its top pension managers have scoured the globe looking for these lucrative private bets and setting an example for other nations.
Critics now contend the pensions haven’t put nearly enough money in the country, especially since Trump started threatening steep tariffs. On Tuesday, Trump said he was increasing the steel and aluminum tariff on Canadian goods to 50% to retaliate against Ontario’s move to place a levy on electricity. The latest salvo doubles a planned 25% metals tariff.
With the escalating levies, Canadians are primed to back the country’s economy and especially loath to support US firms.
The “invest in Canada” movement had been gaining momentum before the tariffs, with a National Post op-ed contending last month that Canada should marshal its pension resources to fund the military.
“This will strengthen Canada in the face of Trump and helps our military,” retired Canadian Forces Honorary Colonel Kevin Reed, who co-wrote the op-ed, said in an interview.
Key members of the Canadian government — which historically hasn’t interfered with pensions — said they want them to allot more of their capital to boost Canada as it struggles with sluggish growth, low productivity and a dearth of affordable housing. In December, the country’s finance department said it would remove a rule limiting pension funds’ investments in Canadian entities to no more than 30%.
“Canada needs to fight harder than ever for capital,” Chrystia Freeland, then-deputy prime minister and minister of finance, said at the time. That includes “facilitating and supporting the investment of Canadian capital here at home.”
The country’s economy is poised to be “more sluggish” than the US’ this year, according to Royal Bank of Canada analysts, who said Canada had “experienced a dramatic” productivity slowdown relative to its neighbor. But pension cash alone can’t boost Canada’s fortunes, some argue.
Charles Emond, the chief executive officer of Quebec’s fund, pointed out that “it goes both ways” when it comes to putting Canadians’ retirement savings to work. Pension funds can always invest more in Canada, he said.
But “you need to be able to have projects to throw money at,” he said.
The timing of the “invest in Canada” push couldn’t be worse for pensions. They’re grappling with one of the toughest economic environments since the 2008 financial crisis, triggered by elevated interest rates that have strained liquidity and weighed on returns. Some of the Maple Eight are reviewing whether they’re too exposed to private markets, which comprise about 60% of their portfolios.
More than two years of subdued deal activity is making it harder for some of the pension plans to exit investments and free up capital. Even as some lack cash to put to work, pension funds encounter relentless calls to invest locally.
The province of Alberta, unhappy with the way its own manager invests and the pension’s rising costs, fired its entire board and CEO late last year — sending a clear message to the Maple Eight: The government is watching.
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This story is based on interviews with more than a dozen people familiar with the industry, including pension plan officials and fund managers. Some of them asked not to be identified discussing sensitive matters.
Maple Model
Ontario Teachers’ Pension Plan pioneered today’s gold-standard methods, focused on independence and long-term bets, in the early 1990s after a funding crisis motivated the province to revamp its model. Similar overhauls ensued at the Canada Pension Plan Investment Board and other Canadian pensions.
Investment-savvy executives now lead the Canadian pension boards, with a former life insurance CEO chairing CPPIB and ex-bankers from Goldman Sachs Group Inc. and RBC sitting on the Ontario Teachers’ board.
Canada’s pensions “invest internally at scale and with force,” and they’ve built internal teams dedicated to risk-management, middle-office functions and finance, said Rashay Jethalal, CEO of investment data firm CEM Benchmarking.
Other funds globally — including those in Australia and the Middle East — have fortified their operations in a similar fashion, he said. In 2017, the World Bank said the Canadian pension model embodies “practical lessons for building world-class pension organizations.”
But the Maple Eight model is showing cracks. When Alberta’s government ousted its pension’s board and management in November, it blamed rising costs and “middling” returns. The move reverberated across the industry, particularly as Alberta Investment Management Corp.’s investment strategy, performance and costs lined up with its peers.
The government installed an ex-politician, former Conservative Prime Minister Stephen Harper, in charge of Aimco’s board and tapped long-time public servant Ray Gilmour as interim CEO. The pension is already cutting costs, potentially prodding others to do the same.
In the shadow of the Aimco takeover, some pensions are discussing internally whether they’re properly engaging with shareholders and maintaining their autonomy. Outside firms managing assets for at least one pension have been asking about political interference, putting the fund in the position of having to make repeated assurances that the government isn’t meddling with its investments.
“Canada has world-class public retirement systems, and to ensure the continued security of Canadians’ pensions, it is vitally important that investment managers like Aimco operate with independence,” Aimco said in a statement.
The pension — which has about 40% of its portfolio invested in Canada — is continuing to “aggressively pursue global investment opportunities to increase the potential sources of diversification and to generate superior risk-adjusted net returns for our clients,” Aimco added.
Open Letter
Last year, about 100 Canadian business leaders, including Montreal-based asset management firm Letko, Brosseau & Associates, signed an open letter urging the finance minister to “amend the rules governing pension funds to encourage them to invest in Canada.”
