VIDEO Prime Minister Mark Carney hopes to attract billions of dollars from large global institutional investors at the Canada Investment Summit next week, but his government will have to remedy a situation in which some fund managers find their most sought-after assets — including energy and transportation — hardest to invest in at scale, according to the research arm of Canada’s largest pension fund.
CPP Investments Insights Institute, housed within the Canadian Pension Plan Investment Board , a co-host of the summit, based its conclusions on input from 65 global institutional investors in 20 countries managing about US$47 trillion and it laid out a playbook for the Canadian government in a pair of reports published Tuesday.
“Global capital is looking for opportunity, but opportunity alone does not make a market investible,” Naomi Powell, director of the institute, said. “Trust and predictable rules build confidence, but capital ultimately moves to opportunities with sufficient scale, profitable structures and a credible path to execution.”
Canada is vying for large funds’ global allocations against a field that includes Japan, the United Kingdom and Germany, and it often loses out when fund managers weigh factors such as scale, regulatory fragmentation and a track record of policy reversals.
“Investors are prepared to price commercial risk. They are far less willing to accept uncertainty that cannot be measured or allocated,” the report said. “Weak risk-adjusted returns, policy reversal, regulatory fragmentation and insufficient scale consistently emerge as the principal reasons capital fails to deploy.”
Market opportunity is the main driver of allocation, but the report said Japan, which has commitments for governance reform, improving capital discipline and attractive valuations, stands out when it comes to being selected by the largest global allocators and U.S.-based asset managers.
Canada fared better with smaller institutions and investors already familiar with the country that are committed to retaining or growing their allocation.
The research said global investors value Canada’s political stability, regulatory predictability and openness to long-term capital, according to the research, and see opportunity in the same sectors that will shape the global economy as the government does: energy , infrastructure , critical minerals , digital systems and artificial intelligence .
However, institutional investors that manage US$200 billion to more than US$500 billion — comparable in size to Canada’s largest Maple 8 pensions funds — rank Canada lower than smaller funds when it comes to “investibility” for a variety of reasons.
“Among investors attracted to Canadian energy, 59 per cent cite risk-return considerations, alongside policy-reversal risk, regulatory fragmentation and scale or liquidity constraints” as barriers, the report said. “These factors most often discourage large-scale capital investment across developed markets among investors attracted to Canadian energy.”
Transportation faces an even sharper squeeze and critical minerals follow the same pattern, according to the report.
“Investors continue to cite regulatory complexity and permitting timelines as factors affecting investment decisions in Canada’s energy and critical minerals sectors,” the report said. “Multiple approval processes, jurisdictional overlap and uncertainty around consultation and environmental requirements can contribute to longer project timelines and reduced investment certainty.”
Heavily touted digital and AI infrastructure, meanwhile, faces the most acute shortage of investment opportunities at sufficient scale in Canada.
“This is ultimately an execution problem, not a demand problem: investors recognize the assets, but remain uncertain whether projects can be developed efficiently and packaged at a scale that supports major institutional allocations,” the report said.
Infrastructure is high on the list of desirable investments for large institutional investors, according to CPP Investments’ research, which highlighted other attributes, such as government partnership, risk-sharing arrangements, tax reform and reduced red tape, that the funds seek when they invest.
“Projects must have clear commercial models,” the report said, adding that risks must be allocated among the parties and approvals must move at a pace that matches the opportunity.
For example, the report said a multibillion-dollar nuclear power development in the U.K. drew attention because a pension fund — Caisse de dépôt et placement du Québec — joined as the major institutional investor alongside the U.K. government.
That project was attractive for the Canadian-based global investor because it was designed with several key attributes: regulated revenue during construction, long-term stability guarantees of key economic terms, targeted government protection for exceptional risks and a single coherent government negotiating position.
Importantly, the project was ready to go before investor entry, according to the researchers.
They also said Canada has investor trust and has made a clear commitment to increasing institutional investment, but that alone does not move capital.
“Institutional investors also require opportunities with sufficient scale, credible revenues, appropriate risk allocation and a clear path to execution,” it said. “They need projects and platforms they can underwrite and return to repeatedly.”
The Canada Investment Summit on Sept. 14-15 in Toronto is being billed as a first-of-its-kind gathering for the country, bringing together leading global investors, Canadian CEOs and public-sector representatives to try to accelerate new investment into Canada.
Carney’s government has laid out an ambitious plan to deploy funds to catalyze $1 trillion in total investment in Canada over the next five years. The federal government said the Canada Investment Summit, which is being mounted in partnerships with the Public Sector Pension Investment Board (PSP Investments) and CPPIB, will serve as “a premier platform to showcase Canada as a compelling investment destination and a trusted convener of global capital.”
• Email: [email protected]
