While the idea of a sovereign wealth is great, I am rather skeptical of the actual proposed implementation. A typical SWF model is that you have a revenue source such as resource royalties or foreign exchange that’s directed to a fund with political independence and a broad investment mandate as seen in Norway or Singapore.
But the proposed approach by the Federal Government does not follow these practices. It is using national debt to make initial investments. In theory, if your return is greater than interest it can work, but it’s not ideal. These investments are targeted at major projects in the national interest. But just like the Major Projects office, these are politically-prioritized. This makes me skeptical of the independence aspect of the fund. Finally, we should ask why our independent wealth funds (CPP/Pensions/Private) and global capital are not more interested in major project investments.
I am open to being convinced with more details provided because we do need a sovereign wealth going forward.
Venezuela will start to pump oil. The Middle-East war will end. Europe is going to structurally cut down how much oil it needs. The war in Ukraine will end. Oil from Africa will flow.
These capital investments aren’t expensive. A $1billion investment into something is nothing nowadays, internationally, so we should be really suspicious as to why these are not getting invested into. I don’t think they have a chance of turning a profit, just money pits.
I actually expect that demand for oil will be shrinking going forward. The renewables are already cheaper today, and the war on Iran is going to drive prices up for years to come. Even clearing the current backlog in Hormuz will take around a year. So, countries are now rushing to buy up solar panels and China’s exports doubled in March. That’s going to be the prevailing trend now because producing energy domestically is a matter of national security at this point. Nobody wants to be stuck with their pants down when the next conflict breaks out or some other shock hits the supply chains. Current wars will end, and supply will get restored, but we might be living in a very different world by that point.
I’d never thought I’d see electric cars replace gas cars, even up till last year. Now I’d think that most gas cars will be gone in 15 years. When tech revolutions happen, they happen fast. Europe, Asia will quickly go all electric, as well as India, Pakistan, Egypt, S. Africa. Followed by S. and then N. America.
Look at pictures from the 1980s and 90s, it was all medium sized sedans, and small hatchbacks; times change.
CPP serves a different and super narrow purpose. The idea is to maintain a very safe, stable portfolio that can reliably pay out pensions. We CANNOT make politically/ethically charged decisions here AT ALL.
From what I’m guessing, the SWF that’s being proposed here is something of a middle ground. Independent, but with a “let’s invest in Canada” approach. The idea doesn’t seem to be just to maximise roi, but to rather do that along with “investing in Canada”. Basically the government wanting to create/fund profit making, Canadian businesses that require large capital to get started (so mostly infrastructure projects).
Keeping it independent from parliament kinda insulates it from political nonsense. At the same time, cheaper debt for the Canadian economy as a whole.
I like it. However, I would like if the operations were cooperativezed. I’m afraid that future governments would raid the fund to promise temporary tax breaks or whatever. They can’t do that with the CPP, as this would cause massive political backlash. I hope the public is well educated enough regarding this fund, where its protection is of paramount importance to them.
A piece I think we’re missing. They probably are opening the fund up to the public to invest in for exactly this reason.
If I’m putting in a thousand bucks in the fund through my TFSA, and if PP decides to sell off my highway for pennies on the dollar, my next thousand bucks would be invested in a sniper rifle.
If public involvement in the fund wasn’t there, then what you said would be the likely outcome. I mean at least that’s how I understand it (and if what I’ve understood is correct… Holy hell is the Carney admin smart lol)
The last bit is precisely the concern. There need to be guarantees that this fund can set long term goals without constant interference. Without that it risks simply becoming a slush fund that produces little tangible value.
I was thinking of this the entire evening. Maybe there’s rebuttal to this point? So they’re talking of opening the fund up to the public as a retail product. They’ve stated that the mandate would be to give market returns. This way, the average individual buys into the fund as well (I would for sure). THAT is how the public becomes interested in the fund’s survival and growth as it is for the CPP.
Let’s say the Tories get in next election. If the fund is giving good returns, then the toriest of Tory voter would get out on the streets if there is even a whiff of the government dissolving it. Now I am exaggerating here, but the point I’m trying to make is that opening it up to retail investors ensures public interest in the fund’s continued existence and expansion.
Here’s my guess from my comprehension of the write-up:
Crown corp with an independent board of directors (like the CPP).
Mandate to invest only in Canadian projects.
So my guess is that the funds would most likely be used to fund highly capital intensive projects from the ground up (instead of just buying Shopify stocks for example). This would almost always be infra projects. Depends on how much risk the board would be willing to take for assessed potential reward.
Tbh I’m not really that worried about the competency of the board. The CPP and QPP have been incredibly successful till now ¯\_(ツ)_/¯.
Yeah, I hope they create structures to reuse the CPP’s analysis and even staff for that matter.
My guess though is that it would be slightly the other way round, where the Canada strong fund creates investment products that the CPP could purchase. But yeah, I hope CPP’s talent is used here. It’s clearly working, and quite competent!
While the idea of a sovereign wealth is great, I am rather skeptical of the actual proposed implementation. A typical SWF model is that you have a revenue source such as resource royalties or foreign exchange that’s directed to a fund with political independence and a broad investment mandate as seen in Norway or Singapore.
