Well I’m from the US so you’re wrong on that point.
Your quality of comment is what I expect from conservatives who think their feelings are reality and complain about shit without making solid inferences or connections.
It’s a sovereign wealth fund and you’re complaining that one of the larger Canadian companies is included in it because Carney worked there. Then when pressed you say you wish someone else represented your(presumably you’re Canadian) people.
> Perhaps I would have simply had someone different represent Canadians. Is this too much to ask?
This was in reference to Carney. I dont think Carney represents the people very well.
It is not a sovereign wealth fund. The name is intended to clash with a real sovereign wealth fund like say Norway has. Basically you need wealth and Canada has the inverse of wealth it has deficits.
The fund was created (of course) by debt. It is a bit like borrowing to invest in the stock market rather than trying to invest your savings/income. Canada already has massive federal debt due to insane levels of mismanagment.
So why would Canada create such a bizarre 'fund'. Well it is what happens when you put a banker in charge of a country. You get banking solutions to country problems.
So now you see why Carney's career path matters.
This is just the tip of the iceberg. If you want to know more I can link you to many facets that you might find interesting.
>So now you see why Carney's career path matters. This is just the tip of the iceberg. If you want to know more I can link you to many facets that you might find interesting.
Nah I don't. So far I'm batting 11/12 for going down the rabbit hole with anti Carney Canadians before i find out they were in support of the trucker convoy.
Benefit of the doubt is gone if you don't open up with actual thought out critique.
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.
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.
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.
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.
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.
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.
> Incessant nit picking, negativity and doubt casting is my issue.
That has unfortunately been very common internet culture since 2020. It was there before the pandemic, but post-pandemic internet never recovered its full whimsy and veered headfirst into a depressive state. Probably says something about everyone's general mood.
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.
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.
> 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).
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?
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.
Don't worry you're not missing out. The country is infatuated with the idea of destroying the entrepreneurial and business running class which creates tax income and jobs. And also the middle class is being eviscerated by inflation and insane levels of government costs and taxes.[0]
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.
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.
Ponzi schemes always make current payments out of current inflows. The first 10 people get paid from the inflows from the next 100 people who get paid from the next 1000 people and so on, until you run out of people to sign up and the last group is left holding the bag. This is how Social Security works in the US because it started out by making payments to people who never paid in and was premised on the early 20th century fertility rate of >3.5 instead of the current ~1.6 to keep the system from collapsing, which is why the "trust fund" is running out of money -- it never had enough to cover future payments to begin with.
Whereas having individual years when the fund pays out more than it collected in interest is not a problem as long as that's not what happens on average.
> 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.
> One time out of five, the consequence of that investment strategy is 'The market had a crash and I lose everything'.
Which is why that strategy doesn't actually beat the market. Keep using it for 30 years and you're bankrupt.
Whereas if you put your money in a major index 30 years ago and left it there, or even 50 or more years ago, what result? Are you even in a bad place if you put all your money into the market in 1926 and left it there for 100 years?
Yes, if a retirement fund had put all their money into a stock index in 1926, it wouldn’t have been able to pay out pensions throughout the 1930s and 1940s and would have been bankrupt before the market eventually recovered.
Going full index is a great strategy for an individual person aged 20-50, but not a strategy for a pension fund which needs to continuously pay out.
During the Great Depression, the stock market stayed below 50% of its peak value for about 20 years. Imagine that the $600 billion turns into $300 billion overnight. It will only last 5-10 years without inflows, but the GDP has also dropped by 40% and inflows have plummeted.
It's still going back to the same assumptions that you're not only timing a depression but also
(a) don't have pre-funding (i.e., millions for an individual at the start of the depression),
(b) don't have CPPIB guardrails and auto-adjustment mechanisms,
(c) and it's not a partial income replacement scheme.
> It will only last 5-10 years without inflows
Without inflows? That's not realistic because people would still be contributing. In fact, CPPIB has triannual resets of contributions and in a recession, they'd up the contribution rate. In a recent actuarial audit, they found that if real returns dropped to 2.5%, then they'd only need to boost contributions from 9% to 11% to keep their 75-year sustainability target.
