Stephanie Ha of CTV News
reports PM Carney announces Canada’s first national sovereign wealth fund:
Prime Minister Mark Carney has announced Canada’s
first national sovereign wealth fund, calling it the “Canada Strong
Fund,” ahead of Tuesday’s spring economic update.
Carney
officially made the announcement in Ottawa on Monday morning, saying it
will allow Canadians who have “a bit of extra money” to invest into it
directly, similar to a government bond.
The
federal government will initially contribute $25 billion into the fund,
which Carney says “will grow through asset recycling and reinvestment,
creating even greater opportunities for future generations.”
A
sovereign wealth fund is a state-owned investment fund that uses
government surplus reserves to invest in financial assets like stocks
and bonds but is independently managed. Alberta has its own sovereign
wealth fund, called the Alberta Heritage Savings Trust Fund, that was
established back in 1976.
According to Carney, the fund will be
“professionally managed and operate as an arm’s length independent Crown
corporation” and “will be accessible to everyone.”
The
fund is also intended to complement and accelerate the work of existing
institutions like the Business Development Bank of Canada and the
advancement of projects through the Major Projects Office.
Whether
a project is in Alberta, Quebec, or in the far north, high north, all
Canadians will have a stake because this is about ensuring that you and
your children and your children’s children benefit from the prosperity
that we are creating today,” Carney later added.
Asked
by reporters why a new agency is required, Carney said the Canadian
Infrastructure Bank “provides debt” and “helps make projects possible,”
while the new fund “comes in on a commercial basis” to get returns
alongside the private sector.
Carney also said
the fund will not be strictly investing in projects deemed in the
national interest, as described under the Building Canada Act, and said
“absolutely not” when asked if the fund signals that there is not enough
private sector investment for projects.
“I don’t think that it will be that restricted, but it will be a focus on investing in Canada,” he said.
Speaking
to reporters in Ottawa, Conservative Leader Pierre Poilievre criticized
the Carney government for creating another agency.
“How
many corporate welfare agencies do the Trudeau-Carney liberals need to
create before they learn that it doesn’t work?” Poilievre said.
Finance minister says fund will take ‘months to set up’Finance
Minister François-Philippe Champagne says the fund will be up and
running “in the coming months,” but did not provide a specific date when
asked by reporters in Montreal on Monday.
“It
will take, clearly, months to set up. But I think the fact that we are
putting that as a pillar of our future growth, I think it’s an important
message at an important time for Canadians,” Champagne said.
Pressed on how the fund will work for investors, Champagne said the federal government will “come back to the details.”
“The
details of the funds, how it’s going to be, the liquidity. There’s a
lot of very relevant questions you have,” Champagne said. “But I would
say this would be for a later time when we have had the chance to have
the consultation (with the industry).”
How does it differ from Norway? Speaking
to reporters, Carney compared the new fund to Norway’s Sovereign Wealth
Fund, which has surpassed $2 trillion in assets.
While
Norway’s fund invests its direct oil and gas revenues and has a strict,
self-imposed cap on how much money the government can spend from it,
the new Canadian fund is more domestically focused and funded by
borrowed money.
Montreal Economic Institute economist Emmanuelle Faubert said there is a difference between the two funds.
“The
Norwegian model is not funded on debt. Right now, we have increasing
deficits. We have increasing debt, both federally and provincially, and
the funding model in Norway might work better because it’s funded
through surpluses,” Faubert said in an interview with CTV News.
“(Canada
is) taking money that should instead go towards clearing deficits,”
Faubert went on to say, later adding that the fund could be “a risky
venture that might end up just costing money and giving nothing to
Canadians.”
Sources say deficit will be smaller than projectedThe
announcement comes as Champagne is set to unveil the Carney
government’s first spring economic update on Tuesday, and the new fund
will be part of that update.
Two senior
government sources tell CTV News that the deficit will be smaller than
what was projected in the federal budget back in November, in part due
to increased revenue from inflation and the price of oil.
While
speaking to reporters, Carney emphasized that the government is
“determined to get spending down” and admitted that “you can’t do
everything at the same time.”
“In order for
the numbers to be better, you have to be on top of them, and we’re on
top of them,” Carney said, while adding that issues of affordability
will be addressed.
Last fall’s federal budget
forecasted a $78-billion deficit in 2025-26 and a $65-billion deficit
for 2026-27, with the figure decreasing to $56.6 billion by 2029-30.
