Prime Minister Mark Carney makes an announcement on the Canada Strong Fund at the Canada Science and Technology Museum in Ottawa on Monday.Justin Tang/The Canadian Press
At the risk of having my boss turn down my request to visit Norway to cover the world’s best-run sovereign wealth operation, the blueprint for success at the newly launched Canada Strong Fund was written two generations back in Quebec.
Prime Minister Mark Carney put $25-billion of taxpayer money behind what he hopes will be a new breed of government financing in part because he’s seen what the Caisse de dépôt et placement du Québec has done to support entrepreneurs in the province since the fund was founded in 1965.
If the new Canada Strong Fund can match what the Caisse has done over 60 years, Mr. Carney just made a generational investment.
The Caisse, unlike the seven other public-sector asset managers that make up the Maple Eight, has a dual mandate to both deliver long-term returns for clients, including pensioners, and contribute to Quebec’s economic development.
Carney announces Canada’s first sovereign wealth fund with an initial endowment of $25-billion
Every year, the chief executive officer of the Caisse must detail the fund’s performance and the contribution it made to businesses in the province. A succession of CEOs, including Michael Sabia, have consistently been able to boast about helping turn Quebec startups into world beaters.
Mr. Sabia, now the country’s senior civil servant as Clerk of the Privy Council and a key adviser to Mr. Carney, has his fingerprints all over the Canada Strong Fund.
The Caisse has roughly $93-billion of its $517-billion portfolio invested in Quebec, including $38-billion of equity holdings. Financial performance is comparable to the rest of the Maple Eight, fulfilling the first part of its mandate.
When it comes to building Quebec champions, the Caisse can take credit for helping to turn a single convenience store into Alimentation Couche-Tard Inc., a global player. The fund gave Quebec-based CAI, CGI, Hopper and AtkinsRéalis the support needed to scale up without being taken out by foreign rivals.
That consistent financial support, from venture capital to mid-market to the international stage, is what’s missing in the rest of Canada.
The Caisse, to its credit, has independent governance. It has avoided being a slush fund for whichever party is in power. Or a cookie jar to be raided by politicians, a problem that has held back growth of Alberta’s Heritage Savings Trust Fund. The new fund will need the same independence from federal fiddling.
Prime Minister Mark Carney announced the country's first national sovereign wealth fund on Monday, pitching the new agency as a way for Canadians to invest in nation-building projects. He says the Canada Strong Fund will invest in major Canadian industrial projects in areas such as energy, infrastructure, mining, agriculture and technology.
The Canadian Press
Norway is considered the poster child for sovereign wealth success because a disciplined approach to investing oil and gas royalties created a US$1.7-trillion capital pool. However, the fund invests internationally to avoid overheating the Scandinavian country’s economy.
Much as I looked forward to an expense-paid visit to Oslo, the Norwegians created a different beast. The fund Mr. Carney launched will have a purely domestic mandate, to solve a purely domestic problem – a lack of capital for Canadian businesses.
Standing in front of a Canadian Pacific steam locomotive in Ottawa on Monday, Mr. Carney talked about the fund as part of our new national dream, with a mandate to “invest alongside the private sector in nation-building projects, on a fully commercial basis.”
Last September, private-equity investor John Ruffolo made the case for a domestic sovereign wealth fund, with an emphasis on the word “sovereignty.”
“Sovereignty today is not just about borders and flags,” said Mr. Ruffolo, founder of Maverix Private Equity. “It’s about control over data, communications, energy, food, health care, mobility, defence, and yes – money. These are not negotiable."
Quebec’s government reached the same conclusion during the Quiet Revolution, creating a fund that supported generations of entrepreneurs. CEOs in the rest of Canada, according to Mr. Ruffolo, relied far too frequently on foreign capital, and lost control of their destiny as a result.
There’s a straight line from Mr. Carney’s Davos speech on the rupture in the rules-based order to the launch of a fund that makes Canada more self-reliant.
Mr. Carney and colleagues such as Mr. Sabia are intimately familiar with how government operates. They realize their sovereign wealth concept overlaps with dozens of existing federal and provincial capital pools.
In weeks to come, the government needs to flesh out the mandate and governance for the Canada Strong Fund, to ensure it meets unfilled needs, rather than duplicating existing programs.
Quebec, rather than Norway, shows there is a promising path forward. At the Caisse, a focus on putting taxpayer money behind provincial businesses has created world-beating companies. That is a game plan the Canada Strong Fund can also execute.