Public sector pension fund looks for more ways to invest in Canada as U.S. risks grow
The internal look at portfolio design also comes as Ottawa is looking to 'catalyze' billions of dollars in private investment to shore up the economy and reduce dependence on the U.S.
'We're asking (ourselves) whether there's opportunities to leverage our global capabilities in areas like infrastructure here at home,' Orida said as the investment manager for the pensions of federal government workers, the Canadian Forces and the Royal Canadian Mounted Police posted a 12.6 per cent return for the fiscal year that ended March 31, with assets climbing to nearly $300 billion.
She said the renewed focus at home stemmed from a wide consideration of factors influencing investing, including geopolitical realignment over the past couple of years, and was not done in direct response to either the Canadian government's desire for stepped-up domestic pension investments or the potential for tax and trade tensions with the U.S. to change the value proposition of investing there.
'It may have all come together at the same time. But really, for us, it's about having the capabilities… better capabilities than we did, say, a decade ago, to make good investments in Canada, because we have this expertise and ability to add value,' she said.
International expertise that could be brought to assets in Canada, should they be made available, includes investing in airports and data centres, she said, adding that PSP has a subsidiary that specifically invests and operates airports around the world. Earlier this year, AviAlliance sold a stake in the Budapest airport and purchased three others in the United Kingdom: Aberdeen, Glasgow and Southampton.
As for data centres, PSP Investments and Macquarie Asset Management bought a control stake in AirTrunk in 2020 that was profitably sold in 2024 to a consortium of investors led Blackstone.
PSP has around $70 billion in investments in Canada, representing about 20 per cent of its portfolio, and that's before including the purchase of a minority stake on Ontario's 407 toll road, a deal that closed this month.
Orida said there is not a specific target for increasing domestic investments. Rather, the pension manager will include its new focus on what's it's calling the 'Canada power intersection initiative' in making decisions that maximize returns without taking on undue risk.
PSP Investments is also focusing on its platform in Europe.
'We're well positioned in Europe. We have a great team in London,' she said. 'It's a cross-asset class team where we have private equity, real estate, infrastructure, (and) private credit expertise.'
As for the United States, she said there has been no decision to pause or pull back on investments there as a result of trade and potential tax developments. But new risks are being taken into consideration, including the potential for new tax costs stemming from a controversial bill making its way through the U.S. Congress, when assessing investments there, she said.
'It's not a black and white turning away. It's rather an incorporation of the additional uncertainty, or risk, or potential implication of changes in tax laws, and then a holistic assessment of the risk adjusted return after factoring in all of that right relative to your other opportunities,' Orida said.
The potential changes to years of favourable tax treatment, which may be applied to Canadian investors in the U.S. if the Senate passes the legislation as the House of Representatives has done, are contained in section 899 of a large budget package U.S. President Donald Trump has dubbed 'One Big Beautiful Bill.'
How PSP Investments is navigating tumultuous markets
PSP Investments posts 4.4% return
'We have analyzed the potential impacts of 899, and looked at different scenarios and analyzed the potential impacts on our existing portfolio,' she said. 'As well, (we have) put thought to how we would incorporate that into new underwritings if there are new underwriting that are attractive, and how we would try to incorporate that uncertainty and potential impact.'
• Email: bshecter@postmedia.com
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