If governments ever decide to implement legislation to restrict investments (for example, protectionist policies) of sovereign wealth funds (SWFs)—funds used for investment purposes to benefit a country’s economy and citizens—could the Canada Pension Plan (CPP) be restricted as well?
Gail Cook-Bennett, chair of the Canada Pension Plan Investment Board (CPPIB), said the board is concerned that some pension plans, like the CPP, may be lumped into the SWF group because they are national funds. “While we do have the word ‘Canada’ in our name, the CPP…is neither a sovereign entity nor a sovereign fund,” she said in a speech to the Organisation for Economic Co-operation and Development (OECD) in Paris today.
There are several reasons, Cook-Bennett said, why the CPP is not an SWF. One, its assets are contributed by employees and employers directly—not by the government. Two, the CPP doesn’t receive any tax revenues or top-ups. Three, the assets are distinctly separate from government assets. And four, by law the CPP “operates at arm’s length from government”: it doesn’t submit its investment strategy, business plans, compensation policies and pay levels for government approval, and it doesn’t have government officials on the board.
Although they’ve been around for many years, recently, SWFs have emerged as direct investors and have acquired international assets in industries such as telecommunications and energy. They’re also growing considerably. According to Deutsche Bank, SWFs currently hold US$3 trillion in assets and could grow to US$5 trillion in five years and US$10 trillion in 10 years.
Despite this considerable growth, SWFs should not ignore the concerns of policy-makers, regulators and governments, Cook-Bennett said. She added, SWFs should define their objectives and increase their transparency in order to respond to any concerns these parties may have about their motives.
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