As a former top Finance Department official, Susan Peterson played a key role years ago in creating the stable Canada Pension Plan that we see today. But even she was surprised by the numbers.
A few weeks ago, the Canada Pension Plan Investment Board (CPPIB) revealed that 12 per cent of the CPP’s assets are invested in Canada — its lowest level ever. The largest chunk of its $714-billion fund, 47 per cent, is currently invested in the United States — its highest level ever.
Peterson doesn’t think she’s the only one surprised.
“If Canadians knew out of the $714 billion such a miniscule amount was invested in Canada, I think they would say, whoa, what’s wrong with this picture.”
The CPPIB is not alone.
Experts say the Canada Pension Plan (CPP) is one of several Canadian pension plans that have been investing far more in the U.S. than in Canada in recent years. The CPP, whose investments are managed by the CPPIB, also known as CPP Investments, is a public pension plan that covers millions of Canadian workers across the country with the exception of Quebec, which has its own manager, the Caisse de dépôt et placement.
Those who support this high level of U.S. investment, including the CPPIB itself, argue the plan’s mandate is to make money. They argue U.S. investments offer more diversity and higher returns — which help ensure the plan will be able to pay out benefits for years to come.
Others, however, question why the plan isn’t doing more to invest in Canada to create Canadian jobs and infrastructure projects.
They are also concerned about the plan’s U.S. exposure at a time when President Donald Trump’s administration has made the country a riskier place to invest.
The Trump administration’s “big, beautiful” tax reform bill also contains a section that risks hitting Canadian pension funds that have U.S. investments with a new withholding tax that experts predict could cost Canadians and Canadian companies billions if it is adopted.
Some pension funds, like the Public Sector Pension Investment Board which has 41 per cent of its assets invested in the U.S., have said in recent days that they are reconsidering their U.S. exposure and are looking for more Canadian investment opportunities.
Michel Leduc, head of public affairs and communications for the CPPIB, says it has to invest for the long term, regardless of individual governments or administrations.
“We’re investing money for people who aren’t even born yet,” he said. “That long-term thinking must be the strongest pillar of how we think about our investment strategy.”
But he says the CPPIB at the same time isn’t “short-term stupid.”
“We’re continuing to think through what could be some of the bigger impacts,” he said.
Leduc said the U.S. percentage has grown even though the fund has been diversifying away from the U.S. because the existing investments have grown in value.
“U.S. stocks have gone up,” he said. “It’s just because we make good investments.”
Time to invest at home again?
The CPPIB is also open to Canadian investment opportunities, Leduc said.
Prime Minister Mark Carney has announced plans to invest and build in Canada. He has mentioned pension funds as one possible source of money.
Finance Minister François-Philippe Champagne said the government plans to host pension funds interested in investing at home.
“People see Canada as the place to invest,” Champagne told CBC News. “So, we’ll always be talking to them and investors from around the world.”
There was a time when the CPP primarily invested in Canada.
Initially, it was operated as a pay-as-you-go model with investments in Canada, largely in government bonds.
However, in the late 1990s the pension plan was facing a crisis — Canada’s chief auditor predicted that it would run out of money by 2014 unless something was done.
Spearheaded by then finance minister Paul Martin, and aided by officials like Peterson, the federal government and provinces agreed to a package of reforms, including the creation of the CPPIB.
While the CPPIB is a Crown corporation, it operates independently from government.
For years, a foreign property rule capped the amount pension funds could invest outside Canada. Introduced in 1971, it limited investments by pension funds to 10 per cent of their assets going abroad. That was raised to 20 per cent in the 1990s and then 30 per cent in 2001.
In his 2005 budget, Finance Minister Ralph Goodale repealed that rule, saying the move had the potential to increase venture capital investments by pension plans in Canada.
Since then, there has been a steady reduction in the value of CPP’s investments in Canada and a steady rise in U.S. investments.
U.S. stocks rise in value
In 2005, 74 per cent of the CPP’s assets were invested in Canada. By 2015 it was down to 24.1 per cent. For the last two years it has stood at 12 per cent.
At the same time, the plan’s assets have grown — from $81.3 billion in 2005 to $714 billion on March 31. Its assets are projected to hit $1 trillion in the next few years, making it one of the largest pension plans in the world.
However, as the proportion of the CPP’s investment in Canada has dropped and its assets in the U.S. has increased, so too have questions about where the money is going.
In March 2024, dozens of top Canadian executives penned an open letter to Finance Minister Chrystia Freeland and provincial finance ministers, concerned with “the decline in Canadian investments by pension funds and its impact on the Canadian economy.”
They called on the ministers “to amend the rules governing pension funds to encourage them to invest in Canada.”
“Investments made in Canada do not impact just pension portfolios; they also have a considerable impact on the country’s economy; generating jobs, improving incomes and increasing contributions to retirement plans,” the executives wrote.
In April 2024, the federal government appointed former Bank of Canada governor Stephen Poloz to look at how to “catalyze greater domestic investment opportunities for Canadian pension funds.”
That resulted in proposals in the fall economic statement including measures to make it easier for pension funds to invest in Canadian companies, municipal-owned utility corporations, airports and AI data centres.
Daniel Brosseau, co-founder of the Montreal investment firm Letko Brosseau, is concerned by the “long-term erosion” in Canadian pension fund investment in Canada and its impact on the economy.
“It’s been a long-term decline, and we’re basically investing very little in Canada now,” he said.
Brosseau doubts the measures in the fall economic update will make much of a difference.
“They don’t allow the pension funds to distinguish between a Canadian and a foreign investment in any way,” he said. “They will have no effect.”
Instead, Brosseau suggests the government tax the foreign income of pension plans.
“They could clearly see a difference between a Canadian investment and a foreign investment, and that would change their behaviour,” he said.
Chris Roberts, director of social and economic policy for the Canadian Labour Congress, says the CPP’s role in the Canadian economy is an important debate that is about to heat up — and he wants all Canadians to participate.
“These are people who pay into the CPP every day and will draw a CPP benefit when they retire,” he said. “They’re often of the view that the CPP Investment Fund should invest more at home and create jobs and economic opportunities here in Canada.”
Lessons from Quebec
Unlike Quebec’s Caisse, which has a double mandate to make money and to also invest in Quebec’s economic development, the CPP’s only mandate is to make money, Roberts said.
Sen. Clément Gignac, an economist by profession and a former Quebec cabinet minister, has asked questions in Senate proceedings about where the CPP is investing. He says Quebec has successfully made money for the province’s retirement fund while also bolstering economic development.
Gignac said Carney’s pledge to invest in infrastructure could create opportunities for the CPP and other pension funds to invest in Canada.
“Do we need to change the mandate officially, or will it come naturally?” he said.
Gignac would like a Senate committee or a special commission to take a closer look at how Canada’s largest pension plans, dubbed the Maple Eight, are investing their assets abroad.
“If anything happens and geopolitics deteriorate, or we have a hostile foreign country who suddenly seize our assets, just like we have seized assets from Russia … or change the rules of the game on taxation, just like Mr. Trump wants to change them — it would be important if we have a robust risk-management analysis.”
Trish McAuliffe, president of the National Pensioners Federation, said her members would like to see prudent, ethical investment by the CPPIB as well as increased investment in Canada.
“We love nothing better than to see great investments here…. investments in infrastructure, hospitals. Things that will benefit our age demographic but also our community at large,” she said.
McAuliffe said the federation attends stakeholder meetings with the CPPIB, and while at the early stages, she expects the question will be part of the federation’s convention in October.
“We’re hopeful … that they’re going to make the right decisions,” she said.
“But make no mistake — people are watching.”
