Where Canada's Pension Plan Invests Your Contributions and why it's Not in Canada

by Shannon Peel | Canadian Resources and Economy Series

Canada Pension Plan Investments Board is one of the most sophisticated active investors in the world, managing approximately 85% of its assets in-house through teams with direct investment mandates. As of March 31, 2026, only 36% of the fund sat in public equities. The remaining 64%, roughly $508 billion of the $793.3 billion total, is in private equity at 22%, real assets at 20%, government bonds at 13%, and credit at 9%. Unlike many corporate pensions, it does not leave the investment decisions to index automation.

A pension fund is not a bank. It is not a charity. It does not fund things because they are good for a country's economy. The Canadian Pension Plan fund is a pool of retirement savings belonging to millions of working Canadians, and the people managing it have one job, make sure the money is there when Canadians need it.

That single obligation, pay the pensions, shapes every investment decision the fund managers make, so before the pension fund writes a cheque for a project, four questions have to be answered.

Criterion One: Is the deal big enough to bother with?

A pension fund managing ~$793 billion cannot spend weeks evaluating a $5 million project. The legal fees, the financial analysis, the ongoing monitoring, the board oversight, all of it costs as much whether the deal is $5 million or $500 million. So the overhead only makes sense if the investment itself is large enough to justify it.

In practice, Canada's pension funds write cheques of $250 million to $300 million at minimum with some of their deals running to a billion dollars or more.

This is one of the core reasons CPP Investments isn't invested more in Canada, there are simply not enough Canadian projects big enough to clear the minimum bar. A local solar farm, a regional hospital expansion, a small mining exploration company, these are real and valuable projects, but they are not pension-fund sized projects. LNG Canada Phase 2, the Darlington nuclear project, the Contrecoeur Port of Montreal expansion, these are the right scale. Canada does small, not big, we need to build big.

The Major Projects Office in Ottawa was built, in part, to address this gap, by aggregating and coordinating projects large enough to matter to institutional investors like the Canadian Pension Plan. The projects submitted to the office are the kind of projects Canada Pension Fund Investments scour the world looking to invest our money into, but only after they are built and in operations for a specific amount of time.

Criterion Two: Can the Fund Predict the Cash Flow?

A pension fund needs to know, with reasonable confidence, how much a project will earn over the next twenty or thirty years. They look for grounded, defensible projection based on evidence that already exists, not projects just starting out. This is why they'll invest in an operating airport, but not a new mine build.

Walk into Toronto Pearson International Airport today. Passengers are already paying for their flights, airlines are paying landing fees. The parking garage is full. The coffee shop in Terminal 3 is selling overpriced lattes to people who have been awake since four in the morning. Twenty years of financial statements show exactly what the airport earns in a good year, a bad year, a pandemic year. A pension fund buying the airport knows, within a range it can model, what it will earn over the next two decades. Having income certainty over decades is vital to the success of the fund to pay out to seniors.

Now stand on an empty piece of land in northern Ontario where someone has found nickel deposits, maybe, the geological survey looks promising. The engineers believes the ore grade justifies a mine. But the permits haven't been granted yet. Construction hasn't started. The commodity price that makes the project profitable today, might not hold for the seven years it takes to build and in that time, there might be unexpected geological complications. The whole thing might cost twice what the plan says. There are too many unpredictable variables and too many years between investment and generation of income for a pension fund to risk our social program dollars.

A fund managing retirement savings cannot afford to be wrong. It needs to know the money will be there when a sixty-eight year old teacher in Sudbury needs it.

This is why the same pension funds that won't touch a new mine build, will happily buy an operating toll road, a contracted 5 year old operating wind farm, or a water treatment facility with a thirty-year municipal contract. The cash flow is not a guess, it is a contract.

Criterion Three: Is the risk something the fund can manage?

Every investment carries risk. Pension funds do not avoid risk. They price it, manage it, and make sure they are being compensated for taking it.

The risk that pension funds will not touch is construction risk because the danger that something being built does not get finished on time, on budget, or at all id too high. Add to that the technology risk, the possibility that a first-of-its-kind system does not perform the way its designers promised, or permitting risk, the chance that regulatory approvals take years longer than expected or never arrive at all. These are unknowns and a pension fund cannot gamble our money on unknowns.

This is where the government's role becomes genuinely useful, not as a cheerleader or a grant-giver, but as a financial participant that absorbs the risk the pension fund cannot to build the thing the pension fund wants to invest in.

