Daniel Brosseau on Why Canada's Pensions Need to Be Part of the Solution

Daniel Brosseau of LetkoBrosseau Global Investment Management sent me their analysis of arguments for and against investing in Canada:

Since the publication of the Open Letter signed by more than 90 business and union leaders in Canada addressing the role of pension funds in the Canadian economy, a much-needed debate has arisen on how Canada can reverse its declining prosperity. We welcome such an important conversation and kindly thank all the signatories for helping to start it.

The document presents the arguments that are being made and analyzes their basis. Some of the analysis is simple fact checking of claims that are being put forth (returns, failure of dual mandates, ...). Other analysis discusses commonly accepted precepts and their application (linking allocation to size of market, government regulatory role, ...). Finally there are novel concepts that appear not yet well understood (role of domestic investment, how the pension manager perspective is severely limited compared to the wider macro-economic perspective, ...).

There are evidently straw men being put forth that are easy to burn down but are not what is being discussed. Some examples include: this is a debate about public equity;  governments want to go back to the 10% rule; the proponents of greater Canadian  prosperity are conflicted; pension funds will be asked to increase their Canadian investments rapidly; ...

The essence of the Open Letter is not to force pension funds to do anything or limit their flexibility. It is about figuring out how to not ignore the enormous impact and benefits of domestic investment on the Canadian economy and the role pension funds, as aggregators of the largest pool of institutional savings in the country, can and must play in Canada’s future development.

We encourage you to read this analysis and hope you will find it useful.

So here is the analysis he sent me earlier today, part of their "Invest in Canada" series which is available on their website here:

Again, this analysis, the open letter and more material is available on LetkoBrosseau's website here.

Daniel Brosseau and Peter Letko were also invited to the 100th meeting of the House of Commons’ Standing Committee on Finance, where they discussed the importance of Investing in Canada.

You can watch that entire video clip here and read the transcript of Daniel's opening statement here. 

I think it's worth reading the transcript of Daniel's opening statement (added emphasis is mine):

Thank you for inviting us.

We would like to talk to you about pension savings, how they are invested and the major transformations that have occurred over the last 30 years. Many changes have been unintended, and several have been quite damaging for both individual pensioners and the Canadian economy.

The negative effects include a substantial decline in private sector employees covered by pension plans, a rise in much less efficient defined contribution plans at the expense of defined benefit plans, an increased reliance on subjective, opaque, and illiquid private markets, disinvestment from transparent, liquid public markets, increased investment in low return bonds, increased herding to the detriment of independent fundamental analysis resulting in a decrease of vitality.

But the negative effect effect that seems to attract the most attention has been the dramatic drop of Canadian public equities held by Canadian pension funds from 80% of their total equities in 1990 to probably less than 10% now representing less than 4% of their total assets.

The argument most often used to justify this behaviour is the expectation of higher returns in foreign markets.

In fact, returns in Canada have historically exceeded most other world markets and by comparison, current valuation metrics are quite favourable.

But let us assume for a moment that returns in Canada will be lower. The question remains whether maximizing single portfolio returns to the exclusion of other factors is the correct global strategy for the country as a whole?

If pension funds siphon away Canadian savings under the guise of higher expected returns without considering the effect this may have on the ability of their contributors to earn incomes, the return calculations are incomplete from the point of view of the Canadian economy.

A $100 invested outside the country may generate an extra dollar in returns, but the impact of the absence of the $100 invested in the local economy may be much greater. The loss in domestic investment, sales, salaries, and profits because of a lack of local investment by committed domestic investors can easily overshadow any pickup in income that may have come from a higher return elsewhere.

We may have already started to see the effects of this dynamic. GDP per capita in Canada in 1980 was 92% of US GDP per capita. This had fallen to 73% by 2020.

