Jim Leech advises Ottawa to maintain a ‘hands off’ approach to pension fund investments
Jim Leech, the former head of the Ontario Teachers' Pension Plan (OTPP), one of Canada's premier pension funds, has voiced a clear stance against federal intervention in pension fund investments.
Speaking to BNN Bloomberg, Leech underscored the imperative for pension funds to maintain their independence from government influence to ensure they deliver the highest returns for Canadians.
His unequivocal message to Ottawa concerning any potential adjustments to the pension model was straightforward: “Hands off.”
Leech's remarks were prompted by an open letter to Finance Minister Chrystia Freeland, co-signed by nearly 100 business luminaries, inAcluding Rogers CEO Tony Staffieri and Canaccord Genuity Group CEO Dan Daviau.
Initiated by the investment management firm Letko Brosseau, the letter called for regulatory amendments to motivate pension funds to increase their investments within Canada.
Peter Letko, co-founder of Letko Brosseau, subsequently expressed to BNN Bloomberg his concern that without a pivot towards more domestic investments by Canada's pension plans, the nation's financial markets and exchanges could face detriment.
Contrary to the apprehensions aired in the open letter, Leech argued that there is no substantial evidence of significant Canadian companies or ventures struggling to raise capital.
Furthermore, he pointed out that Canadian pension plans inherently demonstrate a “domestic bias,” with investments in Canada by the so-called Maple-8 funds ranging from 15 percent to 60 percent of their assets, averaging around 40 percent. He noted that this is substantially higher relative to the size of Canada's capital markets than the global market.
Leech reflected on a time about 30 years ago when Canada's major pension funds were in “serious trouble” and underscored the dangers of regressing to a period of reduced independence and governance.
He credits the reforms undertaken by the Canada Pension Plan, which evolved into the Canada Pension Plan Investment Board with separate governance and investment strategies, for averting such crises.
According to Leech, the government's role should not involve compelling pension plans to “artificially direct funds towards Canadian companies just because they're Canadian.”
Instead, it should focus on enhancing Canada's attractiveness as an investment destination through various economic levers, thereby naturally encouraging domestic and international investments.