On
Sunday, Poilievre wrote an open letter to the prime minister to cap the
deficit at $31 billion and “present a plan to return to a balanced
budget in the medium term.”
Asked by reporters
on Monday about how long he thinks the government should take to
eliminate the deficit, Poilievre would not give a specific target date.
“Let’s
figure out how big a mess the Liberals have made, and then I can tell
you how long it will take me to clean it up,” Poilievre said.
Pressed
further to provide a target date, Poilievre said “it should be
yesterday,” adding “they should have a balanced budget all the time,
except for in massive national emergencies.”
Peter Zimonjic of CBC News also reports Carney announces creation of Canada's first national sovereign wealth fund:
Prime Minister Mark Carney has announced his plan to create Canada's first sovereign wealth fund.
The
"Canada Strong Fund" will serve as an investment vehicle to finance
major projects of national interest and will work in partnership with
the private sector, Carney said in a video posted online.
Carney
said in the video that Canadians will be able to contribute to and
benefit from the fund, investing alongside the private sector and
international partners.
"If
you have a bit of extra money, we'll make it easy for you to invest in
the fund to help build Canada strong for all," he said.
In a
statement, the federal government said the fund will include projects in
"clean and conventional energy, critical minerals, agriculture, and
infrastructure."
At Monday's press conference at the Canadian Science and Technology
Museum in Ottawa, Carney said the fund will begin with an initial
endowment of $25 billion.
"Over time, the fund will grow through
asset recycling and reinvestment, creating even greater opportunities
for future generations," Carney said.
When asked where that $25 billion will come from considering Canada's fiscal situation, Carney said the Spring Economic Update on Tuesday
will deliver news that Canada's finances are on a stronger footing than
they were when Carney's government projected a $78.3-billion deficit
for the fiscal year just ended.
"In order for the numbers to be better, you have to be on top of them, and we are on top of them," Carney said.
The
recent spike in the price of oil, due to the war between Iran and the
United States and Israel, has boosted revenues in Canada's oil-producing
provinces and in turn boosted how much revenue the federal government
has collected.
This time will be different, Carney saysCarney
said the Canada Strong Fund will be managed by an arm's-length
independent Crown corporation that will report to Parliament, and his
government will spend the next few months consulting on "specific
aspects of the fund."
Describing the fund as "essentially a
national savings and investment account," Carney said the fund is being
designed to "grow wealth for future generations."
"This will be a
Government of Canada fund, but more importantly, this will be a
people’s fund. It will be your fund," Carney said.
In
order to allow people to contribute to the fund, the federal government
will launch a "retail investment product" like a mutual fund or pension
scheme where Canadians can buy into the fund and earn a dividend.
"This
will give Canadians a direct stake in our nation’s long-term prosperity
and help build long-term national wealth," the government said in a
statement.
Carney also said that like the Canadian Pacific Railway, the major
projects his government is trying to get built will mostly be
constructed by private companies.
Just like in the 1870s, Carney
said "the federal government will support these projects through loans,
grants and other incentives."
Carney evoked the spirit of major
infrastructure projects that defined Canada's history, but said the
proposed plans would be different from things like the Canadian Pacific
Railway, which was built by displacing Indigenous peoples from their
land, where workers laboured under "appalling conditions" and the only
people who benefitted from the projects were the companies that built
them.
Carney said Indigenous peoples will be full partners in the
projects through equity stakes; that the projects being financed will
be built by Canadians in "high-paying union jobs"; and because the
government is investing in the fund, all Canadians, whether they invest
directly or indirectly as taxpayers, will benefit.
Projects of national interestBill
C-5, Carney's legislation to speed up approvals for major
infrastructure projects identified as being "nation-building," passed
through Parliament last June.
The second half of the bill, the
Building Canada Act, enables the federal cabinet to pick projects,
approve them upfront and override federal laws, environmental reviews
and the permitting process.
The legislation speeds approval times
from five years to two by introducing a "one project, one review"
approach instead of having federal and provincial approval processes
happen sequentially.
When he announced the MPO, Carney said it would "help structure and
co-ordinate financing from the private sector, provincial and
territorial partners" and the federal government to ensure taxpayers get
value for money.
Carney said the projects being financed through
the fund will not be limited to ones of national interest, which have
to meet certain benchmarks to get that classification.
"It
wouldn't be restricted to that, in my judgement. We'll consult on the
specifics of that, so it's a broader range than would be just
specifically C-5," he said on Monday.