Consider these two cases:

1.  A Canadian investor takes $100 of savings and invests it abroad. A昀琀er one year, they repatriate the $100 and $10 of pro昀椀t. Their return is 10%.
2. A Canadian investor takes $100 of savings and invests it in a machine that produces $205 of product in the year. The costs are $100 of labour salaries and $100 of wear on the machine, leaving $5 of pro昀椀t. Their return is 5%.

In case 1 Canada’s GDP would rise by $10, the profit. In case 2, GDP in Canada would rise by $205, the salaries, the machine, and the profit.

From the Canadian investor’s point of view, the foreign investment gives a higher return but from a GDP perspective, from a GDP per capita perspective, from the perspective of Canada’s ability to save, the domestic investment is by far the better one. In addition to these considerations, foreign investments can also present governance, political, legal, currency, supply, and other risks which can sometimes be better managed domestically.

It is unreasonable to think that Canadian pension funds will see the opportunity cost of the loss of investments to the Canadian economy, to the ability of their contributors to earn good incomes and save.

They cannot consider what they cannot see. As a result, moral suasion cannot correct for these negative effects. Only a national policy reflected in appropriate regulation can constructively deal with the problem.

In 2021, investment in Canada accounted for 20.2% of GDP compared to 18.2% in the United States. What these statistics hide is that investment in residential real-estate in Canada was 9.7% versus 4.9% in the United States. Which left 10.4% for non-residential investment in Canada and 13.3% in the United States, close to 30% more. On a per capita basis the United States invests 75% more!

There is room in Canada for more non-residential investments. Given that Canada is a less developed economy than the United States, it may need even more again.

We have prepared a series of reports that examine these unintended and undesirable effects resulting from the changes that have occurred in pension management over the last 30 years. Evidently none of this can be corrected overnight but some relatively simple solutions can be implemented which can incentivize the proper behaviours without imposing strict constraints.

It is incumbent on government to regulate these behaviours.

Thank you again.

Wow! Where do I begin? The Milton Friedman in me just wanted to scream "Daniel, you got it all wrong!" after reading this statement (just like OTPP's inaugural CEO Claude Lamoureux who told me I didn't know what I was talking about when I appeared at the House of Commons’ Standing Committee on Finance back in 2009 to castigate Canada's large pension funds for taking stupid risks and paying themselves huge bonuses after losing billions back then).

Let me be very clear on where I agree and disagree with Daniel Brosseau and Peter Letko who are lot smarter, wealthier and more powerful than me but I don't care about status and prestige, I still write my comments very openly and bluntly (in case you haven't noticed).

I completely agree with Daniel that Canada's GDP per capita has declined from 92% of US GDP per capita in 1980 to 73% by 2020. 

That's a fact and it is a very worrisome trend because our standard of living and that of our children and grandchildren is declining along with that trend.

Canadian standard of living is declining, per the National Bank of Canada Financial: pic.twitter.com/NehZGYARPa

— unusual_whales (@unusual_whales) March 21, 2024

Where I completely disagree with him and Peter Letko is the inference that lack of domestic investment in Canada on the part of Canada's Maple Eight (which invest heavily in Canada) has contributed to this significant decline in GDP per capita and thus -- to use his own words -- "it is incumbent on government to regulate these behaviours" and rectify this situation.

There is a much bigger problem at play here, government policies that have not incentivized large foreign and domestic institutional funds and large multinational corporations to invest more in Canada.

In other words, the significant decline in productivity gains in Canada are largely due to tax and other policies (including immigration and housing), lack of privatization of infrastructure assets, and other problematic policies which have set us back decades and my fear is we are losing sight of this and erroneously believe that if only Canada's large pension funds invested more in Canada, our GDP per capita will quickly catch up to that of the United States.

It won't and this is the biggest issue I have with the statement above and the inferences and prescription it's making and proposes.

I'm sorry if this will hurt many Canadians but I live in a harsh world called capitalism and in my world, the US is so far ahead of Canada, Australia, Europe, Latin America and Asia when it comes to GDP per capita and innovation that I truly feel it's almost hopeless to think we are ever going to come close to closing this gap.

