What the Greek PM’s visit has to do with Canada’s pensions funds

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Prime Minister Justin Trudeau recently welcomed the Prime Minister of Greece, Kyriakos Mitsotakis, to Canada.

As I wrote in a Globe and Mail opinion piece earlier this week, the visit to Toronto and Montreal by Greek Prime Minister Kyriakos Mitsotakis provided an interesting example of how Canada’s status as a creditor nation allows us to yield more global economic power than is perhaps evident given our diminishing hard power around the world.

The visit marked the first time in four decades that a Greek PM has visited Canada. It came a little over one month after a fully owned subsidiary of Canada’s biggest public sector worker pension fund – PSP Investments – took majority ownership of the Athens International Airport, one of Greece’s largest companies.

Greece has been one of the fastest growing economies in the E.U. since the pandemic but remains hungry for capital. Canada has plenty of it. The Greeks are keen to be a destination for Canadian investment, as Mitsotakis said multiple times during his trip.

The call from the Greek PM for more Canadian investment comes amid an emerging debate taking place here in Canada over whether we’re investing too much abroad and not enough at home.

Finance Minister Chrystia Freeland has promised to work “collaboratively’’ with the nation’s pension funds to create an environment “that encourages and identifies more opportunities for investments.” Freeland is exploring the possibility of removing ownership restrictions on Canadian pensions for investments they make in Canada. Currently, these funds can’t hold more than 30 per cent of Canadian corporations - presumably to prevent state-affiliated funds from owning major companies.

But they can hold majority stakes in big companies abroad – which is one reason we’ve seen such a major exodus of capital elsewhere.

Assets held abroad by Canadians totalled over $9 trillion at the end of last year, which is triple what it was a decade ago. That includes about $4 trillion in direct investment assets, as opposed to portfolio investment.

Our net asset position globally – the difference between foreign assets we own and liabilities we owe to residents from other countries – totalled $1.7 trillion at the end of June. This put us in the top 15 of the world’s largest creditors.

In a world of more expensive money and shrinking fiscal room, policy makers are becoming covetous of all this capital.

A cohort of Canadian businesses also want more of our savings to be invested in Canada, with chief executives from some of the country’s largest companies releasing a letter earlier this month calling for the government to press pensions to invest more here.

Removing barriers to investment in Canada is one thing. The bigger concern is that the impetus for more investment here turns into a compulsory system that represses our pension funds and lowers returns for pensioners.

The Globe op-ed highlights another consideration: Our ability to use our newfound status as a creditor nation to exert some soft power.