TSX could 'disappear' without more domestic investment from Canadian pensions: Letko
A veteran wealth management executive says that unless Canada’s largest pension plans start investing more domestically, institutions like the Toronto Stock Exchange could one day fall by the wayside.
Peter Letko, co-founder and partner at investment management firm Letko Brosseau, told BNN Bloomberg that Canada’s economic and financial health is being impacted by the low level of investment from Canadian pension funds.
“I don't think this is good for our economy. It's certainly not good for our financial markets,” he said in a Friday morning television interview.
“Do we want to see a great institution that has served us well like the TSX and other exchanges in Canada just disappear or wind into the Nasdaq or the New York Stock Exchange? I think it's important that we control our capital and direct our capital to the benefit of Canadians as a whole.”
Letko said that without more investment from Canada's largest savings pool, the exchange’s importance could diminish over time. His comments came a day after the TSX marked a full year without a new public offering.
“Will we need it? Will we need all the individuals that are involved and regulate it? We might as well wind all that up and just become part of the Nasdaq,” he said.
“I don't think that's what Canadians would wish and that’s certainly not what we would wish.”
Open letter to Freeland
On Wednesday, Letko and his firm spearheaded the writing of 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, also published as an advertisement in several major newspapers, included signatures from nearly 100 business leaders, including Rogers CEO Tony Staffieri and Canaccord Genuity Group CEO Dan Daviau.
“We thought that it would be helpful to hear the voices of some of the most successful people in the country; some of the wisest business leaders,” Letko said.
“And by the way, they're not just business leaders that have signed, they’re union leaders too, so we thought this would be helpful to move this dialogue forward.”
The letter claims that Canada’s pension funds, which represent nearly 40 per cent of the country’s institutional savings, have over the years reduced their holding of public Canadian companies from 28 per cent in 2000 to less than four per cent at the end of last year.
“It is estimated that the eight largest pension funds in Canada have more invested in China (roughly $88 billion) than they do in Canadian public and private equities (roughly $81 billion),” the letter said.
Canada a 'wonderful' place to invest: Letko
Letko said that he doesn’t want to limit the ability of pension funds to seek investing opportunities around the world, but said that the lack of investment in Canadian companies is negatively impacting returns.
“We agree with investing around the world and we believe that pension funds should be allowed to invest wherever and in whatever quantities they wish, we are not restricting that,” he said.
“What we're concerned about is that there's not enough being invested here in Canada… it is not an effort in getting the best possible returns.”
Letko said that historically, Canada has been a “wonderful” country to invest in, both for institutional and private investors.
“If you look at the last 25 years comparing Canadian returns to the G7, we're on top, and if you look at it over 100 years, the returns have been very, very respectable,” he said.
“Canada has got lots of global champions… that have enjoyed wonderful growth and are being completely ignored by our biggest pool of capital.”
With files from Bloomberg News