Poilievre criticizes Carney for debt-financing fundConservative
Leader Pierre Poilievre criticized Carney for using borrowed money to
endow the Canada Strong Fund, saying countries need to have wealth for a
wealth fund, but all Canada has is debt.
"The investment exists,
it comes from our country," Poilievre said. "It just can't get a return
in our country. Putting another $25 billion on the national credit card
to pad a Liberal slush fund will not change that."
Poilievre said
projects in Canada are struggling to get funding and investment from
the private sector because of onerous regulations and laws that
frustrate development, not because of a shortage of cash.
"If a
project has a business case, why would the government need to fund it?
If it doesn't have a business case, why would the government want to
fund it?" Poilievre asked Monday.
Uday Rana of Global News also reports Canada is getting a sovereign wealth fund, here is what we know so far:
Canada is getting its first sovereign wealth fund, Prime Minister Mark Carney said on Monday, with an initial endowment of $25 billion.
A sovereign wealth fund is a state-owned investment fund, that allows
a government to invest in projects and investment opportunities across
the world.
Carney described it as “essentially a national savings and investment account.”
Several
countries around the world, from China and Norway to Australia and
Saudi Arabia, have similar state-owned investment funds.
The Canada Strong Fund will “invest alongside the private sector in nation-building projects,” Carney said.
“We
will begin with an initial endowment of $25 billion. Over time, the
fund will grow through asset recycling and reinvestment, creating even
greater opportunities for future generations,” he said.
Conservative Leader Pierre Polievre referred to the fund as a “slush fund.”
“Some of the countries around the world, you will note, have sovereign
wealth funds. You need to have wealth for those funds. Norway, Singapore
and Saudi Arabia run big budget surpluses, which they accumulate and
then put into their sovereign wealth funds,” he said.
“Carney has no surplus and therefore, no wealth to put in such a
fund. He’s talking about a sovereign debt fund,” Poilievre added.
The
creation of a national sovereign wealth fund is “largely” a good
initiative for the country, said Saskatchewan Premier Scott Moe.
“We
need to have that environment to attract that economic investment, that
private sector investment into our energy industry, into our industrial
industries like mining, gas, helium, lithium and so on, as well as our
agricultural industries and manufacturing industries,” he said.
However,
when asked if such a fund would have an impact on provincial budgets if
the federal government pulls oil and gas revenue to the fund, he
pointed to questions of “provincial autonomy.”
“The development of our natural resources are the purview and the jurisdiction of the provinces,” he said.
What might the fund look like?
The idea of a government-run investment fund isn’t new, not even in Canada.
Alberta, for example, has the Alberta Heritage Savings Trust Fund, which
reinvests a portion of the province’s resource revenues, particularly
from the oil and gas sector. Quebec has the Caisse de dépôt et placement
du Québec (CDPQ).
The Canada Pension Plan Investments is currently one of the largest
institutional investors in the world, with over $780 billion in assets
under its management globally.
“The really big question is how is
this fundamentally different from what we’ve seen in the past?” said
Jimmy Jean, chief economist at Desjardins.
“We’ve had a series of
funds that haven’t really delivered, even though they were intended to
do the exact same thing – get more investment and involve more private
sector or major investors in major projects,” he added.
The Canada Infrastructure Bank, formed in 2017, was tasked with supporting infrastructure projects.
“We haven’t seen too much in terms of outcomes from that,” Jean said.
The plans for the fund will be included in the spring economic update on Tuesday, Carney’s office said.
The
federal government said it will also establish a Canada Strong Fund
transition office to “advance a targeted engagement with market
participants and regulators,” the Prime Minister’s Office said.
Will a sovereign wealth fund work?
For private equity investors to choose Canada, the new
sovereign wealth fund will need to guarantee targeted returns, said
Concordia University economist Moshe Lander.
“Why would I want to invest my money in building some bridge in
Canada when I can invest my money in some tech company in the U.S.?
That’s where private capital is going to say ‘thanks, but no,’” he said.
The example of Alberta’s provincial fund would not be encouraging for many institutional investors, Lander added.
“They’ve
(Alberta) massively mismanaged it. They use it as a rainy-day fund,
rather than as some sort of generational fund. Any time something goes
sideways in the province, which it inevitably does because it’s
boom-and-bust cycle, they just go and grab the money,” he said.
Individual
Canadians will be able to directly invest in the fund, Carney said,
though it’s not yet clear how that proposal will work.
“If you
have a little bit of extra money, we’ll make it easy for you to invest
in the fund to help build Canada strong, for all,” he added.
