A FEW WEEKS AGO, WE HEARD ABOUT ALMOST 100 CANADIAN BUSINESS EXECUTIVE SIGNING AN OPEN LETTER ASKING OTTAWA TO ALTER THE RULES SURROUNDING PENSION FUND INVESTING. CANADA'S FINANCE MINISTER. SOME OF THAT IN FOCUS AT LAST WEEK'S BUDGET, WHERE ALONG WITH ALL THE BUDGET ANNOUNCEMENTS WE SAW CHRYSTIA FREELAND ANNOUNCED THE FORMER BANK OF CANADA GOVERNOR STEPHEN POLOZ WILL BE STEPPING IN TO EXAMINE SOME OF THE WAYS BY WHICH PENSION FUNDS COULD BE INTERESTED IN PUTTING MORE CAPITAL TO WORK. YOU'RE AT HOME, INCLUDING IN AREAS LIKE HOUSING AND INFRASTRUCTURE. NOW IN RECENT DECADES, OBVIOUSLY CANADA'S BIG PENSION FUNDS HAVE BECOME MAJOR GLOBAL PLAYERS THAT COMES FROM INVESTING A LOT OF CAPITAL IN FOREIGN TO TRY TO GET BIG RETURNS. BUT BECAUSE YOU'VE SEEN SO MUCH INVESTING ABROAD THAT SPARKED QUITE A CONVERSATION HERE, WHICH IN MANY WAYS WAS KICK STARTED BY LETKO BROSSEAU, THE INVESTMENT FIRM DANIEL PER SO IS THE CO-FOUNDER AND PARTNER AND HELP TO GET THAT OPEN LETTER TOGETHER. HE JOINS US FROM MONTREAL DANIEL, NICE TO HAVE YOU BACK WITH US, APPRECE THE TIME. GOOD MORNING. THANK YOU FOR HAVING US. WHAT WE KNOW THAT THE FEDERAL THE FEDERAL LIBERAL GOVERNMENT HAD BEEN OPENLY TALKING ABOUT THIS IDEA OF SEEING MORE INVESTED HERE HOME. YOU'VE SEEN A LOT OF THE PENSION FUNDS PUSHBACK ON THAT. AND THEN THE BUDGET COMES AND WE LEARNED THAT THE FORMER BANK OF CANADA GOVERNOR STEPHEN POLOZ IS GOING TO STEP IN AND TRY TO. WE'RE THROUGH A GUEST OF OF A FEW OF THE OPTIONS. WHAT WAS YOUR REACTION TO THAT? WELL, VERY THE QUESTION THAT WAS RAISED ORIGINALLY A FEW YEARS AGO WAS. >> THE THAT THE PENSION FUNDS HAVE BECOME THE LARGEST BECAUSE OF GOVERNMENT INCENTIVES AND THINGS LIKE THIS TEXAN SENTENCE, PENSION FUNDS HAVE BECOME THE LARGEST INSTITUTIONAL IN FACT, THE LARGEST POOL OF SAVINGS IN CANADA. AND IT WAS MOVING AWAY FROM ANADA. IF YOU FOR EXAMPLE, THAT THE BANKS WOULD TAKE TWO-THIRDS OF SAVINGS DEPOSITS OF FAT OF CANADIANS AND USE THAT TO MAKE LOANS TO THE U.S. OR CHINA. AND THAT IF YOU ARE A CANADIAN COMPANY, YOU HAVE TO GO SEE A FOREIGN BANK 2 HAGGETT YOU'RE FINANCING PEOPLE WOULD KIND OF QUITE QUITE. STRONGLY. I WOULD THINK OUR NATIONAL PENSION FUND CPP HAS 2% INVESTED IN THE CASE IN CANADIAN PRIVATE AND PUBLIC EQUITIES. AND HAS 55% INVESTED IN 4 MONTHS. SO SO THIS IS WHAT KIND OF GODDESS ON ON THIS, THIS CASE. AND THIS WAS ALL HAPPENING UNDER THE RADAR SO SO. THE COULD THE QUESTION MANY IS. IT WE, IT COULD BE SOMETHING THAT THAT CANADIANS THE SIDE MAKES A LOT OF SENSE TO TAKE OUR SAVINGS AND IN AND ENCOURAGE THE