Canada's pension system is the envy of the world. But here's the paradox: while our pension funds build infrastructure across the globe, the infrastructure and businesses right here at home often struggle to find that same level of investment.

As of late 2024, Canadian funds were managing roughly $4.5 trillion in pension assets, putting Canada third globally in total assets and second in pension assets relative to GDP. Our largest funds, known as the Maple Eight, control approximately $2.4 trillion of that total. These funds consistently outperform their global peers and maintain funding ratios above 100 percent, meaning they have enough to cover all obligations to current and future retirees.

That success comes with a catch. The majority of this massive capital pool flows overseas.

‍

Where the Money Actually Goes

For every dollar the Maple Eight manage, more than 75 cents get invested outside Canada. When you exclude fixed income holdings like government bonds, Canadian exposure drops to just 12 cents per dollar. The pattern holds across the board: only four cents of every managed dollar go into Canadian real estate, three cents into public equities, two cents each into infrastructure and credit, and one cent into private equity.

Meanwhile, Canadian pension dollars help build ports in Dubai, railways across Europe, tunnels in Australia, highways in Mexico, nuclear plants in the UK, and renewable power facilities in India.

There's nothing inherently wrong with global diversification. It's smart investing. But the imbalance raises a question: if these projects make sense overseas, why aren't similar opportunities being pursued aggressively at home?

‍

What We're Missing

Consider what major infrastructure projects actually do for an economy. The Trans Mountain pipeline expansion, which cost $34 billion to build, added between 0.2 and 0.4 percentage points to Canada's GDP in 2024 alone. It nearly doubled Canada's non-U.S. oil exports and narrowed the price discount on Western Canadian crude by opening access to Asian markets.

The LNG Canada facility in Kitimat, which began operations in 2025, is expected to boost national GDP by 0.4 percent once fully operational. Between 2024 and 2043, it's projected to generate $9.2 billion in GDP and $2.8 billion in tax revenues.

These aren't theoretical benefits. They're real economic returns happening right now.

If Ottawa created the right incentives to encourage pension funds to double their domestic investment in real estate, public equities, private equity, credit and infrastructure, it would inject nearly a third of a trillion dollars into the Canadian economy. That would be the largest capital influx in the country's history, helping reverse the $350 billion in cumulative net outflows that have left Canada since 2016.

‍

Why Domestic Investment Makes Sense

There are solid reasons beyond patriotism for pension funds to keep more money at home.

Pension liabilities get paid in Canadian dollars, so investing domestically reduces currency risk. Funds also have a home-court advantage when it comes to information and relationships, which often leads to better risk-adjusted returns. Domestic assets naturally hedge against the same interest rate and inflation shocks that affect pension obligations. And unlike foreign investments, Canadian holdings carry no risk of expropriation by foreign governments.

Public sector pensions are funded by Canadian taxpayers through their contributions. With Canada projected to have the lowest per-capita productivity and GDP growth in the OECD until 2060, it's reasonable to assume public sector wages and jobs will face pressure, which means pension contributions could decline. Building a stronger domestic economy helps secure the source of those future contributions.

‍

The Challenge: Not Enough to Invest In

The real problem isn't that pension funds avoid Canada. They invest heavily at home in bonds and other fixed-income assets. The issue is a shortage of investable projects in the asset classes pension funds prefer: infrastructure, private equity, real estate and credit.

You can't invest in what doesn't exist.

Canada ranks as the second-slowest OECD member for obtaining general construction permits. Mining and infrastructure projects spend an average of three to six years navigating federal regulatory processes. By the time approvals come through, opportunities have often moved elsewhere or become uncompetitive.

Several countries including Austria, Belgium, Denmark, Germany and South Korea impose limits on foreign investment by pension funds. The Caisse de dépôt et placement du Québec (CDPQ), one of the Maple Eight, already operates under a dual mandate to maximize returns while investing in Quebec. AIMCo is reportedly considering a similar approach.

But mandates alone won't solve the problem. If political interference undermines independent management, it could erode confidence in the funds and make it harder to sustain returns. The better approach involves creating more opportunities worth investing in, not forcing capital into mediocre projects.

‍

How to Actually Fix This

Rather than mandating domestic investment, Ottawa could make Canada more attractive as an investment destination through practical policy changes.

Fast-track nation-building projects. The government established a Major Projects Office to streamline regulatory approvals for nationally important initiatives. So far, it's focused mainly on natural resource projects led by private corporations. Extending this designation to major infrastructure proposals led by public-sector pension funds would accelerate approvals and unlock large-scale, long-term investment these funds are uniquely positioned to provide.

Encourage asset recycling. Pension funds already favor infrastructure for its inflation-indexed returns. Selectively privatizing existing assets like airports, ports, utilities and energy infrastructure would generate government revenue, reduce fiscal burdens and create investable assets for pensions while keeping Canadian assets in Canadian hands. Ottawa should also eliminate the 90 percent threshold that limits municipal-owned utility corporations from attracting more than 10 percent private ownership. An RBC study estimated Canada needs an additional $2 trillion in new investment over the next three decades just to overhaul the country's energy systems.

Create tradeable infrastructure funds. The UK has infrastructure investment trusts, and India's National Investment and Infrastructure Fund serves as a platform to attract both domestic and foreign capital. Canada could establish publicly traded infrastructure funds or a secondary-market clearinghouse, enabling pension funds to buy and sell stakes in Canadian private equity, credit and infrastructure. Combined with selective privatization, this would unlock capital trapped in public assets, reduce the illiquidity premium for investors and build a more dynamic domestic infrastructure market.

Launch a public-private growth fund. To address weak startup investment and low R&D spending, Canada could expand its Venture Capital Catalyst Initiative by creating a single platform, anchored by the Business Development Bank of Canada, specifically for pension funds to invest in as limited partners. The BDC could backstop the first 10 to 20 percent of losses, creating a bond-like floor to limit downside risk. Israel's Yozma Program in the 1990s helped seed that country's world-class tech sector. Singapore's co-investment schemes spurred innovation. Similar structures could work here.

‍

The Real Estate Connection

For those watching local real estate markets, pension fund investment patterns matter more than you might think. When Canadian funds invest heavily in residential and commercial real estate overseas while opportunities at home go underfunded, it affects development, rental supply and property values.

Domestic real estate holdings dropped $4.5 billion in 2024 even as foreign real estate holdings grew by $8.7 billion. That's capital that could have supported new housing developments, commercial properties or infrastructure that makes communities more livable.

The housing crisis isn't just about zoning and interest rates. It's also about where long-term institutional capital chooses to invest.

‍

Looking Forward

Canada's pension system works. Our funds are among the best-managed in the world, generating strong returns while maintaining full funding. But their success abroad doesn't automatically translate into prosperity at home.

The financial muscle of Canada's pension giants could fuel infrastructure, innovation and growth right here if we create the right environment. That means removing regulatory barriers, creating investable assets through smart privatization, building platforms that reduce investment friction and ensuring pension funds have access to projects that meet their return requirements.

None of this requires forcing pension funds to accept lower returns or compromising their fiduciary duty. It requires making Canadian opportunities as attractive as the ones currently drawing capital overseas.

If you're exploring real estate opportunities in British Columbia or anywhere across Canada, understanding these broader capital flows matters. The presence or absence of major institutional investors shapes markets, determines which projects get funded and influences long-term property values. At Coldwell Banker Horizon Realty, we stay connected to these larger economic trends because they affect the local markets where our clients buy, sell and invest.