September 01, 2015
The increasing sophistication of Canada’s pension funds—evident in recent shifts in strategy including direct investment practices and global investment in private equity and infrastructure—has investment players around the world taking notice. Among other developments, the continuing evolution and success of Canadian funds have brought about debate on the future of the 30 percent rule, which limits a Canadian pension fund’s ownership in voting shares to 30 percent. Mitch Frazer, partner and chair of our Pensions and Employment Practice, was sought for comment by Law Times for a report on this development. Below is an excerpt of the article.
To be sure, there are still limitations on pension fund investment. “The biggest one is the 30-per-cent rule, which provides that pension funds may not own more than 30 per cent of the shares in a corporation that are eligible to vote for directors,” says Frazer. “That’s one of the reasons why you see individual funds partnering with others.”
The 30-per-cent rule, however, is currently under review at the federal level.
“The federal government formulated the rule well before public sector plans started making direct investments,” says Frazer.
“The theory was that pension funds were there to provide a long-term stream of income and were not meant to be active investors.” Nowadays, however, many of Canada’s large funds have hundreds of investment professionals dedicated to ensuring they maximize the returns to beneficiaries.
“So there’s an interesting debate about whether the rule should be modified,” he says.
To read the full article, click here.