Most
of the major investment in big projects in Canada will still come from
the private sector, he said, with the federal government providing
support through loans, grants and other incentives.
The fund will
be “professionally managed and operate as an arms-length, independent
Crown corporation,” he said, adding that the government will be
consulting over “specific aspects” of the fund.
Carney compared the fund to the building of the Canadian Pacific Railway
in the 1870s, however, he said some things would be different.
“This time, we are building with Indigenous Peoples as full
partners—ensuring meaningful Indigenous ownership and major economic
benefits,” he said.
Some Indigenous groups, however, have expressed concern.
“At
a minimum, there should be a clear policy standard: public funds must
not be deployed in ways that infringe on Indigenous rights, title, or
self-determination. Anything less signals that ‘sovereignty’ is
conditional depending on who holds it,” said Gwii Lok’im Gibuu, co-
director of the Skeena Watershed Coalition, in a statement.
Where would the money come from?
When asked where the money for the fund would come from given
the size of the federal government’s deficit, Carney said there would be
“good news” on that front during Tuesday’s spring economic statement.
The range of investments will be “very broad,” beyond just oil and gas, he said.
Managing
oil revenue is a key aspect of Norway’s sovereign wealth fund, but
Norway has a cap on how much of the fund’s spending comes from the oil
sector. This is done to protect the broader Norwegian economy from the
boom-and-bust cycles typically associated with the oil and gas sector.
This
will be harder for Canada to do, given that resource revenue in Canada
is not centralized, a report in the McGill Journal of Economics said
earlier this month.
“The difference between Norway and Canada is
Norway does not have provincial governments with nearly the power that
we have in Canada,” Lander said.
“Any attempt to try and deal with
the oil and gas industry at the federal level will instantaneously be
met with pushback, of course, from Alberta, but also from Newfoundland
and Labrador,” he added.
The federal government needs to ensure
that Canadian investments are protected against the boom-and-bust of
global oil shocks, said Sierra Club Canada.
“We’re awaiting more
specifics, but we are concerned that the fund is effectively a way to
misleadingly ‘re-brand’ public investment and backing for a west coast
oil pipeline and new LNG projects: projects that have no business case
as the world moves rapidly to renewable energy,” says Conor Curtis,
director of communications at Sierra Club Canada, said.
The focus of the fund will be on investing within Canada, Carney
said, as Canada takes “a lesson from other jurisdictions that had the
foresight many decades ago to start sovereign wealth funds.”
“In
some cases, they began with a domestic focus. Then outgrew the scale of
the domestic focus,” he said, pointing to the state-owned private
investment fund Temasek Holdings in Singapore.
When it was founded
in 1974, Temasek made largely domestic investments in Singapore.
Recently, however, it has broadened its scope with global investments.
The
“uniqueness” of Canada’s sovereign wealth fund – as opposed to the ones
that Nordic countries like Norway have – will be the ability of
everyday Canadians to put money in the fund, Finance Minister
Francois-Phillipe Champagne said.
“We’re looking at best practices
to really set something which would be uniquely Canadian, inspired by
best practices in the G7,” Champagne said, speaking to reporters shortly
after Carney.
However, this could mean that many Canadians will be left out of the returns, some economists warn.
“In
order just to actually allocate funds to allocate your money as an
individual to an investment fund, you need to have spare cash lying
around. And the reality is that not everyone has that spare cash lying
around,” said Paul Calluzzo, associate professor at Queen’s University’s
Smith School of Business.
The silver lining for the government’s
new fund might come in the form of the momentum around the Buy Canadian
movement and surge of patriotism, Calluzzo added.
“It’s hard to
think of a geopolitical time that’s more favorable to investing in
Canadian infrastructure than right now,” he added.
You can read more about the Canada Strong Fund on the federal government's website here.
I note this part:
We are Building Canada Strong—and the Canada Strong Fund is designed
to take that effort even further. The government intends to offer
Canadians the opportunity to participate directly in the Fund through a
new, retail investment product.
This means that any Canadian who wishes to can invest some of their savings into the Canada Strong Fund.
The government intends to consult on the specific design of this product, but Canadians can expect the following features:
- Broadly accessible to Canadians from coast to coast to coast;
- Easy and simple to purchase, hold, and transact;
- As the Canada Strong Fund succeeds, investors will be able to share
in the upside, while their initial invested capital will be protected.
