When Prime Minister Mark Carney was making his pitch for why Canada needs a sovereign wealth fund, he pointed to another resource-rich western economy — Norway.
But that comparison doesn’t quite work, some experts argue.
“Many countries that are blessed with natural resources, like Norway, have sovereign wealth funds. Canada hasn’t had one. Until now. The new Canada Strong Fund will give all Canadians a direct stake in building Canada strong,” Carney told reporters while announcing the $25 billion fund.
Carney said it will “invest in the major projects that are transforming our economy.”
But while the precise structure of the fund remains unclear, fundamental differences between the political and industrial realities in Canada and Norway mean that comparison might not be so straightforward, experts say.
“I actually struggle to make the comparison to Norway,” said Sebastien Betermier, professor of finance at McGill University’s Desautels Faculty of Management and executive director of the International Centre for Pension Management.
How does Norway's sovereign wealth fund work?
“Sovereign wealth fund” is an umbrella term that can refer to many things, but in essence, it is a state-owned investment vehicle by which a government can invest public money towards a particular purpose.
It is that purpose where Norway and Canada’s funds fundamentally differ.
The Canada Strong Fund is geared towards funnelling money towards large public infrastructure projects and will “invest alongside the private sector in nation-building projects,” Carney said, pointing to the construction of the Canadian Pacific Railway in the 1870s as one nation-building example.
Norway takes a different approach with their fund.
“The Norwegian fund is prevented from investing in Norway. Everything is invested globally so that it can diversify the country from oil and gas price fluctuations on which the country is very dependent,” Betermier said.
The Norwegian Government Pension Fund Global (GPFG) takes oil and gas revenues, puts them into the fund and invests the money elsewhere. According to one estimate, it owns more than US$2.2 trillion in assets and has equity in more than 9,000 companies across more than 70 countries around the world.
This means the fund owns 1.5 per cent of the value of all of the world’s publicly listed companies, making it one of the largest institutional investors in the world.
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It does so to ensure that the country does not become too dependent on oil money, thereby buffeting it against the boom-and-bust cycles that places like Alberta have faced.
“Canada’s fund is not like that. Canada’s fund is aimed at investing, from what I can tell, in Canada to promote economic development. It’s a different category of sovereign wealth funds,” Betermier said.
Carney said the new sovereign wealth fund will begin with a domestic focus, potentially going global later.
“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.
But Temasek’s goal, too, is different from the Canada Strong Fund.
“The goal (of Temasek) is to manage the large state-own companies like Singtel or Singapore Airlines through a vehicle that is competent, professional, run at arm’s length from government,” Betermier said.
Carney’s idea sounds a lot more like the wealth funds in the Persian Gulf countries than it does the Norwegian or Singaporean ones, he added.
Some of the Middle Eastern funds have development mandates inside their sovereign wealth funds, like in Qatar or in the Emirates,” Betermier said.
“Here it looks like it’s going to be exclusively an economic development mandate,” he added.
What challenges can these funds face?
The idea of a government-run investment fund isn’t new.
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 Canada Investment Bank and Canada Growth Fund both perform the functions that Carney outlined in his press conference — unlocking capital for large infrastructure projects in Canada.
“The Canada Infrastructure Bank, the Canada Growth Fund, have very similar mandates to support related projects in very similar sectors — clean energy, trade infrastructure, for example,” said Kate Koplovich, senior policy analyst at the CD Howe Institute.
How the new fund differs from these other investment vehicles and avoids stepping on their toes will be the “million-dollar question,” she added.
Where will the money come from?
Broadly speaking, sovereign wealth funds draw money from two sources: revenues from resources like oil and gas, and budget surpluses.
Canada has no budget surplus. In the Spring Economic Statement, the Liberals estimated that last year’s federal deficit came in at $66.9 billion.
“Canada’s sovereign wealth fund will be based on debt,” Koplovich said.
“What that means for the fund is that, of course, the returns from the fund then have to be greater than the borrowing costs for the government to supply that debt,” she added.
While Canada, as a resource-rich nation, could finance this new fund with oil and gas revenue, like Norway does, there’s one key difference.
“The difference between Norway and Canada is Norway does not have provincial governments with nearly the power that we have in Canada,” said Concordia University economist Moshe Lander.
“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.
Norway’s sovereign wealth fund is also known for its fiscal discipline.
By law, the government cannot draw any of the principal amount from oil revenues into its budget. Only the interest — which comes out to around three per cent of the revenues — can be put into the budget.
Alberta, in contrast, has in the past used their own as “a rainy-day fund, rather than as some sort of generational fund,” said Lander.
“Anytime 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, noting that wouldn’t be a sustainable approach for Carney’s proposed sovereign wealth fund.
The Canada Strong Fund has another difference from Norway’s model: everyday Canadians will be able to invest in the fund.
It is not yet clear how that will be implemented, whether it’s going to be through portfolios or bonds or any other way. But no other sovereign wealth fund in the world has this aspect to it.
The concern with that is that retail mom-and-pop investors often lack the patience for long-term projects, Betermier siad.
“I expect this fund most likely to be invested in long-term infrastructure projects that can take years before cash flows come out. Retail investors are usually not that patient,” he said.
Everyday investors often have a very limited amount of money they can invest, which means the Canada Strong Fund will be competing with global equities for investment.