DELOPMENT OF OTHER ECONOMIES AND INVEST JUST A LITTLE BIT IN OUR OWN, BUT IT HAS TO BE A CAUTION, A CONSCIOUS DECISION. IT HAS TO BE ONE THAT WE ARRIVE AT THROUGH DISCUSSION. SO WE'RE VERY HAPPY THAT THIS IS NOW COME FORTH AS BEING AS SOMETHING THAT NEEDS TO BE DISCUSSED AND WE'RE QUITE HAPPY WITH THE CHOICE OF THE MODERATOR OF THIS DISCUSSION BECAUSE HE HAS ALL THE REQUIRED SKILLS AND KNOWLEDGE TO BE ABLE TO UNDERSTAND WHAT THE REAL ISSUES ARE. SO NOW IT BECOMES A QUESTION OF OF THIS, WHAT IS GOING TO BE THE NATURE OF THIS DISCUSSION. AND I NOTICED IN YOUR INTRO THAT YOU TALKED ABOUT RETURNS AND THINGS OF THAT NATURE. AND IN FACT, IT REALLY ISN'T ABOUT RETURNS BECAUSE RETURNS IN CANADA HAVE BEEN BETTER. THEN THE JUST ABOUT EVERYWHERE ELSE IN THE WORLD. AND FOR QUITE SOME TIME OVER THE LAST 25 YEARS, THE TSX HAS OUTPERFORMED THE MORGAN STANLEY UP BY 4% PER YEAR. IT HAD HAS OUTPERFORMED THE S&P AND MORGAN STANLEY EMERGING MARKETS FUNDS BY CLOSE TO ONE PERCENT PER YEAR. SO EVEN IF THE RETURNS HAVE BEEN BETTER, THEY WOULD STILL HAVE LEFT CANADA. PENSION FUNDS WILL STILL HAVE LEFT CANADA AND IT'S ALSO NOT ABOUT DIVERSIFICATION BECAUSE WHEN YOU HAVE CBP INVESTING 2% IN CANADA AND 55% ELSEWHERE. WELL, THE 2% REALLY BECOMES IRRELEVANT AND YOU DON'T NEED TO INVEST 55% ELSEWHERE TO DIVERSIFY YOURSELF OUT OF THE 2%. SO SO IT'S REALLY NOT ABOUT DIVERSIFICATION AND AND IT'S BEEN COMMENTED THAT MAYBE CANADA'S NOT VERY COMPETITIVE AND DOESN'T HAVE VERY INTERESTING PLACES TO INVEST IN THINGS LIKE THIS, WHICH WHICH EVIDENTLY YOU WANT CANADA BE EVEN MORE COMPETITIVE. THERE'S NO DOUBT ABOUT BUT CANADA IS ALREADY. CANADA IS ALREADY VERY COMPETITIVE. THE IMD WORLD COMPETITIVE RANKINGS THAT WERE PUBLISHED LEE LAST YEAR SHOWED CANADA TO BE IN THE TOP COURT. I'LL AMONGST ALL THE WORLD ECONOMIES IN REGARDS TO COMPETITIVENESS AND SECOND, JUST AFTER THE U.S. WITH REGARDS TO THE G7. SO SO WE SHOULD MAKE CANADA MORE COMPETITIVE. BUT EVEN IF IT WAS MORE COMPETITIVE DOUBT THAT THERE WOULD BE MUCH MORE INVESTED HERE. NONETHELESS. SO WHAT IS THE ISSUE, WHAT IS CAUSING THIS PROBLEM? AND INTERESTINGLY ENOUGH, IT'S A CLASH OF TITANS BECAUSE WE HAVE TO ECONOMIC THEORIES. ONE PORTFOLIO MANAGEMENT THAT SAYS CANADA'S OLDEST 3% OF WORLD GDP AND THE 3 PERCENT. THE WORLD MARKETS END THE FIRST FLIGHT. PORT FOOD SHOULD HAVE JUST 3% INVESTED IN CANADA. ANYTHING MORE IS A BIT OF OVERWEIGHT. SO SO AND IT'S ONLY INTERESTED IN RISKS AND RETURNS. NOW YOU HAVE ANOTHER THEORY, WHICH IS MACROECONOMIC THEORY, THAT'S AS THAT COUNTRY SHOULD INVEST ALL IT CAN