Pension manager urges funds to rethink FX risk as Loonie climbs and trade tensions bite
A Canadian pension manager is quietly preparing for a world where the US dollar is no longer the unquestioned anchor of institutional portfolios.
According to Bloomberg, Investment Management Corp. of Ontario (IMCO) is urging investors to diversify away from the greenback, pointing to the Swiss franc, Japanese yen and gold as alternatives in a landscape shaped by tariffs, trade wars and political risk.
IMCO’s latest world outlook says “currency risks are a feature of the new environment of trade wars and geopolitical threats.”
IMCO argues that “the acceleration in US efforts to address global imbalances, combined with Trump’s unpredictable and unconventional approach, could weigh on the USD in the years ahead while potentially lifting inflation and bond yields.”
The fund links this to recent market behaviour, noting that the US dollar slid even as Treasury yields rose after Trump’s April 2 tariff announcements, suggesting investors may no longer see the currency as a reliable safe haven.
Some asset owners are already acting.
Bloomberg also reported that European pension plans such as AkademikerPension and Alecta are cutting US Treasury holdings because they see credit risks tied to Trump’s policies as too large to ignore.
IMCO manages about $86bn for public-sector clients and had more than half its assets in the US as of December 31, 2024, leaving performance exposed to swings between the loonie and the greenback.
IMCO chief strategist Nick Chamie says “investors may need to contemplate what a rebalanced global economy — where the US plays a different role — means for their portfolios.”
That could include “rebalancing exposures away from the US to take advantage of increasing opportunities elsewhere.”
The report also highlights physical assets tied to strategically important areas such as artificial intelligence, energy-related infrastructure, commodities and natural resources, arguing that governments “need stuff to make stuff” as they build productive capacity and secure supply chains.
Currency dynamics are already shifting.
The Canadian dollar is at its strongest level against the US dollar since October 2024 after the Bank of Canada and the US Federal Reserve both held rates steady, which helps cross-border consumers but complicates life for exporters that prefer a softer loonie to offset tariffs.
At the same time, US Treasury Secretary Scott Bessent has tried to steady sentiment by telling CNBC that “The US has always had a strong dollar policy,” after which the Bloomberg Dollar Spot Index rose for the first time in a week.
