Joe Oliver: Hands off my pension! That includes you, Chrystia Freeland

financialpost.com:

Last week, 92 prominent senior executives, investment managers and individual investors signed an open letter to the federal and provincial ministers of finance expressing concern with “the decline in Canadian investments by pension funds and its impact on the Canadian economy.” Aggregate public and private Canadian equity investments are down to about a tenth of the total of more than $3 trillion in total pension assets.

Since pension funds receive crucial government sponsorship and tax assistance, the letter argues, “Government has the right, responsibility, and obligation to regulate how this savings regime operates.” It supports amending the rules to “encourage” pension funds to invest more in Canada, without specifying how this should be done or to what extent.

The signatories are pushing on an open door. Finance Minister Chrystia Freeland said in her fall economic statement that “The federal government will work collaboratively with Canadian pension funds to create an environment that encourages and identifies more opportunities for investments in Canada by pension funds.”

Many of the signatories have skin in this game. New capital investment could bolster stock prices and reduce the cost of equity capital for companies they own or manage. Self-interest aside, however, they raise a top-of-mind and contentious public policy issue.

Pension fund managers predictably hold a contrary view. Everyone can agree that diversification is an important investment consideration. Last year, Canada’s stock market capitalization represented just 2.7 per cent of the $109-trillion global market. It is therefore prudent to invest a significant percentage of assets under management in other countries to mitigate concentration risk and