Yes, Canada has great universities, a stable democracy, an overly generous safety net, we have very smart people but we definitely lack the venture capital ecosystem they have down south and that's not because we aren't investing in emerging technology companies, it's just that we will never compete with Silicon Valley and we will never compete with the NASDAQ exchange. No country ever will.

This is why I concur with the foreign exchange policy of Canada's large pension funds which for the most part do not hedge their US dollar exposure. 

I too am long US dollars in my personal investments and have made a conscious choice to only invest/ trade US stocks (mostly US biotech stocks).

It's not that I don't know or don't like Canadian equities, know them extremely well and have nothing against them, it's just that I prefer the most liquid, most innovative markets in the world and that is and will always be US markets.

Sure, there's a tech bubble going on right now and US stocks risk underperforming Canadian and foreign ones for a while but I'm far from convinced, just like I'm far from convinced that Canadian equities will perform well in the future with the soaring debt crisis that looms large over us right now after eight years of a Liberal government that has destroyed our public finances.

Aren't the US and Europe in the same fiscal boat? Yes but the US economy is hell of a lot more diverse, innovative and robust than ours and that of European nations. 

Nobody knows what the future holds, by definition it's unknowable, which is yet another reason for our large pension funds to prudently diversify outside of Canada where it makes perfect sense to obtain the highest risk-adjusted returns possible across public and private markets.

That's another issue I have with Daniel's opening statement, his bias against illiquid private markets where valuations are "subjective and opaque" in favor of "liquid and transparent public markets" comes through loud and clear.

I realize that as Canada's large pension funds invest a significant part of their assets in private markets (40% to 50%+) it leaves the door open to criticism and skepticism that they fudge their numbers to beat their benchmark and obtain millions in bonuses (at least the top brass) but this is the wrong way to think about it.

The right way to think about it is they are managing 70 to 80% of the assets internally across public and private markets, saving on fees and costs, and adding significant value over the long run.

Do we need a lot more transparency on where Canada's large pension funds invest and how they value private markets? You bet and we also need detailed performance audits on all these large pension funds performed by OSFI or another independent entity to make sure the risks they are taking are commensurate with the benchmarks they gauge their performance against (forget the Auditor General of Canada or Quebec which rubber stamp their auditors' reports and forget their respective board of directors which have plenty to oversee, in my opinion they would also benefit from an independent third party report).

But what we don't need is more government regulations forcing our large pension funds to invest more in Canada (trust me, they invest more than they should in Canada, especially when compared to Norway's giant pension fund).

What about Canadian companies "starving for capital"? Well, I suggest instead of signing an open letter encouraging our large pension funds to invest more in Canada, they sit down with key policymakers in Ottawa and change asinine tax, immigration and housing policies that are detrimental to our economy and are scaring away foreign and domestic investors.

What else? I do agree with Daniel Brosseau that CDPQ's dual mandate has worked well for them and I also agree it's stupid comparing CDPQ's long-term performance to that of CPP Investments which until recently was a partially funded plan exclusively that is able to take on a lot more risk in private equity and other private markets than its large Canadian peers (33% of its assets are in private equity).

But as I told Daniel in my email exchanges earlier, the success of CDPQ's Quebec portfolio has more to do with its private investments where it has more control than its investments in public equities and this mandate carries risks as well as opportunities. 

I clearly remember a time when I was working at the Caisse where that Quebec portfolio was a mess, performing terribly and it was fraught with fraud, abuse and other shady practices.

This is the dark side of forcing pension funds to invest more at home and while fraud, abuse and shady practices can also occur investing abroad, the risks are magnified investing at home (in my opinion).

Sure good governance and good operational risk management are suppose to mitigate shady activity but trust me, where there's big money involved, there's a heightened risk of corruption.

