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petermcneeley
lwansbrough
I guess we shouldn’t do anything because Brookfield exists.
weirdmantis69
I guess we should do stupid corrupt things because Trump exists.
lwansbrough
What’s Trump got to do with this?
If you invest anything in the Canadian market you probably hold some Brookfield.
Carney’s investments are in a blind trust.
What more could be done, in your view?
alexb_
Wow! This guy knew a lot about working in an environmental/social/governance framework, AND he knows enough about money to have been an international central banker?
I knew Carney was great, but I didn't know he was so well-qualified too.
adjejmxbdjdn
Carney was the governor of the Bank of Canada through the financial crisis and Canada was one of the least affected developed countries. To be fair, Canada’s insular banking system also helped limit exposure, but Carney’s handling of the situation was good enough that the UK made him the first non British governor of the Bank of England, during which period he oversaw the whole Brexit saga, where again his handling of the UK economy was extremely highly regarded.
There are justifiable question about whether he will be a good PM but he is probably one of the most successful central bankers of all time.
_whiteCaps_
https://en.wikipedia.org/wiki/British_Columbia_Resources_Inv...
Hopefully turns out better than BCRIC.
boringg
One of the biggest challenges is finding investable projects these days. If they put this money in as a hold to time projects well than could be a good future asset for Canada. If it ends up actually being more of a jobs production vehicle for political gain then probably less successful.
red-iron-pine
laudable goal. I suspect it will end up like most other Canadian procurement projects.
also why all the love for Canadian Pacific rail?
1over137
>also why all the love for Canadian Pacific rail?
The Canadian Pacific rail connected the country east to west, was a major milestone in the country's history: <https://en.wikipedia.org/wiki/History_of_the_Canadian_Pacifi...>
brailsafe
While that's true, it does seem to be a strange thing to glamorize now, since as much as it was an engineering accomplishment, it was also arguably a genocidal pursuit, and it's doubtful the sort of projects the government has in mind now will be as "nation building" as expropriating the entirety of Western Canada and letting a single private entity have as much power as CPR does.
nish__
Why is HN so pessimistic?
pie_flavor
The parent comment just says it'll perform similar to how past similarly-shaped things performed, without saying what that past performance is. If that implies pessimism, that's not HN's fault.
visceralasonia
I think they missed "laudable." My first read I thought it said laughable too—it's an easy misread that set a completely different tone for the rest of the comment.
nish__
Give me a break.
kirubakaran
Is setting expectations based on track record considered pessimism?
nish__
Incessant nit picking, negativity and doubt casting is my issue.
And Canada is unrecognizable these days. Why should I think past performance is indicative of future success?
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visceralasonia
That says "laudable" not "laughable." They were actually complimenting the effort, even if some folks misread it
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lbrito
It's the default for any non USA story.
dahdum
This is a great way to sidestep the political process to fund popular projects. The political constraints will ensure returns are middling, so unless they subsidize with tax breaks on dividend income I think it would be a poor commercial investment.
Whether its perfect or not, it almost has to be better than the current status quo.
onlyrealcuzzo
How are you going to have a Sovereign Wealth Fund when you're in debt ~300% to GDP?
Are they going to fund their "wealth" with debt?
This is an oxymoron.
You aren't "rich" if you have $1M and you owe $4M. You're a con-man living a lie that will crush you eventually.
And by the way, if you have -$3M, sorry, but you're the last person I want to invest money with...
Norway gets to have a wealth fund because they have a small population with a massive amount of oil revenue, and they aren't run by morons.
Canada only produces about 2x as much oil as Norway, but it's got 10x the population. Sorry, you can't all be rich like Norwegians unless you start pumping 5x more oil.
Things like this should be laughed off the world stage.
We live in an upside down world.
roncesvalles
>How are you going to have a Sovereign Wealth Fund when you're in debt ~300% to GDP?
This seems to be incorrect. Including federal, provincial and local, the debt is about 110% of the GDP.[1]
The US has 3x more debt per citizen than Canada.