The mechanism is called concessional capital, and it works like this.

A project needs $3 billion to get built. The government puts $1 billion in a position where it loses everything before anyone else loses anything. Only after the government money is completely gone does the pension fund start losing a dollar. The pension fund is not protected from all risk. It is protected from the first and worst losses, the ones that happen when construction goes sideways before the asset has generated a single dollar of revenue.

The Darlington New Nuclear Project in Ontario shows how this works in practice.

Nobody has built a small modular reactor in Canada before, the technology is promising, the engineers are credible, but there is no track record, no proven construction timeline, and no guarantee the reactor performs exactly as designed. For a pension fund, that uncertainty is disqualifying.

What can change the equation and bring a pension fund in earlier.

Ontario's Building Ontario Fund committed C$1 billion to the project. The federal Canada Growth Fund committed C$2 billion alongside it. Three billion dollars of government money went in first, in a position where it absorbs every loss before pension capital is touched. If the reactor runs over budget, the government money covers it. If the technology underperforms in its first years, the government money absorbs it. The pension fund does not lose a dollar until the government has already lost everything it put in.

Once the reactor is built, tested, and selling electricity under a long-term power contract, the picture changes completely. Now there is a track record. Now there is a revenue stream. Now there is a real asset generating predictable cash flow for decades. The fund can model it and the risk it could not price before the build is gone. What remains is operating risk, and operating risk is something pension funds know how to manage.

A reasonable question at this point is why any pension fund would put money in before a project is running at all. Why not simply wait until it is finished and then buy in?

The honest answer is they can, and most funds prefer to, but the problem is everyone else is waiting too. Every major pension fund in the world, Canadian, Australian, Dutch, Norwegian, is competing for the same pool of already-built, already-operating infrastructure assets. When too much money chases too few running assets, sellers charge a premium for the certainty. The fund that waited gets to buy something safe and pays dearly for the privilege.

Coming in earlier, after the government has absorbed the construction risk but before the asset is fully priced as an operating project, gives the fund a better return without requiring it to gamble on concrete supply and engineering overruns. The government took the construction risk and got the thing built. The fund arrives to buy the asset when the hard part is done but the premium has not yet been fully priced in because operation has barely started. Both parties get something the other cannot provide alone.

Criterion Four: Are the rules going to hold?

A pension fund making a thirty-year investment needs to know that the rules around that investment will not change dramatically midway through.

This is not about legal guarantees. It is about confidence that the regulatory environment, the contracts, the market structure, and the government's approach to the sector will remain stable enough that the original investment thesis still holds a decade from now.

It is also the most difficult criterion of the four to predict, because cataclysmic change is unknown and unpredictable.

Canada's own history provides a clear cautionary example. In 2012, Prime Minister Stephen Harper approved CNOOC's $15.1 billion takeover of Calgary-based Nexen, the largest acquisition by a Chinese state-owned enterprise in history. In the same announcement, he declared that future state-owned enterprise takeovers of Canadian oilsands companies would only be approved under extrordinary circumstances. He drew the line immediately after crossing it making predicting what he would do next uncertain.

It cost a lot of money to do the due diligence on such a transaction, and if you aren't sure if the government will approve it or not in the end, it may be a non-starter. In Canada's case it was as the economic investments tanks right after that deal and did not come back until now. Yes, there was a different gov't between the two markers, and things got worse under their stewardship. However, by the fourth quarter of 2013, foreign investment in the Canadian oil and gas sector had fallen 92% because investors could not determine what the regulatory rules were.

Regulatory certainty is not a luxury. It is the foundation on which every long-term capital decision is made. A pension fund evaluating a thirty-year investment in Canadian energy infrastructure needs to know whether that investment will be welcomed, scrutinized, or blocked, and on what basis, before it commits. "Extraordinary circumstances" is not an answer. It is the absence of one. Then things got worse as government jurisdictional fights took each other and industry to court to stop projects resulting in Kinder Morgan selling TMX, the Northern Gateway collapsing, foreign and domestic capital going elsewhere.

This is the problem Carney's One Project One Review model is attempting to fix, compressing regulatory timelines and making the approval process predictable rather than open-ended. Whether it succeeds or not is what institutional investors are watching for.

CPP Investments chief executive John Graham said it plainly in September 2025, the government needed to remove friction and eliminate unnecessary complexity in project approvals. He demanded all levels of government remove the uncertainty that makes the original investment calculation impossible to complete.