Lastly, and I really want emphasize this, we all want what is in the best interest of our country and its citizens, we just have different views on how to fix things.

Daniel Brosseau and Peter Letko are Canadian investment legends, they deserve a lot of respect for what they built and more importantly for opening up a conversation on the way our large pension funds invest and where they invest.

I just do not agree with their prescription to fix a structural productivity problem caused by years of successive governments (Conservatives and Liberals) that have failed to implement the right policies to attract foreign and domestic investments.

Forcing or "encouraging" Canada's pension funds to invest more in Canada isn't the right approach.

The right approach is changing policies and privatizing assets especially infrastructure assets like other G7 countries are doing to pay down debt and have these asset run more efficiently by private sector entities (not just large pension funds but also the Brookfields and Blackstones of this world).

So let me end this long ramble by thanking Daniel Brosseau for sending me over their analysis and lighting a fire in me earlier today with our spirited back and forth email exchanges, but I remain resolutely in the camp that our governments shouldn't meddle with our large pension funds.

There is nothing Daniel Brosseau, Peter Letko, Tullio Cedraschi, or anyone else that signed that open letter including friends of mine can say to change my mind on this topic.

I will listen to their views, read their analysis but for me the fundamental productivity problem will only be rectified when policymakers in Ottawa put on their big boy and girl pants and start getting to work to make sure we have policies in place to attract more foreign and domestic investment. 

As far as pensions are concerned, let them focus on investing in the best opportunities across the globe in public and private markets, making sure they are building up generational wealth to pay future Canadian retirees.

By the way, those future generations which are contributing now to enhanced CPP will benefit from increased CPP payments later on and so will our economy and country as they spend more in retirement -- those dividends were conveniently left out of LetkoBrosseau's analysis which is why I urge you to read Stephen Poloz's analysis as well. 

As I stated a couple of weeks ago, let's do what's right for the country, let's make sure we strengthen, not weaken, our retirement system and let's introduce policies that make our industries more competitive and stronger, thus attracting more foreign and domestic investment. 

I will obviously let Daniel Brosseau respond to my remarks as I expect him to criticize me for "not sticking to facts" but I will remind him and others that I work all day analyzing and trading markets (blowing off steam on LinkedIn to deal with the stress) and I put in hours after the close to write blog commentaries covering pertinent issues.

Regardless of whether you agree or disagree with my views, show some respect and contribute financially to this blog to support it, encouraging words don't pay my bills, only my trading and my blog (to a far lesser extent) do. 

Thank you to all of you who I don't need to hound for your annual contributions, for the rest of you, get ready because I too am going to ask for a well-earned increase!

For more views on this topic, please the time to read Barbara Shecter's excellent article on why the Liberals' 'dangerous' pursuit of Canada's pension billions keeps falling flat. It is a little long but has further insights on why governments shouldn't meddle with our large pensions. 

Below, 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. 

Update: As you can appreciate, this post generated a lot of feedback.

First, Daniel Brosseau replied:

Thank you for your review and presenting the pros and cons of Investing In Canada. This is an important debate and a consensus will not be reached overnight. The arguments will need to be presented and stand on their own merits.

For Canada to need to be the best place on earth to invest in before we stop diverting our savings away from our economic development may make us a little late. Investors need to be engaged and help create that environment we need. In the meantime, the  Canadian financial markets are being emptied out, not quite what is needed.

We cannot say governments have no policy interest in where pension funds invest and then ask those governments to sell them their developed and monopolistic assets at some great price. It is a bit duplicitous.

In any event, nobody is asking the government to force pension funds to invest in anything. The ask is that there be something that enters into the investment calculus to differentiate domestic from foreign investment, and the considerable impact difference domestic investments have on the economy and the incomes of future and present pensioners. When we were managing pension assets subject to the 10% foreign property limit, we never once blamed bad results on the constraint. We simply did our job and had great returns.

