Ottawa talking to pension funds about investing in infrastructure

The Canadian government is speaking with the country’s largest pension funds about purchasing vast amounts of dollars price of infrastructure projects to assist stimulate the economy, the Infrastructure Ministry told Reuters on Wednesday.

Prime Minister Justin Trudeau’s Liberals won an election in October around the back of a promise to run three consecutive annual budget deficits of up to $10 billion to help fund investment in infrastructure and will aim to boost by using private funding, sources told Reuters.

The money is fiercely protective of their independence from political interference and would not be compelled to invest, however their backing for the projects will be a major boost for Trudeau.

“We are engaging pension funds and other potential partners to find areas of alignment,” a spokeswoman for Infrastructure Minister Amarjeet Sohi said. She didn’t give further details.

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Executives in the pension funds, that are one of the world’s biggest infrastructure investors, say that the projects will have to be structured in a manner that limits the risk they take if they’re to be lured into backing them.

Traditionally, funds like the Canada Pension Plan Investment Board (CPPIB) have been unwilling to back ‘greenfield’ projects, that are constructed from scratch, because of the risk they carry.



Funds usually prefer investing in ‘brownfield’ infrastructure, projects which have already been constructed, executives said.

Mark Wiseman, chief executive of CPPIB, which has $283-billion in assets under management and invests on behalf of the federal plan that covers most working Canadians, told Reuters projects will have to have adequate scale to become interesting, be overseen by a predictable regulatory regime and carry limited risk.

“That means projects where we are not going to need to go ahead and take build-out, greenfield-type risk because we aren’t good at having the ability to assess those. There’s ways to structurally de-risk these opportunities for institutional investors,” he said.

Bankers say private funding for the projects could add up to many times more than that coming from the public purse and Canadian pension funds, already one of the world’s biggest infrastructure investors, could be an obvious source of capital.

One government source acquainted with the problem said officials had also had conversations with institutional investors for example Canada’s Brookfield Asset Management, along with the major Canadian pension funds.

“We’ve talked to Teachers’, we’ve spoke with Caisse, we’ve spoke with OP Trust, we’ve talked to OMERS, we’re talking to CPPIB, the majority of the Canadian ones. I think the conversations have gone well and there is lots of interest on sides to find a way to partner,” the origin said.

The source said the talks were exploratory and specific projects hadn’t yet been discussed. Officials have sought advice on establishing the Canada Infrastructure Bank, which Trudeau had discussed creating throughout the election campaign to supply low-cost financing for infrastructure projects.

? Thomson Reuters 2016