Canada, Singapore & Norway to US Congress: Relax, we’re not trying to take you over
Mar 10th, 2008 | Filed under: Hedge Fund RegulationOn January 31, we made a quip that one of the largest and fastest-growing sovereign wealth funds in the world was right at the doorstep to the United States - the $120 billion Canadian Pension Plan.
Last week, the president of this pension plan appeared before a House Financial Services Subcommittee to argue the opposite, that the CPP Investment Board (”CPPIB”) was not, in fact, a sovereign wealth fund. The Canadians appeared alongside representatives from the funds of Norway and Singapore. The CPPIB’s written statement is available in full here. But their basic argument was that the plan was responsible to pensioners (Canada’s 17 million pension plan members) not to the government itself. And unlike funds that are controlled directly by foreign governments, the CPPIB does not re-invest foreign currency reserves.
Said the statement:
“The CPPIB is not a government-controlled entity. Although the CPPIB was created and is owned by the Canadian Federal government, its governance structure was carefully designed to prevent political interference. Our founding legislation specifies that we operate at arm’s length from governments, and in accordance with a legislated investment-only, fiduciary mandate. Our investment decisions are not influenced by government direction, regional, social or economic development considerations, or any other non-investment objectives. Independent directors are appointed for three year terms, which can be renewed twice, and can only be removed for cause. We accompany our observance of these features with a high degree of transparency, much of which is also mandated by our legislation, including reporting to the public like a Canadian public company. CPPIB is not a sovereign wealth fund, and instead is internationally recognized for its independence from government influence.”
Many believe that this freedom from government influence is what has allowed the plan to become one of the world’s most innovative institutional investors. When it comes to money, Canadians distrust their government. So pension reforms in the 1990’s were only permitted if the government stepped aside. Continues the written statement:
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Economics has always been the foundation of all politics. Nothing new. Yes, it is possible that in the long run, the influence is more than just about return on investments, it could be political/nationalistic. But alls fair in trade and commerce
So why are Americans now suddenly wary? Why are they not able to abide by the policies they preach to the rest of the world?