Numbers are sometimes very maddening things. As much as we would love to explain that pension funds have not invested in Canada because they want better returns, the facts are that Canada has been one of the best places in the world to invest over the last 5, 10, 15, 20, 25, 30 and 100 years. Who would believe this after listening to the naysayers.

On the CDPQ, the last numbers I saw were that the Quebec based public companies have outperformed the TSX by 4% per year over the last 10 years. So much for the help from private companies. Go figure.

Pension funds are highly subsidized entities and it is not only the right but the obligation of governments that the tax benefit they confer benefit all Canadians. The Canadian government`s role is not to subsidize the development of the United States or China.

Thanks again for your blog post and discussing this important issue.

He later added this:

In any event, the larger pension funds in this country are all government plans or government sponsored plans where pensions are guaranteed by the government. What the pensioners have is a government undertaking to pay them a pension. In a way the money in the plans is how the government has decided to set funds aside to finance the pensions it will have to pay. It is in some sense government money. So selling government assets to the plans is just taking money out of one government pocket and putting it into the other. This shuffling does not help economic development and is not private sector dynamism.

Without getting into the entire subsequent exchange, I took issue with some of his statements above.

First, Canada's large pension funds are engaged and do help create that environment we need. They invest considerable amounts in Canada across many asset classes, just not a lot in publicly listed equities (which I honestly feel is where Daniel, Peter and others are overly concerned/ focused on).

Second, it's high time that our provincial and federal governments follow Australia, the UK and other countries and privatize infrastructure assets. This should be a fair, open and competitive bidding process which allows domestic and foreign investors to bid on these assets and create added value and jobs in the process and long-term prosperity.

As far as CDPQ's Quebec publicly listed companies, I don't know where he got his figures since I checked with my sources and they are not publicly available.

One person added this:

I honestly don't know the actual numbers of private versus public in CDPQ's Quebec portfolio but I can name several PIPEs that did extremely well like CGI, Couche-Tard, WSP and Intact. On an absolute basis these public trades can contribute a lot just based on sheer size and ease of deployment versus what can be deployed privately. For that reason, I would add Valeant to the list, a name that was bought and sold in a timely fashion prior to the debacle, for a gain that would have taken the private guys years to get, even in position for. Of course, SNC was a detractor to this fine record. Rona would also be as well, owing to a brutal entry price.(in my time, it was Nortel)

When I stated most of the returns in CDPQ's Quebec portfolio came from privates it's because I was thinking of Circle du Soleil, Boralex, REM and prized real estate assets.

To be very honest, I wish CDPQ published a comprehensive, detailed performance history of all the major deals in their Quebec portfolio across public and private markets and yes, they have done well and fulfilled their dual mandate, no doubt about that.

However, I think we need to be very careful making inferences from CDPQ to other large Canadian pensions and thinking if a dual mandate works there, why not impose it on others as results will be easily replicated.

The brutal truth is I see a long difficult period ahead for all pensions investing all over the world and we need to allow them to make the best investments as they see fit taking all risks into consideration.

On the point of pension funds being "highly subsidized entities and it is not only the right but the obligation of governments that the tax benefit they confer benefit all Canadians," I reminded Daniel that employers (governments) and employees only make up 20% of assets in contributions, the rest (80%) comes from investment gains that pension fund managers need to generate in the best interest of contributors and beneficiaries.

In fact, Jim Leech, former CEO of OTPP shared this  with me:

In any event, the larger pension funds in this country are all government plans or government sponsored plans where pensions are guaranteed by the government. What the pensioners have is a government undertaking to pay them a pension. In a way the money in the plans is how the government has decided to set funds aside to finance the pensions it will have to pay. It is in some sense government money. So selling government assets to the plans is just taking money out of one government pocket and putting it into the other. This shuffling does not help economic development and is not private sector dynamism.

Pension funds are highly subsidized entities and it is not only the right but the obligation of governments that the tax benefit they confer benefit all Canadians.