Eric Boyko, CEO of music and media company Stingray Group Inc., signed the letter. Pension funds should be obliged to invest a minimum level of their assets in Canada, he said, explaining that small, publicly traded firms like his struggle more and more to attract investors.
“We need to find a way to bring more money to the Canadian market,” he said.
The federal government has so far resisted requiring pensions to invest domestically, though it strongly encourages them to do so — including through the recent loosening of restrictions around pensions’ ability to own controlling stakes in Canadian companies.
“We were disappointed and really not that impressed with what’s been put forward,” said Peter Letko, co-founder of Letko Brosseau, adding that he doubts the measures will make a meaningful difference. Proposals from the federal government, such as allowing pension plans to own airports, are tantamount to giving the pensions a stake in “gold mines,” he said.
“They should invest a lot more,” Letko said. “Investing in our own community does encourage more economic activity.”
The funds’ domestic backings have fallen over the past two decades, he said, “starving Canada of much-needed investment and compromising our independence.” His firm’s research shows that most of the Canadian investments are in fixed-income such as government bonds, not equity in companies.
One pension could serve as a model for feeding the Canadian economy: Caisse de Depot et Placement du Quebec. That fund has a mandate to invest in Quebec and its businesses, which it has emphasized even more since Trump ramped up his tariff threats in February. As of Dec. 31, C$93 billion of the C$473 billion in total assets were invested in Quebec, with the goal to reach C$100 billion by next year without compromising its performance.
“Independently of tariffs or not, I think this is something we need to address right away,” said Emond, the Quebec pension’s CEO.
Some who signed the letter argue that the government shouldn’t force pensions to back domestic businesses. Canada must simply become “more investible,” said National Bank of Canada CEO Laurent Ferreira. If the country encourages broad investment in industries including energy and natural resources, he said, the pensions will follow suit.
Reed, who co-wrote the National Post op-ed, suggested that some of the money that pensions hold in Canadian bonds be directed to fund military infrastructure.
“The pension plans should be encouraged to do it,” he said. “And it is the right investment decision.”
CPPIB and Ontario Teachers’ didn’t reply to requests for comment. The Ontario Municipal Employees Retirement System and the Public Sector Pension Investment Board said in separate statements they’re committed to collaborate with the government to create an environment that encourages and unlocks domestic investment.
Strategy Shift
As Canada’s pensions are pushed to shift investments home, they’re also re-examining a strategy that sets them apart from many other public entities that oversee retirement income. The Maple Eight pensions manage a large chunk of their assets internally, investing part of those funds directly. They’ve built up their staff in order to lead the way on deals, rather than simply handing their capital to alternative asset managers, such as Brookfield Asset Management, KKR & Co. and Blackstone Inc. — though they do that, too.
Meanwhile, Canada’s pensions have opened offices and hired people across the globe, which has given them access to coveted deals. CDPQ invested $5 billion in some of Dubai’s most prized assets, including the Middle East’s biggest port, and owned a 19% stake in Eurostar Group as of 2023. Canadian pensions also own London City Airport, private credit firm Antares Capital and India’s ReNew Energy Global Plc.
But they also have run into some trouble. US bribery charges against Indian billionaire Gautam Adani have ensnared CDPQ after three of its former employees were charged with conspiracy to violate the US Foreign Corrupt Practices Act. Omers is the No. 2 holder of Azure Power Global — which was involved in Adani’s alleged bribery scheme, according to the US Securities and Exchange Commission.
Separately, a member of Ontario Teachers’ sued the pension plan in January, alleging the board didn’t conduct proper due diligence when investing $95 million in FTX, a crypto exchange that imploded in 2022.
Going forward, pensions are considering investing more in public markets amid diminishing returns in private ventures.
“Does it really still make sense to invest huge amounts in the private markets if the additional compensation is definitely less than it used to be?” said Eduard van Gelderen, the former chief investment officer of the Public Sector Pension Investment Board. Moreover, he said, pensions will need to become more liquid as baby boomers retire.
When they do invest in alternatives, some of the Maple Eight, such as CDPQ and Omers, are looking to lean more on external managers instead of owning direct stakes, particularly in private equity. Direct ownership can require hiring richly compensated executives, who expect to work in lavish offices where they can strike multibillion-dollar deals.
These are the kinds of expenses that irked Alberta’s government. Its pension fund’s global expansion included renting an office in high-end tower One Vanderbilt in New York, opening an outpost in Singapore, creating new non-investment executive roles and awarding expensive contracts to external consultants. Aimco has since shuttered its offices in both locations.
But some critics contend that Alberta overstepped its authority by ousting the entire leadership. The push to invest locally interferes with pensions’ primary objective to deliver returns and make pensioners whole, the critics say.
“If from one day to the next, the government can dismiss an entire board and start over, that’s not as independent as you wish it to be,” said Sebastien Betermier, an associate professor of finance at McGill University in Montreal. “That’s potentially affecting other funds, too — and it’s a top-of-mind question because it affects your ability to be long-term focused.”
— With assistance from Christine Dobby.
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