CPPIB CEO says leaders must act quick as world’s largest investors focus on Canada
Canada is attracting new interest from the world’s largest investors and has a chance to grab a bigger share of foreign capital, but political and business leaders need to act quickly, the chief executive of Canada’s largest pension fund says.
Just last week, Canada Pension Plan Investment Board CEO John Graham hosted two “extremely large foreign investors” who wanted a primer from him on Canada’s investing landscape.
“They have capital and they’re curious. And this week I’m hosting another one,” Mr. Graham said in an interview on Monday, after speaking at an event at the Canadian Club Toronto.
Of late, he has found that the tone of those conversations has been different. These large investors hail from Asia and the Middle East, and until now, many of them “haven’t done a lot here,” he said.
Mr. Graham has travelled abroad to meet investors for years and found that their portfolios consistently underweighted Canada, which was overshadowed by the vast market next door in the United States. Big investors routinely allocate less than 1 per cent of their funds to Canada, even though it makes up 2 to 3 per cent of global stock market value, he said.
“Canada just hasn’t been on the radar.”
Now, with tariffs and economic instability shaking even the most established investment markets, Canada is drawing interest for its relative predictability, its natural resources and energy infrastructure. Even its proximity to the U.S., which is still the world’s most important investment market, “is a plus,” Mr. Graham said.
“I think Canada’s got a moment here,” he added. “It’s got a moment where it’s got people’s attention.”
The challenge for Canada will be to move fast enough to secure contracts and funding commitments before investors look elsewhere. Mr. Graham told a lunchtime audience Monday that he is “encouraged by the speed at which we’re trying to move,” but that investment capital is fluid and can “disappear overnight.”
The U.S. is moving at pace with new measures to speed up tax deductions for capital expenditures, he said. “Europe is saying all the right things also.”
Canada’s largest pension funds are also under pressure to invest more money domestically. Several pension fund CEOs have signalled they are eager to help fund major, nation-building projects that Ottawa is prioritizing – if the terms are acceptable.
Early talks with the federal government have focused on what would be interesting to pension funds, he said. And political leaders can attract more interest by removing friction and “unnecessary complexity” to make it easier to invest money in large infrastructure and energy projects.
“We’re super optimistic about what’s going on right now,” Mr. Graham said. “But to be clear, we’re also not policymakers, so we’re not involved in picking the projects.”
One of the most acute sticking points is the awareness among long-term investors, such as pension funds and asset managers, that “policy priorities ebb and flow,” he said.
As Ottawa tries to roll out a list of major national projects with shorter timelines to approval, investors are looking for signals that the conditions will stay in place to make multibillion dollar investments pay off over the long run.
“A few years ago, the policy priority was EV battery makers,” Mr. Graham said.
The CPPIB invested US$55-million as part of hundreds of millions of dollars of loans that four major Canadian pension funds made to Swedish-based battery maker Northvolt AB. The company filed for bankruptcy protection last year, leaving its investors facing losses.
“So you’ve got to be comfortable with every position you put in the portfolio,” he said. |