[1] https://www.imf.org/external/datamapper/GG_DEBT_GDP@GDD/CAN/...
triceratops
> How are you going to have a Sovereign Wealth Fund when you're in debt ~300% to GDP?
https://en.wikipedia.org/wiki/Canadian_public_debt this article says it's 57% of GDP. Where are you getting your 300% from?
I-M-S
> You aren't "rich" if you have $1M and you owe $4M. You're a con-man living a lie that will crush you eventually.
I'm not sure the simile lands. If that $1M is financing a lavish lifestyle, then you are for all intents and purposes rich. As for the crushing down part, the modern economy shows us one can stay solvent longer than the market is irrational (especially true the more zeros are added to the numbers above).
badc0ffee
GDP isn't wealth. This is closer to making $1M/year and owing $4 million.
glitchc
GDP isn't the only measure of wealth. Canada has vast resources that act as collateral for the debt. You wouldn't be friends with a billionaire who only owns stock and lives mostly off the debt issued against that stock?
rogerkirkness
Canada has tens of trillions of dollars in natural resources it could choose to monetize at any time.
pyrolistical
A sovereign wealth fund makes sense if fund with profits from exploiting our natural resources.
That is how Norway did it
hvb2
And Norway has north of 2 trillion in that fund for about 5M people...
Like, well done. Impressive financial planning at that scale
unixhero
Yep. Long term greedy nation taught by the best at Goldman Sachs. Thank you guys!
kreyenborgi
Yeah, why doesn't Norway spend the oil money on soccer teams and golden airplanes like a respectable and proper oil nation, instead of squandering it on reprobate socialist pension funds? Those lefse-eaters will just waste it on EV's and sensible woolen sweaters.
maxglute
Norway extracts 1/2 oil as Canada but has 1/8 the population. Canada too big to be petro state. Canada has lots of other resource endowments, but not enough to sustain norway tier of per capita sovereign fund returns even if it massively increased extraction game. Only hope for Canada is US being really friendly, or even more friendly and force Canada to retool internal trade / reduce braindrain and build and capture more value in commodities and other sectors.
lbrito
Norway's oil is also sweet and light, whereas Canadian oil is sour and heavy. The former is more valuable than the latter, from what I gather.
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incomingpain
A sovereign wealth fund requires surpluses to be run.
This is not a wealth fund at all. This is a debt fund. It doesnt even try to hide the debt that's drowning the federal government.
We are borrowing money to play the stock market.
rapind
This is exactly what I was thinking when I heard him speak about it. Borrowing for a slush fund for the projects (probably many of them American) they want to push... which in a way just means another future tax.
Calling it a "sovereign wealth fund" doesn't seem honest at all. (coming from a lifelong Liberal / NDP voter)
WorkerBee28474
If this is run anything like the CPP, it will underperform both the market and their own benchmarks yet lead to executives awarding themselves huge bonuses.
bparsons
Over the last decade (and even prior to that) CPPIB has been the best performing fund of its kind. National pension funds have different risk tolerances and investment guidelines that someone's personal portfolio or a family office.
Thanks to CPPIB, Canada does not have have a giant unfunded pension liability (unlike our neighbors to the south). It has been an enormous success story.
sefrost
Yes, far better than how the UK runs its state pension system.
The Australians seem to have the best model overall though. Mandatory payments in to private investments has made them very wealthy.
The UK system takes the national insurance contributions of workers but doesn’t invest them in anything on behalf of the individual. So despite decades of payments you technically have nothing at the end and survive on the goodwill of the government and current taxpayers. That works right now because of the population pyramid.
Canada definitely has a better system than that.
infinite8s
>The UK system takes the national insurance contributions of workers but doesn’t invest them in anything on behalf of the individual. So despite decades of payments you technically have nothing at the end and survive on the goodwill of the government and current taxpayers. That works right now because of the population pyramid.
That's how Social Security works in the United States as well.
lotsofpulp
>That works right now because of the population pyramid.