IN HIS OWN DEVELOPMENT BECAUSE THAT'S THE WAY IT'S BEEN INCREASE ITS PRODUCTIVITY, ITS INCOMES JOBS AND IT'S, IT'S GENERAL WEALTH. SO SO IT ALSO STATES THAT TO A COUNTRY IS BETTER OFF CONTROLLING ITS FUTURE BY CONTROLLING ITS COMPANIES. THE CORE MARY OF THE PORTFOLIO MANAGEMENT THEORY, WHICH HAS JUST 3% IN CANADA, MEANS THAT BASICALLY YOU'RE GIVING OFF TO FOREIGNERS, THE CONTROL OF YOUR COMPANIES. SO SO WE HAVE 2 THEORIES THAT ARE COMING TO VERY DRAMATIC, DIFFERENT CONCLUSIONS, PORTFOLIO THEORY THAT SAYS INVEST VERY LITTLE IN CANADA. THE LEAD THE CONTROLLED TO FOREIGNERS AND MACROECONOMIC THEORY THAT SAYS INVEST ALL YOU CAN IN CANADA AND KEEP CONTROL COMPANY'S DANIEL, JUST TO JUMP IN AS WELL. I THINK THERE IS A POLITICAL COMPONENT AS WELL, BECAUSE I DO HAVE TO BE CLEAR THAT WE'VE TALKED TO PEOPLE WHO PREVIOUSLY RAN PENSION FUNDS, PEOPLE WHO PREVIOUSLY WORKED. >> IN OTTAWA TO TALK ABOUT THEIR VIEWS ON THIS IDEA. VERY QUICKLY HAD PEOPLE SHUTTING IT DOWN. AND I THINK THERE'S SORT OF A BROADER VIEW THAT HAVING THE FEDERAL GOVERNMENT MESSING WITH WHERE THE INVESTMENTS ARE GOING, GETS US ON THIS COMPLICATED SLIDING SCALE. THAT'S JUST MY OWN $0.2 ON THE MATTER. BUT LISTENING TO WHAT YOU'RE SAYING, WHICH ALL MAKE SENSE. BUT THERE ARE A LOT OF PEOPLE WHO ARE RELUCTANT, EVEN HAVE THE CONVERSATION RIGHT NOW. I WOULD IMAGINE IT'S BECAUSE OF THAT BIGGER POLITICAL TAKE AWAY AS A WORRY. >> SO SO GOVERNMENTS HAVE BEEN FINANCIAL INSTITUTIONS. 4, MANY, MANY, MANY DECADES. THEY REGULATE THE BANKS TO REGULATE THE INSURANCE COMPANIES AND EVEN THE REGULATORS OF THE OF THE PENSION FUNDS THE REGULATIONS OF THEIR OF THE BANKS AND THE INSURANCE ARE NOT REALLY THAT MUCH. THERE'S ALWAYS A LITTLE SOMETHING HERE, LITTLE SOMETHING THERE AND THINGS LIKE THAT. THERE'S NO QUESTION THAT THE GOVERNMENT CAN REGULATE NOW, THIS IDEA THAT THE GOVERNMENT'S GOING TO STEP IN AND TELL THE ECONOMIC AGENTS WHERE TO INVEST AND HOW TO INVEST IN THINGS LIKE THIS IS NOT PART OF THE OF THE. IT'S JUST THAT. RIGHT NOW. WE HAVE A SYSTEM THAT DOES NOT TAKE INTO ACCOUNT THE MACROECONOMIC EFFECTS OF INVESTMENT. AND THESE MACROECONOMIC EFFECTS ARE ARE LARGE, VERY LARGE. AND IF WE LOOK AT $5 INVESTMENT, FOR EXAMPLE, AND YOU TALK ABOUT A ONE PERCENT EFFECT ON THE ON THE RETURNS. THAT'S $0.5. PUBLISHED A STUDY ON THEIR WEBSITE RECENTLY KIND INDICATED THAT A $5 INVESTMENT ADDED ONE DOLLARS TO ONTARIO'S ANNUAL GDP. SO SO YOU CAN'T IGNORE THAT. THE $5 INVESTMENT HAS THE POTENTIAL OF ADDING ONE DOLLAR TO ONTARIO'S GDP ARE CANADA'S GDP RIGHT NOW WE'RE TAKING THAT $5, INVESTING IT IN THE U.S. AND INVESTING IT IN THE IN CHINA AND ADDING TO THEIR GDP. THE QUESTION IS MAYBE WE SHOULD THINK ABOUT ADDING IT TO OUR GDP. AND SO SO IT'S, IT'S, IT'S A QUESTION THAT NEEDS TO BE ASKING, NEEDS TO BE DISCUSSED. AS I SAID, IF PEOPLE DECIDE THAT THE BEST THING IS NO, NO, BUT THAT MONEY GO. AND WE DON'T, WE DON'T ENCOURAGE OUR OWN ECONOMY AND THINGS LIKE THIS. THAT'S THE BEST FOR THE COUNTRY. SO BE IT WILL LIVE WITH THAT. NO PROBLEM, BUT IT CANNOT HAPPEN BY ACCIDENT. SO SO DISCUSSION THAT'S GOING TO OCCUR IS IS GOING TO BE QUITE IMPORTANT. AND AND I AGREE WITH YOU THAT THAT THE HOW THE GOVERNMENT DECIDES RESOLVE THIS AND AND AND HOW. YOU KNOW, DOESN'T DOESN'T ACT ON SPECIFIC INDUSTRIES, TWEAK THIS TWEET THAT OR DOES IT SET A GENERALLY ENVIRONMENT THAT'S CONDUCIVE FOR OR BRINGS IN THIS, THIS MACROECONOMIC EFFECT INTO INTO CONSIDERATION IS GOING TO BE PART OF THE DISCUSSION AND AND THAT THOSE THAT ARE ARGUING THAT THE GOVERNMENT SHOULD NOT BE DIRECTIVE, BUT ACT ON THE ENVIRONMENT. WE WOULD AGREE WITH THAT. RIGHT. DANIEL, JUST WANT TO GET ONE MORE QUESTION IN HERE. JUST FOR AUDIENCE, YOU KNOW, WE TALKED ABOUT THE >> CANADIAN BUSINESS LEADERS WHO HAD SIGNED THE LETTER THAT YOU, YOU GUYS WERE INSTRUMENTAL IN INJURED, BRINGING THIS TO THE FOREFRONT. THE BANKS HAVE BEEN PRETTY THE BANK'S ONE COULD ARGUE, YOU KNOW, THEY THEY, THEY SERVE THE BUSINESS COMMUNITY AND A LOT OF THE BUSINESSES THAT THAT SIGNED THAT LETTER, THEY ALSO SERVE LOT OF THE PENSION FUNDS AS WELL. BUT WHAT I D I HAVE ONE BANK CEO PRIVATELY IS, IS THERE A COMPROMISE AREA HERE WHERE WE HAVE ALL THESE BIG INVESTMENTS WE NEED TO MAKE FOR THE FUTURE. WE HAVE TO MAKE BIG INVESTMENTS IN AREAS LIKE INFRASTRUCTURE. WE'RE TALKING ABOUT A CLEAN ENERGY FUTURE. A LOT OF THESE PENSION FUNDS HAVE BEEN PUTTING MONEY TO WORK IN SUCH PROJECTS AROUND THE WORLD. WOULD THERE BE SOME OPPORTUNITY TO FIND COMMON GROUND TOWARDS INVESTMENT. I'M ASKING THAT QUESTION BECAUSE IF IF THE FORMER BANK OF CANADA GOVERNOR IS COMING IN TO LOOK AT OPTIONS, I WOULD IMAGINE, YOU KNOW, FINDING SOME COMMON GROUND HERE WOULD BE THAT GOAL. WELL, OF COURSE, THIS IS WHY DISCUSSION IS SO IMPORTANT. IT IS TO FIND COMMON GROUND. THERE IS NO USE. >> TO TO RESOLVE THIS BY IMPOSING THINGS THAT MAKE NO SENSE. SO SO COMMON GROUND IS VERY, VERY WHAT WE HOPE IS THAT THIS DISCUSSION IS GOING TO BE VERY THERE IS NOT JUST GOING TO BE PENSION FUNDS AND GOVERNMENT THERE LOT OF OTHER PEOPLE THAT HAVE INTERESTS IN THIS WE HOPE THAT IT'S GOING TO BE A TRUE DIALOGUE AND IT'S
