Forcing pension funds to invest in Canadian equities is an idea that seems merely terrible at first glance but, when you really dig into the details, turns out to be truly abysmal.urging federal and provincial finance ministers to alter the rules governing pension funds in order to boost the amount that they invest in Canada. In 2000, they point out, publicly traded Canadian companies made up 28 per cent of the assets of domestic pension funds. Last year, that proportion fell to 4 per cent.
The letter remains studiously vague about how the government might prod pension funds into shifting dollars into Canada. But one option proposed by some of the signatories would require pension funds to set aside a “reserve” when investing abroad. It’s not quite a return to the era of formally capping foreign investment, but the result would be the same: trapping capital inside of Canada.
And what has been the result of that natural experiment? As of the end of fiscal 2023, the base CPP had a five-year net return of 8 per cent. The enhanced CPP had a significantly lower net return of 5.6 per cent. Or to put it another way, the plan heavily weighted to Canada did only 70 per cent as well.