Is it really a pyramid if the base is less wide than the top? I guess it would be an upside down pyramid, but not very useful for the intended purpose then.
morepork
I thought that honour belonged to the NZ super fund with an annualised return of 10% before tax since it's creation in 2003. I couldn't find a comparable figure for the CPPIB, but it looks to be lower.
cherioo
That seems fine as long as they can show lower volatility than market while still being close in return?
Did they?
lesuorac
Why does it matter if volatility is lower than the market?
Future payments in the short term are covered by inflows.
You might as well maximize the returns now so that in the future when it's not covered by inflows you've acrewed a larger return.
vkou
> Why does it matter if volatility is lower than the market?
Because I can trivially beat the market by ~100% by going long on 3:1 margin.
The volatility is why that's a bad idea. One time out of five, the consequence of that investment strategy is 'The market had a crash and I lose everything'.
'Lol, YOLO' is not a great investment strategy for a well-ran country.
akamaka
> Future payments in the short term are covered by inflows.
That wouldn’t work in a major depression when there is high unemployment and inflows drop.
jjtheblunt
> Future payments in the short term are covered by inflows.
is that similar to the Ponzi scheme pattern, though?
WorkerBee28474
caminante
This youtuber appears to be anti-active management. CPPIB is underperforming their own benchmarks and charging substantial active fees.
> Where 20 years ago the CPPIB had just 150 employees and total costs of $118-million, it now has more than 2,100 employees and total expenses (not including taxes or financing costs) in excess of $6-billion.
But...they don't appear to be terrible v. their peers, but that might be an indictment of pension funds.
roncesvalles
"We achieved superior risk-adjusted returns" as an excuse for sovereign fund underperformance is nonsense. PE (depending on how levered it is) inherently has lower volatility than buying public stocks.
If your fund gets consistently lower returns than if you had just stuck everything in a 60/40 portfolio, the whole endeavor has failed.
triceratops
I really like the ideal of just chucking it all in VTI (or, since it's Canada, some other equivalent). But does it still work at that scale? Or does the fund exert its own gravitational field on the index in question?
xattt
In contrast, the PSPF (federal public sector pension) has over-performed.
m3kw9
different risk profile
caminante
They've underperformed their risk-adjusted benchmarks.
> But the CPP fund didn’t just underperform the indexes last year. It has done so, on average, ever since it switched to active management. That’s the admission you find buried on page 41 (it was on page 39 last year): since fiscal 2007, “the Fund generated an annualized value added of negative 0.2 per cent.” Compound that 0.2 per cent annual shortfall over 19 years, and it adds up to more than $70-billion in forgone income, on assets that now total $714-billion. [0]
[0] https://www.theglobeandmail.com/opinion/article-cppib-pensio...
slopinthebag
Usually a sovereign wealth fund is funded by excess profits, like Norway for example. In this case, it's being seeded by $25 billion dollars of debt. Can anyone more financially gifted explain how this is any different from, well, regular government spending and money printing?
Tiktaalik
Yea really. Feels like a bit of a communications exercise and effort to create arms length distance from the Federal government and spending on major projects.
Now it's not the Federal government and taxpayers propping up the oil industry by buying yet another oil pipeline, but rather a "sovereign wealth fund" (funded by Canadian taxpayers).
slopinthebag
Yeah and like, if they want to use it for infrastructure, mining, and LNG development, isn't that at odds with retail investors who require more liquidity? Doesn't it require the fund to either hold massive cash reserves to manage redemptions or rely on government bailouts if retail sentiment sours before projects mature?
To me it sounds less like a "sovereign wealth fund" and more like a domestic infrastructure bank wrapped in populist messaging. I expect plenty of boomers to invest to "stick it to Trump", elbows up!
Tiktaalik
And we already have an infrastructure bank! Trudeau started it. And Carney was the financial advisor to Trudeau, so it was probably his idea too! lol.
llm_nerd
>Usually a sovereign wealth fund is funded by excess profits, like Norway for example.