Rules that hold over time are what allow a pension fund needs to model thirty years of cash flow with enough confidence to write the cheque in the first place.

Run any Canadian project through these four questions and you get a clear picture of why Canada's pension money went elsewhere and what needs to change for it to come home.

LNG Canada currently clears all four. The scale is right. The cash flow from a contracted LNG facility is predictable. The construction risk on Phase 1 is already built and running. The regulatory framework around LNG export in British Columbia, while debated, has been in place long enough to be modelled. If given the opportunity, the Canada Pension Plan can invest in LNG Canada Phase 1 and the company can use those funds to build out Phase 2.

The Darlington nuclear project clears three of four on its own and clears the fourth once the government absorbs the construction risk enabling the fund to buy in once it hits a measurable milestone. This is exactly what the Building Ontario Fund and the Canada Growth Fund are doing to build opportunity in Canada.

What Other Canada Pension Funds Own in Canada

Ontario Teachers' holds 36% of its portfolio in Canada, three times CPP's weighting, and the reason is Cadillac Fairview, its wholly owned commercial real estate arm. Large, illiquid, genuinely Canadian, and generating contracted revenue.

CDPQ, Quebec's provincial pension plan, is the most domestically anchored of the group, because investing in Quebec content is written into its provincial mandate. Its Quebec holdings reached $93 billion by the end of 2024, against a stated target of $100 billion by 2026. The named investments tell you what institutional capital will buy: the REM light-rail network in Montreal, the TramCité project in Quebec City, a $500 million investment supporting National Bank of Canada's acquisition of Canadian Western Bank, a $158 million investment in WSP Global, a $103 million loan for a Vantage Data Centers expansion in Quebec City. (The amounts are lower than the Canadian Pension Plan minimums because the Quebec Plan is a smaller fund)

OMERS pension plan holds roughly $26 billion in Canada, 18% of its $145 billion portfolio. BCI's domestic exposure runs through QuadReal and its 2025 acquisition of BBGI Global Infrastructure, a C$1.9 billion deal bringing in Canadian transportation, healthcare, and energy concessions in British Columbia. AIMCo holds direct equity in Coastal GasLink. PSP owns FirstLight Power, which acquired Montreal-based clean power producer Hydroméga in 2023.

Infrastructure, real estate, regulated transportation, energy. Almost none of the pension funds are invested in Canadian public equities or early-stage Canadian companies. The funds are not avoiding Canada. They are concentrated in a narrow slice of Canada, which already clears their criteria bars. The problem is there just aren't enough large projects generating income over 30 years to keep the bulk of the money inside our borders.

48% of Canada's Pension Plan is invested in the USA.

In the US, CPP holds a 40% stake in ALLETE, a Minnesota clean energy utility focused on grid resiliency and renewables, acquired in a US$6.2 billion deal. In private equity, it acquired Neogov, a government-focused HR software platform, in a $3 billion deal in July 2025. In real estate, it holds direct ownership of US office, logistics, residential, and life sciences properties, along with a portfolio of senior living communities. In sustainable energy, it holds interests across conventional and renewable energy assets in the US energy value chain. These are contracted, revenue-generating, largely private assets, which you can't buy shares on in secondary markets like the TSX, Dow Jones, or Nasdaq.

CPP's own chief investment officer Ed Cass in June 2026 said, CPP's diversified portfolio generated positive returns while limiting exposure to the concentration risk embedded in many public market indices. The fund's fiscal 2026 return was 7.8%. Its benchmark, which is more heavily weighted to public equities, returned 13.2%. CPP Investments accepted a lower return than a passive index fund would have delivered, deliberately, because its mandate is to maximize long-term returns without undue risk, not to chase short-term benchmark performance, which is quickly creating a high risk "eggs in one basket" bubble.

The vulnerability CPP Investments carries in the United States is not directly AI stock valuations or Passive Index fund holdings. It is US dollar exposure, US interest rates, US regulatory conditions, and US economic cycles broadly. All of those are variables outside Canadian control.

Canada spent thirty years not building enough of projects in Canada to clear all four bars for the pension funds to put their money, whether it is building new projects fast enough is the question the next five years will answer.

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Shannon Peel is a Brand Narrative & Communications Leader based in Vancouver, open to senior roles in brand strategy, marketing, or communications leadership.