The advice that you need to taper off your investment portfolio risk as you get older doesn't really apply to people that have a nest egg. I know a lot of people that aren't necessarily living frugally and are told by their financial advisors that they might as well upgrade their cars, travel more, etc. They can cover their costs and don't have net worth > ~$3 million.
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.
"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.
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?
The gravitational field of indexes that large is one of the reasons why it works. The stock price of a company will generally increase when it's added to a major index because there are now so many more people trying to buy it as part of the index.
The risk is nominally that if you ever wanted to move a fund that large into some other investments, the act of selling would lower the price of the assets in the fund. But that's what happens no matter what you invest that amount of money in. But then widely distributed whole-market indexes would tend to mitigate that.
The real problem with this is that it disconnects what people invest in from the fundamentals of the companies. Promising companies don't get as much investment if they're not in an index, and mismanaged companies get too much if they are.
> The gravitational field of indexes that large is one of the reasons why it works
I'm confused because my question was whether a sovereign wealth fund could move an index by too much. Not about the issues with index investing (which IMO are mostly overblown).
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.
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.
>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.
I believe it’s tied to your earnings in the US though, which it isn’t in the UK.
I also have a number of qualifying years in the UK when I didn’t work, and for decades you could buy a year contribution for about £150. The payout is £12,500 per year.
>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.
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.
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]
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.
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.
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)
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?
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).
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!
>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.
>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).
>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.
>So the US is the world's poorest nation, by far, right?
Considering the USD still has decent purchasing power, no? The demand for US goods and services relative to other nations' might have dropped from its peak, but still considerably higher than other nations.
>There is no master book of records that dictates cause and effect
There is for simple stuff, like supply and demand. There is no way of getting around that executing a successful peaceful trade requires both parties to have something that the other wants.
On a nation state level, debt denominated in a nation's currency is more like a claim on the future productivity of a nation (since any nation can always print money or edit a digital database to satisfy its debts).
When you buy a US Treasury, you are betting that at some point in the future, the US is going to be be selling things worth having. You are not worried that your loan to the US will default, because it is trivial for the US government to repay you in USD. Your risk is that when it gets paid back, what will you be able to buy with it?
>Considering the USD still has decent purchasing power, no?
You understand I was applying your logic, right? The US has the worst trade deficit on the planet, by a long shot. It buys far, far more than it sells. Its primary role on the planet is money printer.
>When you buy a US Treasury, you are betting that at some point in the future, the US is going to be be selling things worth having.
Again, this almost sounds sophomoric. When you buy US treasuries, you are betting that the US will still be printing money when it matures, or when you unload it earlier. It is not based on sound rational logic -- if so the country with the $40 trillion dollar debt and $2 trillion dollar deficit with the massive trade deficit -- would be already bankrupt.
I feel like I'm arguing with someone who is arguing rational economics when someone points out how farcical a stock like TSLA is. All of the hot air in the world doesn't change the fact that it relies upon a shared delusion, and everyone is playing a bit of a game of chicken.
I am not sure what logic you are referring to. My first reply was to point out that no matter what economics are "made up", when push comes to shove, there has to be delivery of real goods and services for the charade to continue. "Enough" people won't go along with someone that doesn't result in them getting what they want, and no one wants a currency if they don't think it will get them what they want.
My second post is responding to the claim that America is the poorest country, to which it obviously isn't, since it can still buy almost whatever it wants.
Regardless of the technical details, someone who can buy something is richer than someone who cannot buy something. Maybe that is due to a shared delusion, and maybe everyone is playing a bit of chicken. Obviously, that will only be revealed in the future, but in general, that's what all sovereign nations' debt is, a "delusion" (or assumption) that the fruit of the nation's productivity will be worth having in the future.
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.
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.
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.
If I understand democracies, the private sector get easy access to credit via the creation of debt. You win you win. You win we lose. but also get money invested on behalf of the tax payer.
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.
I guess we shouldn’t do anything because Brookfield exists.