The above statements are just another part of the disinformation campaign this group is running. 

First: Although I do not know the legal inner workings of the Alberta and Quebec pension plans (whose assets are managed by AIMCO and CDPQ), nor of PSP, the fact is that CPP and the Ontario jointly sponsored plans are not guaranteed by any government. If, for example, Teachers’ has a deficit then benefits must go down and/or contributions go up – THERE ARE NO GUARANTEES FROM ANYONE. The same holds for CPP – contrary to the above statement there is no guarantee from governments. I am shocked that participants in this campaign would not know this – or is it a deliberate untruth?

How do these targeted plans work: each month employees contribute a fraction of their wages to the plan. Their employer contributes a similar amount. These funds are pooled with all other employees in the fund and invested on their behalf by professional managers. The relationship is akin to a “trust” – the plan holds these funds on behalf of the employee beneficiaries  – the employer has no rights or claim over the funds. On average the resultant pension payouts are derived 20% from contributions and 80% from investment income ie the investment return component is critical; a few basis points can make a huge difference in a retiree’s pension.

One thing that is so galling about this disinformation campaign is that the proponents want to put artificial constraints on how workers/retirees invest their retirement savings as part of some non-defined public goal and require that those workers/retirees bear the entire risk that the returns might not be there and thus their pension reduced– REALLY!!!! 

Second: Pension funds are not “highly subsidized” – it is true that all pension plans (public/private/DB/DC/RRSPs/etc) enjoy various levels of tax deferral ie tax is deferred today but is paid tomorrow – it depends on the investment return and discount rate assumed whether or not the individual worker/pensioner is net positive or negative. Studies I recall seeing indicate that the net present value of the  “cost”, if any, to the government coffers is minimal. In fact, many of the plans are mature ie the pension payouts (fully taxable as ordinary income in pensioners’ hands) far exceed contributions (tax deferred). Also, remember that capital gains received by the plans ends up taxed as ordinary income in the pensioners hands! 

The math is complex, but the plans are not highly subsidized and the governments have no inherent rights/obligations to direct the funds. 

Such a statement also runs counter- productive to the public policy rationale creating pension plans: to encourage workers to save so they are not impoverished in retirement and become a far greater burden on future generations. It is a non sequitur that this gives governments the right/obligation to employ the savings that these workers have accumulated to fund their retirement as government may wish.

And why only single out teachers, hospital, and provincial workers/retirees?? Perhaps constraints should be imposed on other pools of savings eg savings resulting from proceeds of stock options or investment management fees (sorry – had to take that poke), RRSP’s, Defined Contribution Plans, proceeds from house sales, etc.

For the record, I was paid well at Teachers’ but that was over a decade ago. I have zero connection to Teaches’ and am not a member of their pension plan. My interest/passion is not to see us turn the clock back 30/40 years when most of the plans which are targeted by this disinformation campaign were in big trouble with large deficits (unfortunately, most government/business leaders are too young to remember that time). Canada took decisive action to address this issue – CPP was reformed and CPPIB created (outside government); the big Ontario plans were taken out of government and freed to invest in all investment instruments (remember the days when Teachers’ was run by the Ontario government and invested entirely in below market government debentures, resulting in a funding ratio of 70ish percent!!!). 

As a result of this new Canadian Model, with improved governance/accountability and professional investment management independent of government with the ability to invest in the entire global capital market, all of these plans are now solvent and the financial future for all plan members (incl all Canadians in CPP) is more secure. Compare that to other jurisdictions where cities have gone bankrupt, most public plans are way under water and federal social security is in jeopardy. Looking back, you have to take your hat off to those policy makers and unions who created this Canadian Model. Jurisdictions around the globe are trying to emulate it. Why should we jeopardize it for no reason.