If Canada ran resources like Norway does, it would have an enormous "excess profit". Norway's royalty rates and "profits" are dramatically higher than Canada where decades of American psyops fooled a bunch of very foolish people that the primary purpose of Canada is to ensure maximum profits for US orgs.
But really, international economics is just mostly made up, and if enough people go along with it then it's as real as real can be.
lotsofpulp
>But really, international economics is just mostly made up, and if enough people go along with it then it's as real as real can be.
What is not made up is that if you need to import things from other countries, then you need to export things from your country in proportional value, or else the country as a whole loses purchasing power (i.e. gets poorer). In this case, if Canada is increasing its money supply, then the purchasing power of the currency will go down unless it correspondingly increases demand for its currency (usually by increased demand for its goods and services, including land or businesses in Canada).
llm_nerd
>What is not made up is that if you need to import things from other countries, then you need to export things from your country in proportional value, or else the country as a whole loses purchasing power (i.e. gets poorer).
So the US is the world's poorest nation, by far, right? Country has a two trillion dollar+ deficit, a one trillion dollar trade deficit, absolutely no end in sight of spiralling to bankruptcy (it's only getting worse), and lets the money printer go brrrr.
Most of international economics are made up, and often are nonsensical. There is no master book of records that dictates cause and effect (there simply isn't, so at best we get "but if you do this...that maybe will happen...or maybe it won't", but mostly it's people looking around and trying to figure out what other people will go along with.
WorkerBee28474
Only in that it's in a private equity fund, not one-time spending.
Fire-Dragon-DoL
Doesn't that has the problem of over exposing canadians to canada economics from an enormous an investment perspective?
I guess it benefits my kids though
mapt
There are multiple types of sovereign wealth fund associated with taxes on resource extraction. The type you see in Norway is used to shelter the economic diversity, currency, and labor force from the steamrolling impact of the extractive industry. The type you see in Saudi Arabia, which has no such diversity and where basically all employment is tied to oil through few degrees of separation, is basically a slush fund for long-term infrastructure projects that would not otherwise be approved because of their size in relation to the secular economy, whether those are profit-generating enterprises like harbors or not-for-profit ones like roads.
Both aim to take today's windfall and spend it on something other than hookers and blow.
Norway still does have some totally unjustifiable passion projects, like the coastal highway it's building, but it's doing this from general funds to keep the wealth fund separately managed as a giant pile of investment money that just happens to belong to an investor called 'Norway', while in Saudi Arabia it is an instrument of policy.
scosman
I think the thesis is it's not solely about returns. Get a 7% return investing a dollar domestically, plus add a taxable dollar to economy (and some recurring benefit to tax base) beats getting a 9% one-time return investing internationally.
somewhereoutth
I believe wealth taxes (really, wealth restitution) should go into sovereign wealth funds - not least as then the public can see how that money is working for them, and so support the continuance and expansion of such taxes.
vizzier
Agreed, we should also nationalise resource extraction and put the funds in there. Canadian resources should be for Canadians.
qball
No.
Historically, this just ends up with Toronto and Montreal (and to a more limited extent, Vancouver) treating the rest of the country as a resource colony. The pretense that consent of the governed is equally geographically distributed is, naturally, very useful to you.
If you do that again, as you did in the '60s, Canada will only be Toronto and Montreal.
contagiousflow
> this just ends up with Toronto and Montréal (and to a more limited extent, Vancouver)
So, where most Canadians live?
sefrost
There’s a reconciliation dimension that complicates that framing, at least in BC.
triceratops
More importantly - revenues from the funds should be used for reducing income taxes. That's how you get broad-based public support for wealth taxes.
robocat
Submarine nationalisation/communism. Just use a wealth tax until the wealthy don't own anything. Please ensure you simultaneously destroy any self-made businesses.
No country requires business growth or an economy /s.
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This makes sense once you see the list of Canadian companies
https://en.wikipedia.org/wiki/List_of_largest_companies_in_C...
#1 is Brookfield Corporation.
The now prime minister of Canada headed the ESG there. He is also an international central banker.