Good morning. The new sovereign wealth fund announced yesterday by Mark Carney adds another layer to Canada’s funding ecosystem. Where it fits – and what we know so far – is in focus today. Plus, how long can consumers “look through” price shocks?
Up first
In the news
Telecoms: Rogers Communications Inc. is offering voluntary buyouts to half of its work force – excluding those in its Maple Leaf Sports & Entertainment division – as revenue growth slows.
Deals: Shell is set to buy Canadian producer ARC Resources in a US$16.4-billion deal.
Trade: Quebec furniture maker South Shore is shutting down as tariffs bite into business.
Norway supporters rejoice at this year's Winter Olympics. (We assume for petroleum.)Kacper Pempel/Reuters
In focus
How to scale up a country
At a glance: “Canada Strong” is a sovereign wealth fund – a state-owned investment account that is independently managed.
How it works: The fund is linked to planned federal support for what the government describes as nation-building projects, including ports and natural resources projects.
Where the money comes from: The fund will open with an initial budget of $25-billion, seeded by the government over three years.
- Carney said the fund will then grow through “asset recycling” – building projects like power lines or data centres, selling them once they mature, and ploughing the money into the next round of projects.
- The size of the fund will grow over time through returns and “other assets” the government may allocate to it.
- Canadians will also be able to invest – a direct option that would be “something consistent with buying a government bond,” Carney said. Maybe they’re still workshopping that pitch.
- Sovereign wealth funds of resource-rich nations are typically seeded with windfall earnings, Campbell Clark notes. Canada will have to borrow more to invest more.
Case study: Taking the Norway
In announcing the fund, Carney cited the Scandinavian country as among similar countries that are “blessed with natural resources” – but which run successful sovereign funds.
How Norway is the same: Norway, like Canada, has a massive oil and gas sector. Its “Government Pension Fund Global” – often just called “the Oil Fund” – invests surplus petroleum revenues on behalf of the state, and at roughly US$2-trillion is the largest sovereign wealth fund in the world.
How it’s different: Norway runs consistent surpluses, built on oil revenues that seeded its sovereign wealth fund. Canada, meanwhile, is projected to run a deficit flirting with $80-billion. (Although Carney has suggested it will come in lower in today’s revised outlook.) The BBC reported in 2024 that some Norwegians are feeling a sense of guilt over their relatively comfortable lives.
In any event, The Globe’s Andrew Willis argues Carney shouldn’t look to Norway as a blueprint for success, but to Quebec.
How this fund fits with the others
Next up for the Canada Strong Fund is the Canada Strong Fund Transition Office, which will lead months-long consultations on how it will work. The announcement comes just a couple of years after the launch of the Canada Growth Fund.
You can see how this might give opposition ammo to argue Carney is creating more layers of consultation even as he vows to run a more responsive and austere government.
But the other tools at Canada’s disposal are meant to absorb political and logistical risks markets won’t take. In theory, at least, each of the acronyms you might see tossed around represent investment devices with nominally distinct roles to play in financing the projects governments want built.
Canada Strong Fund: Introduced yesterday, the Canada Strong Fund is meant to give Ottawa a larger ownership stake in projects it helps finance – after years of public support for major projects, including pipelines and LNG facilities, left Canadians without a share in long-term profits.
Canada Growth Fund: Designed in 2023 to absorb risk after climate and regulatory uncertainty stalled investment, the CGF is an arm’s-length government fund with $15-billion at its disposal to invest in clean Canadian technologies in the resource sector.
Canada Infrastructure Bank: Created in 2017 after project delays and cancellations, such as the collapse of the Energy East pipeline and repeated stalemates over major urban projects. Its mandate is to invest $35-billion in revenue-generating public infrastructure projects. In 2020, The Globe’s editorial board asked: “What is the Canada Infrastructure Bank? And why?”
CPPIB: Probably the least likely to be caught up in the acronym soup, given it isn’t in the business of coaxing investors, but the Canada Pension Plan Investment Board could play a key role down the road. (Depending, of course, on whether the road is built.)
The fund, which manages nearly $800-billion on behalf of the Canada Pension Plan, is fixated purely on achieving a “maximum rate of return without undue risk of loss” for its millions of Canadian contributors. About 47 per cent of its investments are in the United States, compared with 12 per cent in Canada.
CPPIB chief executive John Graham said last week that he’s encouraged that Canada is creating more large-scale opportunities to invest, and the fund is “open for business” to the defence sector as the country ramps up spending on national security.
Putting them all together
A project could move through Canada’s updated funding ecosystem like this: Finance it, de‑risk it, own it, and – one day – have it treated by major funds like the CPPIB as any other investment. That’s the point at which we sit back and think fond thoughts of Norway. I’ll keep typing just in case that moment belongs to another generation.
Charted
A lot to ‘look through’
The Bank of Canada and most economists talk about “looking through” the immediate effects of the war in Iran.
The dominant assumption is still that this mess will be unwound in short order, the financial fallout contained and a price shock averted. But the war is two months old, Tim Shufelt notes. The Strait of Hormuz is still blocked, fuel is being rationed throughout Asia and flights are being cancelled everywhere. That’s a lot to look through.
Quoted
In this madness that we are living, where I spend half of my free time in the streets fighting for basic human rights, I found something that feels so good for me. I discovered a new world.
— Nevenka Bila, 72
Amateur choir brings joy to hundreds in Serbia.
Up next
More files we’re following
By the numbers: The U.S. Conference Board publishes its Consumer Confidence Index for April this morning. The March report showed slightly more upbeat views of current business and labour-market condition, but captured only the first few weeks of the war. The Conference Board downgraded its outlook for the U.S. economy earlier this month based on the effects of an “oil-driven inflationary pulse that is percolating through the U.S. economy.”
Before the bell: Investors are bracing for a festival of earnings starting tomorrow, including five of the Magnificent Seven: Google parent Alphabet, Microsoft, Amazon, and Meta Platforms. Apple is up on Thursday.
Morning update
Global markets were mixed as investors braced for a week packed with central bank meetings and corporate earnings, and also weighed a diplomatic impasse in U.S.-Iran negotiations.
Wall Street futures diverged after the S&P 500 and the Nasdaq notched their latest in a series of record closing highs yesterday, while TSX futures were little changed.
Overseas, the pan-European STOXX 600 edged up 0.02 per cent in morning trading. Britain’s FTSE 100 gained 0.49 per cent, Germany’s DAX climbed 0.1 per cent and France’s CAC 40 advanced 0.19 per cent.
In Asia, Japan’s Nikkei closed 1.02 per cent lower, while Hong Kong’s Hang Seng fell 0.95 per cent.
The Canadian dollar traded at 73.19 U.S. cents.