But the proposed approach by the Federal Government does not follow these practices. It is using national debt to make initial investments. In theory, if your return is greater than interest it can work, but it’s not ideal. These investments are targeted at major projects in the national interest. But just like the Major Projects office, these are politically-prioritized. This makes me skeptical of the independence aspect of the fund. Finally, we should ask why our independent wealth funds (CPP/Pensions/Private) and global capital are not more interested in major project investments.
I am open to being convinced with more details provided because we do need a sovereign wealth going forward.
Venezuela will start to pump oil. The Middle-East war will end. Europe is going to structurally cut down how much oil it needs. The war in Ukraine will end. Oil from Africa will flow.
These capital investments aren’t expensive. A $1billion investment into something is nothing nowadays, internationally, so we should be really suspicious as to why these are not getting invested into. I don’t think they have a chance of turning a profit, just money pits.
I actually expect that demand for oil will be shrinking going forward. The renewables are already cheaper today, and the war on Iran is going to drive prices up for years to come. Even clearing the current backlog in Hormuz will take around a year. So, countries are now rushing to buy up solar panels and China’s exports doubled in March. That’s going to be the prevailing trend now because producing energy domestically is a matter of national security at this point. Nobody wants to be stuck with their pants down when the next conflict breaks out or some other shock hits the supply chains. Current wars will end, and supply will get restored, but we might be living in a very different world by that point.
I’d never thought I’d see electric cars replace gas cars, even up till last year. Now I’d think that most gas cars will be gone in 15 years. When tech revolutions happen, they happen fast. Europe, Asia will quickly go all electric, as well as India, Pakistan, Egypt, S. Africa. Followed by S. and then N. America.
Look at pictures from the 1980s and 90s, it was all medium sized sedans, and small hatchbacks; times change.
It’s often like this with new tech, it kind of simmers under the radar for a while, and then explodes seemingly all at once.
CPP serves a different and super narrow purpose. The idea is to maintain a very safe, stable portfolio that can reliably pay out pensions. We CANNOT make politically/ethically charged decisions here AT ALL.
From what I’m guessing, the SWF that’s being proposed here is something of a middle ground. Independent, but with a “let’s invest in Canada” approach. The idea doesn’t seem to be just to maximise roi, but to rather do that along with “investing in Canada”. Basically the government wanting to create/fund profit making, Canadian businesses that require large capital to get started (so mostly infrastructure projects).
Keeping it independent from parliament kinda insulates it from political nonsense. At the same time, cheaper debt for the Canadian economy as a whole.
I like it. However, I would like if the operations were cooperativezed. I’m afraid that future governments would raid the fund to promise temporary tax breaks or whatever. They can’t do that with the CPP, as this would cause massive political backlash. I hope the public is well educated enough regarding this fund, where its protection is of paramount importance to them.
What will probably happen is
The fund builds something like a new toll highway where tolls were supposed to pay back into the fund.
Conservatives take office, and sell the highway toll rights for pennies on the dollar.
Conservatives lose office, and then trash talk the liberals for the fund not working and what a waste the highway was.
A piece I think we’re missing. They probably are opening the fund up to the public to invest in for exactly this reason.
If I’m putting in a thousand bucks in the fund through my TFSA, and if PP decides to sell off my highway for pennies on the dollar, my next thousand bucks would be invested in a sniper rifle.
If public involvement in the fund wasn’t there, then what you said would be the likely outcome. I mean at least that’s how I understand it (and if what I’ve understood is correct… Holy hell is the Carney admin smart lol)
The last bit is precisely the concern. There need to be guarantees that this fund can set long term goals without constant interference. Without that it risks simply becoming a slush fund that produces little tangible value.
I was thinking of this the entire evening. Maybe there’s rebuttal to this point? So they’re talking of opening the fund up to the public as a retail product. They’ve stated that the mandate would be to give market returns. This way, the average individual buys into the fund as well (I would for sure). THAT is how the public becomes interested in the fund’s survival and growth as it is for the CPP.
Let’s say the Tories get in next election. If the fund is giving good returns, then the toriest of Tory voter would get out on the streets if there is even a whiff of the government dissolving it. Now I am exaggerating here, but the point I’m trying to make is that opening it up to retail investors ensures public interest in the fund’s continued existence and expansion.
I think the bigger question is what this fund ends up being used for, and how it will be decided which projects it invests in.
Here’s my guess from my comprehension of the write-up:
So my guess is that the funds would most likely be used to fund highly capital intensive projects from the ground up (instead of just buying Shopify stocks for example). This would almost always be infra projects. Depends on how much risk the board would be willing to take for assessed potential reward.
Tbh I’m not really that worried about the competency of the board. The CPP and QPP have been incredibly successful till now ¯\_(ツ)_/¯.
yeah I think we’ll have to wait and see how this develops
Hey, CPP, want to grow and handle this other thing?
Yeah, I hope they create structures to reuse the CPP’s analysis and even staff for that matter.
My guess though is that it would be slightly the other way round, where the Canada strong fund creates investment products that the CPP could purchase. But yeah, I hope CPP’s talent is used here. It’s clearly working, and quite competent!
It would be kind of funny if the sovereign fund does its thing and CPP is like, no thanks, its not suitable for our goals
Can you even do that? The next majority government could just change something via law and then use it as a slush fund?
Making it cooperatively owned as wraekscadu suggested could be one approach.