I guess we should do stupid corrupt things because Trump exists.
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?
Perhaps I would have simply had someone different represent Canadians. Is this too much to ask?
Yes, considering everyone else was either utterly incompetent, didn't want the job, or screwed the pooch under pressure.
Look, I checked my email everyday and didnt see anything.
So you were just complaining because you don’t like the guy?
Your response is the quality of argument that I have come to expect in Canada.
Well I’m from the US so you’re wrong on that point.
Your quality of comment is what I expect from conservatives who think their feelings are reality and complain about shit without making solid inferences or connections.
It’s a sovereign wealth fund and you’re complaining that one of the larger Canadian companies is included in it because Carney worked there. Then when pressed you say you wish someone else represented your(presumably you’re Canadian) people.
That’s just kvetching.
> Perhaps I would have simply had someone different represent Canadians. Is this too much to ask?
This was in reference to Carney. I dont think Carney represents the people very well.
It is not a sovereign wealth fund. The name is intended to clash with a real sovereign wealth fund like say Norway has. Basically you need wealth and Canada has the inverse of wealth it has deficits.
The fund was created (of course) by debt. It is a bit like borrowing to invest in the stock market rather than trying to invest your savings/income. Canada already has massive federal debt due to insane levels of mismanagment.
So why would Canada create such a bizarre 'fund'. Well it is what happens when you put a banker in charge of a country. You get banking solutions to country problems.
So now you see why Carney's career path matters. This is just the tip of the iceberg. If you want to know more I can link you to many facets that you might find interesting.
>So now you see why Carney's career path matters. This is just the tip of the iceberg. If you want to know more I can link you to many facets that you might find interesting.
Nah I don't. So far I'm batting 11/12 for going down the rabbit hole with anti Carney Canadians before i find out they were in support of the trucker convoy.
Benefit of the doubt is gone if you don't open up with actual thought out critique.
Come now, that's just the cognitive dissonance talking.
I'm your huckleberry.
Apparently!
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.
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.
https://en.wikipedia.org/wiki/British_Columbia_Resources_Inv...
Hopefully turns out better than BCRIC.
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.
laudable goal. I suspect it will end up like most other Canadian procurement projects.
also why all the love for Canadian Pacific rail?
>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...>
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.
Why is HN so pessimistic?
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.
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.
Give me a break.
Is setting expectations based on track record considered pessimism?
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?
> Incessant nit picking, negativity and doubt casting is my issue.
That has unfortunately been very common internet culture since 2020. It was there before the pandemic, but post-pandemic internet never recovered its full whimsy and veered headfirst into a depressive state. Probably says something about everyone's general mood.
As a Canadian I see little reason for optimism
You're right, it is unrecognisable, and past performance is not indicative of future success. It will be much worse than past performance.
Sorry, not optimistic enough I suppose :(
That says "laudable" not "laughable." They were actually complimenting the effort, even if some folks misread it
It's the default for any non USA story.
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.
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.
>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/...
> 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?
> 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).
GDP isn't wealth. This is closer to making $1M/year and owing $4 million.
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?
Canada has tens of trillions of dollars in natural resources it could choose to monetize at any time.
A sovereign wealth fund makes sense if fund with profits from exploiting our natural resources.
That is how Norway did it
And Norway has north of 2 trillion in that fund for about 5M people...
Like, well done. Impressive financial planning at that scale
Yep. Long term greedy nation taught by the best at Goldman Sachs. Thank you guys!
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.
Don't worry you're not missing out. The country is infatuated with the idea of destroying the entrepreneurial and business running class which creates tax income and jobs. And also the middle class is being eviscerated by inflation and insane levels of government costs and taxes.[0]
0, https://www.youtube.com/watch?v=PKn1FrthKwU
It's so bad, they're ranked 7th happiest country in the world...
Yeah and it isnt true
Sounds terrible. I bet the poor businessmen are moving in droves to more pro-market places like Argentina and Paraguay, right?
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.
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.
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.
That seems fine as long as they can show lower volatility than market while still being close in return?