A few additional comments:

1. By its very definition, putting artificial constraints on the investible universe will/can lead to sub optimal returns over time – irrefutable!
2. Of course, the targeted plans will always look to invest in Canada – information advantage, lower currency risk – provided they still maintain appropriate risk mitigation through diversification and the risk rated returns of the opportunity meet their thresholds. To my knowledge, there has not been a good (in terms of risk weighted return) Canadian investment opportunity that has failed to attract capital either domestically or from international sources. Perhaps there are ideas that were brought to market that did not attract capital; but that is not due to a lack of supply of capital – rather it is a reflection of the merits (again, risk weighted return) of the particular investment.
3. CN pension plan of years ago was undoubtedly the gold standard of its time (besides equities/bonds that they largely managed directly, they had private equity, real estate, oil/gas investments, etc.) Most other pools of capital were invested only through expensive asset managers and focused primarily on fixed income; and the public plans (the ones being targeted in this disinformation campaign) weren’t even a factor as they were managed by government and invested exclusively in government bonds.

It was a different time.

Today the competing pools of capital are much larger and the competition from domestic players as well as foreign players is much greater. To reduce risk the large plans must diversify their exposure – by instrument, geography, industry, currency, etc – in order to deliver the financial security that the plans (not the government) have promised their beneficiaries. Artificially constraining their investment universe inhibits their ability to provide that security.

In my view, what needs to be addressed is increasing the supply of good Canadian investment opportunities (as stated previously there is more than enough available capital from both domestic and foreign sources for good Canadian investments). Governments gave a number of policy levers to effect this:

1. Eliminate interprovincial trade barriers
2. Tax policy to stimulate R&D, innovation, risk taking
3. De-risking investments eg Canada Infrastructure Bank, Ontario Infrastructure Bank
4. Ensuring that stable, transparent Regulations and Regulatory Agencies – Canada has unfortunately sullied its reputation and lost the trust of some investors as a safe place to invest due to a number of politically expedient about turns that have hurt investors. Money has a long memory; introducing artificial constraints as suggested will only add to that aura of mistrust.
5. Divesting non-core assets (like all other jurisdictions do) to free up capital to invest in priority areas.
   

We will not get there by artificially forcing workers/retirees to put their retirement savings into the existing universe of public equity opportunities simply because they are in Canada. All that will do is push up the cost, reduce risk adjusted returns and undeservedly reward existing share and employee option holders (there I go again).

I thank Jim for sharing his wise insights and agree with his points and recommendations.

Lastly, while I value their insights and push for a more transparent debate, I'm not sure Daniel Brosseau and Peter Letko are the best people to push for this agenda given the perceived conflicts of interest.

One pension fund manager shared this with me last night: 

I find it astounding that no one is pointing out the obvious, which is how Letko and Brosseau stand to move from multi millionaires to billionaires by politically pressuring the pension funds to invest in Canadian equities.

Of course Daniel and Peter take issue with such accusations sharing this with me: 

Let me put this very clearly, neither Peter, myself or the 90 plus signatories of the letter are doing this to get rich! It is insulting and absurd. It should be beneath you and those that find no better argument. Just to repeat the argument, even if not agreeing with it, is to cast aspersions and indirectly associate oneself to it. Why else mention it?

The simple reason I'm putting this out is because a lot of people are thinking it and while I don't think any of the signatories are doing this to get rich, Canadians deserve to know if there are any potential conflicts of interest.

The same goes for current and former pension fund CEOs who tout and defend Canada's "gold standard pension governance model" and scream "hands off", what is their angle? Are they really concerned about strengthening our retirement system or about ensuring they and their successors continue to collect multi-million dollar bonus packages doing what they do without being scrutinized or held accountable through an independent performance audit?

As I stated in my post, I live in a harsh world called capitalism, been at this blog long enough and in this business long enough to know everyone has an angle and everyone is talking up their book.

Alright, back to markets, I've discussed this issue in detail and given everyone the best platform and exposure they can get to put out their views (you're welcome).