Canada seeks $500 billion for domestic projects as CPP invests only 12% at home
Ottawa is pushing hard for more pension money to stay in Canada. The real battle is over whether that shift happens by mandate or by making better deals on home soil.
According to reporting by the Financial Times, the federal Liberal government wants Canada’s pension plans – which manage more than $3tn – to play a central role in revitalising the domestic economy.
Ottawa is seeking upwards of $500bn in new financing for infrastructure, innovation and industrial development as GDP weakens and exports fall 7.5 percent.
Prime Minister Mark Carney has launched a “Buy Canada” campaign that prioritises local products in procurement and aims to make Canada “the strongest economy in the G7,” as reported by the Financial Times.
Industry Minister Mélanie Joly told the Financial Times that a new era of “economic nationalism” means pension funds should “think about Canada first” and “put capital where our mouth is,” even as they continue to focus on yields.
Policy changes back up that message.
As reported by the Financial Times, the federal government has:
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Scrapped the 30 percent cap on pension fund investments in Canadian entities, saying this “will make it easier for Canadian pension funds to make significant investments in Canadian entities.”
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Set up a Major Projects Office to fast‑track national infrastructure projects and reduce approval risk for large institutional investors.
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Started reviewing ownership limits that cap private positions in municipal utilities at 10 percent.
Major plans, however, still lean heavily global.
According to the Financial Times, CPP Investments, with $714bn in assets, has cut its allocation to Canadian assets to 12 percent from 14 percent two years earlier, even though the dollar value of those holdings has risen.
Nearly half of its portfolio sits in US‑based assets, while Benefits and Pension Monitor reports that OMERS, with $141bn in assets, has 16 percent in Canada and 55 percent in the US.
CPP Investments is not ignoring Canada.
Benefits and Pension Monitor notes that the fund has committed $225m to a new data centre in Cambridge, Ontario, and holds a $1.7bn stake in Canadian Natural Resources, the country’s largest energy company.
In a statement to the Financial Times, CPP Investments said it “acts in the best interests of contributors and beneficiaries in line with the pension promise,” and described its approach as “unwavering and steadfast” despite frequent calls from policymakers to invest more at home.
John Graham, chief executive of CPPIB, told the Financial Times he is “super encouraged” by Carney’s efforts to create large‑scale investable projects, but pointed to an “opportunity deficit.”
He said the fund will deploy more capital in Canada “if we see opportunities,” stressing its mandate to “maximise return without undue risk of loss” and describing its talks with Ottawa as constructive and focused on opportunities “without undue pressure to invest.”
Other plans are more domestically tilted.
Benefits and Pension Monitor reports that HOOPP, with $123bn in assets, has more than 55 percent allocated to Canadian investments, while OTPP, with $270bn in assets, holds 36 percent in Canada.
The sharper fault line is over method.
Speaking to Benefits and Pension Monitor, Sebastien Betermier, finance professor at McGill University’s Desautels Faculty of Management and executive director of the International Centre for Pension Management, warned against “the path of mandating or telling the funds what to do and starting to blend other priorities with the retirement security policy goal.”
He argued the better route is to “create conditions that naturally encourage pension fund investment to come in.”
Betermier told Benefits and Pension Monitor that he does not oppose domestic investing but cautioned that forcing funds into politically driven projects risks undermining the independence and governance that have made Canada’s pension model one of the most effective globally.
He sees room for “really good alignments between pension funds and governments” if the system’s integrity stays intact.
To structure that alignment, Betermier and a working group at the International Centre for Pension Management developed the idea of an “investable window.”
It defines when domestic projects fit pension funds’ legal and financial obligations: competitive risk‑adjusted returns, sufficient liquidity, appropriate scale, strong governance and low development risk.
He said governments can widen that window by de‑risking parts of projects, ensuring regulatory clarity and speeding up approvals.
Betermier also pointed out, in Benefits and Pension Monitor, that Canadian plans already show a natural home bias in key asset classes.
He estimated that about 70–80 percent of Canadian bond holdings and roughly 60 percent of real estate assets are invested domestically, above what global benchmarks would suggest.
He argued that attracting both domestic and foreign institutional capital depends more on creating a stable, long‑term business environment than on mandating allocations, warning that the “silent loss” from failing to draw in foreign capital can be “an order of magnitude higher” than the gains from forcing more Canadian deployment.