Did they?
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.
> 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.
Well, it could absorb it because its horizon is past the depression.
Let's not forget, CPPIB underperformed a passive benchmark during the Great Financial Crisis and lost 18.8% in FY09.
> Future payments in the short term are covered by inflows.
is that similar to the Ponzi scheme pattern, though?
Ponzi schemes always make current payments out of current inflows. The first 10 people get paid from the inflows from the next 100 people who get paid from the next 1000 people and so on, until you run out of people to sign up and the last group is left holding the bag. This is how Social Security works in the US because it started out by making payments to people who never paid in and was premised on the early 20th century fertility rate of >3.5 instead of the current ~1.6 to keep the system from collapsing, which is why the "trust fund" is running out of money -- it never had enough to cover future payments to begin with.
Whereas having individual years when the fund pays out more than it collected in interest is not a problem as long as that's not what happens on average.
kudos for a thoughtful and clear explanation: useful indeed as my question was genuine, not snarky.
> 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.
> One time out of five, the consequence of that investment strategy is 'The market had a crash and I lose everything'.
Which is why that strategy doesn't actually beat the market. Keep using it for 30 years and you're bankrupt.
Whereas if you put your money in a major index 30 years ago and left it there, or even 50 or more years ago, what result? Are you even in a bad place if you put all your money into the market in 1926 and left it there for 100 years?
Yes, if a retirement fund had put all their money into a stock index in 1926, it wouldn’t have been able to pay out pensions throughout the 1930s and 1940s and would have been bankrupt before the market eventually recovered.
Going full index is a great strategy for an individual person aged 20-50, but not a strategy for a pension fund which needs to continuously pay out.
> Going full index is a great strategy for an individual person aged 20-50, but not a strategy for a pension fund which needs to continuously pay out.
It's OK for a person in their 70s that has a few million in the bank.
This person (CPPIB) has 780 billion and has a sustainability rating for 75 years.
$780 billion divided by 6 million current recipients is a little over $100,000, which is hardly comparable to your wealth retiree example.
Did you realize that CPP's support isn't full income replacement? It's only 10-20k/year per person.
While your metric is common to compare pensions, it's not relevant for debunking ability to survive a recession.
6 million x $100k is 600 billion.
Whereas the annual benefits paid is ONLY 1/10th that at 60 billion/year.
Turn off 80 billion/year in contributions and the investment income (50-60 billion/year) can sustain.
During the Great Depression, the stock market stayed below 50% of its peak value for about 20 years. Imagine that the $600 billion turns into $300 billion overnight. It will only last 5-10 years without inflows, but the GDP has also dropped by 40% and inflows have plummeted.
I saw you say this in another comment.
It's still going back to the same assumptions that you're not only timing a depression but also
(a) don't have pre-funding (i.e., millions for an individual at the start of the depression),
(b) don't have CPPIB guardrails and auto-adjustment mechanisms,
(c) and it's not a partial income replacement scheme.
> It will only last 5-10 years without inflows
Without inflows? That's not realistic because people would still be contributing. In fact, CPPIB has triannual resets of contributions and in a recession, they'd up the contribution rate. In a recent actuarial audit, they found that if real returns dropped to 2.5%, then they'd only need to boost contributions from 9% to 11% to keep their 75-year sustainability target.
The advice that you need to taper off your investment portfolio risk as you get older doesn't really apply to people that have a nest egg. I know a lot of people that aren't necessarily living frugally and are told by their financial advisors that they might as well upgrade their cars, travel more, etc. They can cover their costs and don't have net worth > ~$3 million.
No lol
https://youtu.be/DQgqEFOc894?t=267
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.
"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.
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?
The gravitational field of indexes that large is one of the reasons why it works. The stock price of a company will generally increase when it's added to a major index because there are now so many more people trying to buy it as part of the index.
The risk is nominally that if you ever wanted to move a fund that large into some other investments, the act of selling would lower the price of the assets in the fund. But that's what happens no matter what you invest that amount of money in. But then widely distributed whole-market indexes would tend to mitigate that.
