On Monday (April 27), Canadian Prime Minister Mark Carney introduced the Canada Strong Fund, marking the country’s first attempt at creating a sovereign wealth fund.
The fund will be similar to those held by Norway and Saudi Arabia, but will function differently.
Instead of being built through either high taxation or resource nationalism, the Canadian government will seed the fund with a C$25 billion investment spread over three years, and will partner with both domestic and foreign private sector investors to grow the fund and generate long-term returns.
Capital from the fund will be allocated for investments with the highest potential for return, with a focus on projects in conventional energy, critical minerals, agriculture and infrastructure.
The new initiative closely aligns with the goals of Canada's Major Projects Office, which was formed last September to focus on developing projects deemed to be in the national interest.
So far, two tranches of projects have been announced, including support for the completion of LNG Canada’s Phase 2 in Kitimat, BC; Eldorado Gold's (TSX:ELD,NYSE:EGO) McIlvenna Bay copper project in Saskatchewan; and Canada Nickel Company's (TSXV:CNC,OTCQX:CNIKF) Crawford project near Timmins, Ontario.
“Canada’s new government is catalyzing a series of nation-building projects in energy, trade, critical minerals, transport, data, and beyond — projects that will make Canada stronger, more resilient, and more independent. Through the Canada Strong Fund, all Canadians will have the opportunity to share directly in these benefits. This is our country, this is your future, and we are building it together,” said Carney in a press release.
In addition to government and private sector investments, the prime minister's office said it will encourage Canadian investment by creating a retail investment product. Details on how this product will function have not been made available yet; however, the government release notes that the product will be accessible to all Canadians. It will also be easy to purchase and designed to protect initial investment capital.
The government will consult on the nature of the product over the coming months. To do this, it will create the Canada Strong Fund Transition Office, which will meet with market participants and regulators to finalize the fund.
The prime minister added that the fund will operate like “a national savings and investment account,” and that retail investment in it will allow regular Canadians to participate in its growth.
While Carney didn’t comment on specifics, he said the focus will be on national interest projects, but won't be limited to these and may eventually expand to include Canada-owned international projects.
When asked how the fund will differ from the Canadian Infrastructure Bank, Carney said it will focus on equity return instead of returns from interest on loans.
The government said more details will follow, starting on Tuesday (April 28) when it tables its spring economic update. That update will also provide an overview of foreign direct investment in the Canadian economy.
Don't forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
