Tensions with China concerning Canadian pension fund giants

Tensions between China and the West causing Maple Eight pension fund investors to reassess investments

Tensions with China concerning Canadian pension fund giants

Majority of the eight largest pension fund investors in Canada faced a dilemma when it came to their investments in China as the country’s tensions with the West continue, as reported by The Globe and Mail.  

Some have paused their direct investments in the country as they try to reassess the risks that come along with it. There are others that have lessened their exposures and shifted their focus mostly to liquid public investments and index funds which can help them easily change course if they need to. 

However, even with their cautious moves around the situation and careful weighing of their statements, the fund managers do not plan to completely pull out of the market. 

Canada’s pension plans are looking for good risk-adjusted returns in order to ensure that they can continue their service to their beneficiaries and China still holds promise for large investors even as calculating the risks and rewards have become more complex.  

“As a global investor, we do feel it’s important to have exposure in China,” said John Graham, chief executive officer of the Canada Pension Plan Investment Board (CPPIB) in an interview.  

“It’s important to understand the biggest economies in the world. And the way to understand them is to spend time studying them and investing in them,” he said. 

The Caisse de dépôt et placement du Québec (CDPQ) has invested 2% of its $402 billion worth of assets in China which has stayed mostly steady in the past five years. However, it is taking a much more cautious approach and has not made any new direct private investments in the country. 

The Public Sector Pension Investment Board has 3% of its $244 billion worth of assets in China and an office in Hong Kong. It had recently required signoffs from a company-wide investment committee in order to approve new direct investments in the country as the risks have increased.  

The Ontario Teachers’ Pension Plan (OTPP) had reduced its investment activities in China. It had also paused its new direct investments, similar to what the British Columbia Investment Management Corporation (BCI) has done.  

Both the Ontario Municipal Employees Retirement System (OMERS) and the Alberta Investment Management Corporation (AIMCo) only have investments through public markets and funds in China. None of them have any direct investments in the country.  

Many Canadian politicians and advocacy groups have expressed their criticisms against some pension funds regarding ethical concerns with their potentially problematic in Chinese companies as some have been linked to mass surveillance or are allegedly using supply chains relying on forced labor

Several spokespersons from these pension funds have expressed that their investments complied with the Canadian laws and sanctions and that holdings that raise concerns are brought up with index managers. However, with the tensions continuing, conversations are getting much more difficult to have. 

“I’ve been in this game around global issues for three decades,” said Michel Leduc, a CPPIB senior managing director. “National interests, trade and economic competition have never been as tricky as they are today.”