'Amazing number of cool ideas': Poloz hears proposals to draw Canada's pension managers home

financialpost.com:

Former Bank of Canada governor Stephen Poloz is examining a list of ideas to get the country’s pension funds to invest more in the domestic economy — including the creation of a pooled fund that would make dealmaking easier for some of them.

People in the industry have also told him the government may need to change regulations for pension funds — potentially opening the way for them to play a more activist role in companies they’ve invested in, the former central banker said in an interview with Bloomberg News.

In April, Finance Minister Chrystia Freeland tasked Poloz with exploring ways to “catalyze” more local investment opportunities for Canadian pension funds. His study comes at a time when there’s a debate in the country about how to solve weak productivity, soft business investment and a general lack of excitement in capital markets. The initial public offerings market in Canada has been largely frozen for the past two years.

Some pension funds may be discouraged from looking at smaller opportunities within Canada because the analytical work in making an investment decision is costly and eats up a greater share of their potential profit, Poloz said.

That’s where the pooled fund concept comes in. Pension plans could make allocations to a central fund devoted to Canadian assets, where those costs are shared. It’s “one of the ideas that solves scale,” Poloz said, increasing the likelihood that pension managers will say yes to investing in assets that they would otherwise take a pass on.

He pointed to the Venture Capital Catalyst Initiative or VCCI as one potential model. Through the initiative, the federal government invests in venture capital funds, which then use the public money to leverage private-sector