About a hundred high-profile business people join Montreal asset manager Letko Brosseau to encourage Ottawa and provincial governments to change pension regulations to encourage Canadian pension funds to invest more in the country.
The most important investors for the future of Canada hardly invest in the country anymore, they regret in unison.
Letko Brosseau has deplored for several years that the country’s pension funds are divesting themselves of Canadian stocks, a situation which has repercussions on economic growth and which, according to the asset manager, should represent an important political issue for Canadians and the government .
To raise public awareness of this issue and try to broaden the debate, an open letter signed by Letko Brosseau and around a hundred personalities from the business community was published this Wednesday in the Dialogue section of The PressTHE Globe & Mail, The duty and the Financial Post.
The list of signatories includes the names of Alain Bouchard (Couche-Tard), Laurent Ferreira (National Bank), Eric La Flèche (Metro), Pierre Karl Péladeau (Québecor), Louis Audet (Cogeco) and Éric Martel (Bombardier) .
Canadian pension funds have reduced their stake in publicly traded Canadian companies from 28% of their total assets at the end of 2000 to less than 4% at the end of 2023.
Excerpt from the letter addressed to the Minister of Finance of Canada and the provincial finance ministers
It is specified that investments made in Canada have an impact on portfolios, but also on the Canadian economy: job creation, improved income and increased contributions to retirement plans. Less investment in Canadian companies increases their cost of capital, decreases their value, and reduces their capacity for growth, which makes Canada less attractive, it is emphasized.
“Without government sponsorship and considerable tax assistance, pension funds would not exist. The government has the right, responsibility and obligation to regulate the operation of this savings scheme,” it is added.
Promoting investment in Canada should be a national priority, according to the signatories, and they say they would support a political effort aimed at changing the rules governing pension funds to encourage them to invest in Canada.
According to them, consideration should also be given to encouraging other investors to devote more capital to domestic investments.
Solutions
Daniel Brosseau, one of the co-founders of Letko Brosseau, which has assets under management of approximately 17 billion, documented the situation and presented his concerns to the relevant authorities. He and his colleague Peter Letko believe that governments are currently considering measures that could be put forward.
“The impact of retirement funds is not limited to pensions,” said Daniel Brosseau in an interview. “Investments also have an impact on the economy which should not be neglected. This is perhaps beyond the capacity of pension fund managers to take this into account. However, that doesn’t mean we should ignore it if they can’t do it. Governments could create a small advantage that would allow the system to take this into account. »
Pension funds must be able to invest where they think it is best, in Canada or elsewhere, and in the sector they want, says Daniel Brosseau. But relatively simple solutions exist to the problem raised, according to him.
In particular, he proposes regulations including a reservation. “If a pension fund invests in Canada, it does not have a reserve to take, but if it invests abroad, there would be a reserve to take and the return on this reserve would belong to it, but would not count in its actuarial assessment of solvency. » This would ensure, he adds, that if a manager believes he can obtain a much better return elsewhere, he will be able to do so by agreeing to take a reserve.
And if, in equal circumstances, he prefers not to be forced to put money aside by taking a reserve, investment in Canada would be favored. “It’s a gentle remedy and it is in this spirit that we presented our solutions,” says Daniel Brosseau.
National investments with an impact are not limited to the purchase of company shares, he emphasizes, because pension funds are very “active” in infrastructure, real estate and private investments. .
An example of a local investment with an economic impact is the REM, he said.