Ottawa should keep its 'hands off' pension funds, says former OTPP head

Former OTPP CEO says 'hands off' Canada's 'gold standard' pension plans Jim Leech, former president and CEO of Ontario Teachers' Pension Plan, joins BNN Bloomberg to talk about why he thinks the open letter calling on Canadian pension funds to invest more at home is counterproductive. He also talks about the incentives needed to get our pension funds to funnel more dollars to Canadian projects.

The former head of one of Canada’s largest pension plans says the federal government should avoid telling Canadian pension funds where to direct capital, despite recent calls encouraging them to invest more at home.

Jim Leech, former president and CEO of the Ontario Teachers' Pension Plan, told BNN Bloomberg in a Tuesday interview that pension funds must remain independent of government to guarantee the best returns for Canadians.

“Hands off,” Leech said when asked what his message to Ottawa would be regarding potential changes to the current pension model.

“Canada has got the gold standard in pension plans – they are independent of government, they're not being interfered with, and they have great financial returns… don't mess with it.”

Open letter to Freeland

Leech’s comments come after dozens of high-profile business leaders signed an open letter to Finance Minister Chrystia Freeland and her provincial counterparts earlier this month, urging them to “amend the rules governing pension funds to encourage them to invest in Canada.”

Montreal-based investment management firm Letko Brosseau spearheaded the letter, which was signed by nearly 100 business leaders, including Rogers CEO Tony Staffieri and Canaccord Genuity Group CEO Dan Daviau.

Days after the letter was published, Letko Brosseau co-founder and partner Peter Letko told BNN Bloomberg that unless Canada’s pension plans start investing more domestically, the country’s financial markets and exchanges will continue to suffer.

Leech disagreed with that sentiment, saying he’s yet to hear of any major Canadian companies or projects that have had trouble securing capital when attempting to raise funds.

He also said that despite concerns around Canadian pension plans not having enough invested in Canada, most funds still have a sizeable domestic bias.

“Of the big Maple-8 funds, the least is about 15 per cent invested in Canada, and the most is around 60 per cent,” Leech said.

“I think they average out at around 40 per cent of their assets invested in Canada, so there's a huge bias. It's ten times the capital markets of Canada versus the rest of the world.”

Pension plans were once in 'serious trouble'

Leech said the main reason he opposes further government intervention in pensions is because he remembers a time roughly 30 years ago when many of Canada’s biggest funds were struggling and in need of reform.

“The Canada Pension Plan, which was in serious trouble, went through a number of reforms and came out the other end as the Canada Pension Plan Investment Board to give separate governance and separate investment,” he said.

“What's being talked about now is kind of returning back to those earlier days when, in fact, the pension plans were not independent, didn't have separate governance, and were in big trouble.”

Leech said that the government’s role should instead be to ensure Canada remains an attractive place to invest, both for Canadian and international investors.

“They have a number of levers that they can pull to try and increase the productivity of our economy,” he said.

“One of them is not forcing pension plans to artificially direct funds towards Canadian companies just because they're Canadian.”

With files from Bloomberg News