The co-founder of the firm leading the charge to encourage Canada’s pension funds to invest more at home says that increased domestic investment would strengthen the Canadian economy, and the funds themselves in turn.

Daniel Brosseau, partner at Montreal-based investment management company Letko Brosseau, told BNN Bloomberg that Canada’s pension plans should look at more than just near-term returns when deciding where to invest capital.

“Domestic investments have an enormous impact, which (pension funds) can't see because they're just looking at the returns on their investments,” Brosseau said in a Tuesday morning television interview.

“(They’re) missing out on the economic impact of the investments on the local economy, which is considerably larger… the wellbeing of the pensioners has something to do with the wellbeing of their incomes.”

Brosseau said he acknowledges that the fundamental responsibility of a pension plan is to secure the best returns for those who have paid into it, but added that “the question is then how this responsibility is filled.”

He said the Canadian stock market has outpaced most other emerging global market economies over the past 30 years and has been competitive against U.S. markets in recent decades if the “Magnificent 7” are removed.

“(For pension funds) to say that their ability to fulfil their obligations vis-a-vis their pensioners is dependent on not investing in Canada is a little bit of a stretch,” he added.

Pushback against open letter

Earlier this month, Letko Brosseau wrote an open letter to Finance Minister Chrystia Freeland and her provincial counterparts, urging them to “amend the rules governing pension funds to encourage them to invest in Canada.”

The letter was signed by nearly 100 business leaders, including Rogers CEO Tony Staffieri and Canaccord Genuity Group CEO Dan Daviau, but it has since been opposed by a number of other stakeholders.

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

Brosseau said he finds those kinds of counterarguments to his firm’s point of view “quite constructive,” as they have opened a dialogue and allowed people to examine all sides of the issue.

“One of the objectives of the open letter was to initiate the discussion, and it's a very important discussion for Canada because of the size that this savings pool represents,” he said.

“It's in fact the largest institutional savings pool in Canada, and the only one that can take on the type of long-term equity risk that's required to build the country… we have to pay attention to this.”

'Canada needs a lot of investment'

Brosseau said that Canada lags behind the U.S. and its other G7 peers when it comes to domestic investment of any kind, which has created a competitive disadvantage and hampered Canadian economic output.

“Canada needs a lot of investment. We invest 10 per cent of GDP (gross domestic product) in non-residential investments; that's 30 or 40 per cent less than the U.S. does,” he said.

“For every dollar we invest in startups, the U.S. invests $40. In research and development, we're ranked amongst the lowest in the G7… so Canada has a lot of things to do.”

Brosseau argued that with that in mind, finding reasons to keep investment dollars at home shouldn’t be hard for Canadian pension funds, considering the many economic advantages Canada already has.

“Canada is the largest democratic country in the world by landmass, it's rife with resources, it has a well-educated population and its government and legal systems are sound,” he said.

“So if you can't find a way of making money with that… I don't know.”