When Canadians invest directly in the Canada Strong Fund, they will
help fuel its growth and increase its ability to deliver meaningful
benefits across the country.
Alright, let's get to it.
Mark Carney's government is setting up Canada's first sovereign wealth fund and calling it the Canada Strong Fund.
The Fund will be an independent Crown corporation and operate at arm's length from the government, similar to CPP Investments and PSP Investments.
It will have an initial endowment of $25 billion with a principal objective to create wealth for future generations.
The Fund is in the process of being formed and it will likely start operations within the next three months and be fully operational when CPP Investments and PSP Investments host the Canada Investment Summit in mid-September (they look stupid if it's not up and running by then).
So who's going to be the inaugural CEO of the Canada Strong Fund?
There are several contenders starting with Mark Wiseman, who was recently appointed Ambassador of Canada to the United States and was formerly CEO of CPP Investments and Chair at AIMCo; Evan Siddall, former CEO of AIMCo and close friend of Mark Wiseman; Neil Cunningham, former CEO of PSP Investments; and Macky Tall, Chair of the Canada Infrastructure Bank and former Head of Liquid Markets and Infrastructure at CDPQ when Michael Sabia was CEO of that organization.
Speaking of Sabia, my money is on him being the inaugural Chair of the Canada Strong Fund, and if that happens, Macky Tall's chances increase significantly to lead the new fund.
Of course, all this is conjecture, but as the late George Carlin once remarked: "It's a Big Club; you and I aren't part of the Big Club."
And don't kid yourselves, everything is already in place, they are hashing out the details but I guarantee you Carney, Sabia, Wiseman, Blanchard and company have discussed this new fund and they already know who the new leader will be.
Yes, it will operate at arm's length from the government, but you'd be really stupid if you think the government isn't going to have a say on how this fund operates and who will be appointed its leader.
Canada is really good with what I call the "illusion of independent governance"; in reality, the governments have a lot more say than you think -- and that goes for all Crown corporations.
What about female leaders? There are plenty of qualified women who can do the job but I wouldn't be betting on them to be the inaugural CEO.
Now, what exactly will this new fund be doing? Those details remain to be hashed out.
The key passage in the CBC article is this:
Bill C-5, Carney's legislation to speed up approvals for major
infrastructure projects identified as being "nation-building," passed
through Parliament last June.
The second half of the bill, the
Building Canada Act, enables the federal cabinet to pick projects,
approve them upfront and override federal laws, environmental reviews
and the permitting process.
The legislation speeds approval times
from five years to two by introducing a "one project, one review"
approach instead of having federal and provincial approval processes
happen sequentially.
If the federal government wants to really speed up major projects, it has to ram them through without delay but my close friends who know Ottawa well anticipate major lawsuits ahead (funded by left-wing and right-wing special interest groups).
The Trudeau Liberals really did a number on this country, causing irreparable harm and they put in ridiculous legislation to ensure nobody tampers with their asinine policies.
Lastly, the Canada Strong Fund will have and has nothing really in common with Norway's giant sovereign wealth fund.
It will never be as big or close to it, it will have a more domestic investment angle and it will never match its transparency or governance, that I can assure you of.
Do we really need this new wealth fund? Why can't CPP Investments take care of this mandate just like PSP Investments is taking care of the Canada Growth Fund?
That's a really good question as is how exactly this new fund will be funded since we don't generate the wealth that Norway does (again, thank the Trudeau Liberals and their asinine "keep it in the ground" policies).
I'm willing to give Mark Carney and his entourage the benefit of the doubt but I remain somewhat skeptical and cynical.
One thing is for sure: this Canada Strong Fund better not flop like the Canada Infrastructure Bank.
Personally, I want to see it succeed so my child and future generations benefit from it.
But I'm too old and cynical, it's part of my Greek DNA, so forgive me if I'm not enthusiastic about it.
Having said this, it does irritate me when I hear people saying "Carney set this up to be a slush fund for Brookfield."
Brookfield is one of the best alternative investment funds in the world and doesn't need the Canada Strong Fund, more like the other way around (people are so stupid).
Let me wrap it up there.
Below, Prime Minister Mark Carney discusses the Canada Strong Fund and what its objective is.
Like I said, I wish them much success and if Carney, Blanchard, Sabia and Wiseman want my expert insights on setting this up right and getting the governance right, they know where to find me (won't be holding my breath).
A month ago, Alex Ortolani of Wealth Management reported that $37 billion Allworth was exploring a majority stake sale:
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