The real problem with this is that it disconnects what people invest in from the fundamentals of the companies. Promising companies don't get as much investment if they're not in an index, and mismanaged companies get too much if they are.
> The gravitational field of indexes that large is one of the reasons why it works
I'm confused because my question was whether a sovereign wealth fund could move an index by too much. Not about the issues with index investing (which IMO are mostly overblown).
Not Canada, but Bank of Japan and the equivalent JP pension fund have juiced the crap out of domestic JP stocks with ETF purchases.
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.
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.
>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.
I believe it’s tied to your earnings in the US though, which it isn’t in the UK.
I also have a number of qualifying years in the UK when I didn’t work, and for decades you could buy a year contribution for about £150. The payout is £12,500 per year.
>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.
https://www.populationpyramid.net/united-kingdom/2026/
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.
https://nzsuperfund.nz/
In contrast, the PSPF (federal public sector pension) has over-performed.
different risk profile
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...
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
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.
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.
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.
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)
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?
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).
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!
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.
We do?!?!? Why don't we ever build any infrastructure with it lmao
Probably because of NIMBYs
Only in that it's in a private equity fund, not one-time spending.
>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.
>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).
>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.
>So the US is the world's poorest nation, by far, right?
Considering the USD still has decent purchasing power, no? The demand for US goods and services relative to other nations' might have dropped from its peak, but still considerably higher than other nations.
>There is no master book of records that dictates cause and effect
There is for simple stuff, like supply and demand. There is no way of getting around that executing a successful peaceful trade requires both parties to have something that the other wants.
On a nation state level, debt denominated in a nation's currency is more like a claim on the future productivity of a nation (since any nation can always print money or edit a digital database to satisfy its debts).
When you buy a US Treasury, you are betting that at some point in the future, the US is going to be be selling things worth having. You are not worried that your loan to the US will default, because it is trivial for the US government to repay you in USD. Your risk is that when it gets paid back, what will you be able to buy with it?
>Considering the USD still has decent purchasing power, no?
You understand I was applying your logic, right? The US has the worst trade deficit on the planet, by a long shot. It buys far, far more than it sells. Its primary role on the planet is money printer.
>When you buy a US Treasury, you are betting that at some point in the future, the US is going to be be selling things worth having.
Again, this almost sounds sophomoric. When you buy US treasuries, you are betting that the US will still be printing money when it matures, or when you unload it earlier. It is not based on sound rational logic -- if so the country with the $40 trillion dollar debt and $2 trillion dollar deficit with the massive trade deficit -- would be already bankrupt.
I feel like I'm arguing with someone who is arguing rational economics when someone points out how farcical a stock like TSLA is. All of the hot air in the world doesn't change the fact that it relies upon a shared delusion, and everyone is playing a bit of a game of chicken.
>You understand I was applying your logic, right?
I am not sure what logic you are referring to. My first reply was to point out that no matter what economics are "made up", when push comes to shove, there has to be delivery of real goods and services for the charade to continue. "Enough" people won't go along with someone that doesn't result in them getting what they want, and no one wants a currency if they don't think it will get them what they want.
My second post is responding to the claim that America is the poorest country, to which it obviously isn't, since it can still buy almost whatever it wants.
Regardless of the technical details, someone who can buy something is richer than someone who cannot buy something. Maybe that is due to a shared delusion, and maybe everyone is playing a bit of chicken. Obviously, that will only be revealed in the future, but in general, that's what all sovereign nations' debt is, a "delusion" (or assumption) that the fruit of the nation's productivity will be worth having in the future.
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.
Agreed, we should also nationalise resource extraction and put the funds in there. Canadian resources should be for Canadians.
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.
> this just ends up with Toronto and Montréal (and to a more limited extent, Vancouver)
So, where most Canadians live?
There’s a reconciliation dimension that complicates that framing, at least in BC.
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.
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.
If I understand democracies, the private sector get easy access to credit via the creation of debt. You win you win. You win we lose. but also get money invested on behalf of the tax payer.
The market economy is brilliant.