“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,’” Lander said.
Some of us would invest in “some bridge being built in Canada” because we’re up for investing in Canadian infrastructure, jobs and growth – not just padding our pocket by investing in some US company with no moral compass. I’m excited to see if integrity and genuine Canadian collectivistic sentiment will result in the success of this fund!
It’s just another way for the Federal government and the private biusnesector to get richer, and the rest of the country gets poorer. It’s A Hugh SCAM. Canadians are struggling to house and feed themselves and Mark CONMAN Carney is only thinking of himself and the WEALTHY.
Assuming Canadians have enough money to participate, will we be taxed on gains?
The fund seems to be based off of the Taiwanese National Development Fund which provided some of the initial investment for TSMC, UMC, and Vanguard. Today, the TNDF is worth more than $90.23 billion CAD from an original investment cost of around 2.82 billion CAD.
Nice to see Goebbels news deleted yet another one of my comments. Ass hats.
The Carney sovereign debt fund will enrich the usual suspects that have never been held accountable for looting hundreds of millions from all the other previous “invest in Canada’s future” funds the LPC government have used to lauder taxpayer cash since 2015.
Only Elbows Up Liberals think taking on more debt is an “investment “. Obviously Carney is the economic whiz he bragged about.
What the hell is Carney’s liberal government smoking? Have to get rid of all the red tape the liberal’s put in the last 11 years.
Excited morons with their elbows up will be bragging about this clown as they go broke . Canada is nothing like Norway or Singapore and liberals have ZERO fiscal responsibility. They are broke and routinely block or slow resource (oil & gas ) production because Greta tells them.
Pull your money out of that failing nation as soon as you can . Canada is just India light at this point and soon to be owned by Indians.
Bots a’ plenty here.
Please, liberal voters, can you explain why you voted for Carney? After 10 years of steady decline under their leadership, they choose a banker as their leader and you assume that he would make a good politician, why? A banker isn’t the same thing as an economist, he can’t turn our economy around like Milei did with Argentina. Just remember that who you vote for affects all of us. By re-electing the Liberals, you may have prevented your fellow Canadians from being able to afford houses for another decade. Bankers care about one thing: money, they don’t care about people.
In the past Carney took billions of taxpayers money and invested it in failures like EV manufacturing in Canada. Now he is doing the same but calling it a Sovereign Wealth Fund? Sorry Carney, this sounds like a scam for Canadians
Is Carney ever going to make a deal with the USA? He dragging his feet for his own cynical gain, meanwhile Canadians in the sectors affected are losing their jobs. Carney been a true let down so far
Carney has been a huge disappointment in his first year in office. A banker doesn’t make a good leader
@Robert G
Truth hurts?
It seems the only “news” worthy for mainstream media are stories that celebrate Canada being “broken” or on the road to third world status.
Yup, different. One is stock investment, and the other is to help Canadian business invest in Canada.
Another nothing burger announcement by Elbows Up Carney
Trying to understand how some support Carney and the Libs. Any comment thread I read the support seems minimal but polls say something else.
The average Canadian is a different breed, look at Canada Saving Bonds of the past, when Canadians could invest a thousand dollars and seven years have two thousand dollars. You make it easy for Canadians to invest they will do it now those same bonds are referred to as Canada suckered bonds no one invest in them today because the normal Canadian understands that this item will not help them get a head of infrastructure which is more costly than the bonds.
It’s just a scam. The Liberal Party is in a terrible state. The fund invests in domestic infrastructure such as railways and minerals. If the high-speed rail starts construction in 2029, it is estimated that it will take 20 years to complete. Even if there is passenger flow, it will take 50 years to recoup the investment. What’s the difference between this and leaving the money in the sea?Carney is worth tens of millions of US dollars. Would he invest 10 million?This is completely a deceptive trick.
More gaslighting by Carmey. His “wealth” fund is funded by $25B of borrowed money. Perhaps Carney should get to surplus budgets first.
“Broadly speaking, sovereign wealth funds draw money from two sources: revenues from resources like oil and gas, and budget surpluses.“ Under the Liberals and Carney Canada has absolutely neither revenues nor surpluses. What it does have is massive deficits and debt and Carney will borrow tens of billion of dollars more to “invest”. A lose, lose scenario. Canadians lose because the debt is rapidly increased which means we taxpayers are on the hook to service that debt, which this year alone will cost us $59 BILLION !!! It is just smoke and mirrors from Carney. The old saying “A country run by bankers will always be in debt” is apt for Canada under Carney’s Liberals.
Yep, borrow money to invest in dubious investments like clean energy. Anyone learn how much it will cost to overhaul a windfarm turbine when it will wear out? Or what it costs to replace solar panels after their 20 year lifespan? And if one goes nuclear, what is done with the used fuel, that lasts hundreds of thousands of years.
Like the money wasted on battery powered cars. Resale on those is based on the scrap value.
This will be like their green fund – which has yet to be accounted for or replaced. Or the billions given to natives, and they are still whining they have a housing and water problem (because they pay for neither).
It sounds like Carney and this Liberal government are trying to compare apples with oranges over this fund. Another way to get their hands on borrowed money and increasing our debt without declaring it in the fiscal update. This government is all about smoke and mirrors.