In the Introduction, it was observed that financial returns-driven pension investment is often likely to generate collateral benefits to the economy or society, either intentionally or unintentionally. To the extent that pension assets have some exposure to investment activity in some of the capital markets or market segments discussed here, there is a better chance that funds will intersect and interact with national economic and restructuring trends. Hence, there will a contribution to new business formation and development in knowledge-based and technology-intensive industries, as well as more traditional construction, manufacturing, resource and service industries.

In this case, the collateral benefits produced may be the creation or preservation of “good” jobs and incomes. Depending on the specific allocation of assets, benefits may also include community and regional economic development. In other cases, the benefits may also be new or improved stocks of residential (rental or owner- occupied) housing or commercial and industrial property. Alternatively, it may be public works and communications and transportation infrastructure. It may be any of these with additional equity features attached. The list goes on. Such collateral benefits materialize from much Canadian pension investing already. More can be reasonably anticipated with more concentration on overcoming market-specific barriers to pension participation.

Individual sections of this CLMPC report have provided anecdotal evidence of how pension funds go about maximizing returns that may also yield such collateral benefits. Options range from the direct, internally- managed alternative/non-traditional asset programs and subsidiaries of large private and public sector funds to the range of indirect, externally-managed vehicles — corporate syndicates, limited partnerships, project-by- project co-investments, etc. As discussed in relation to the CLMPC-PIAC survey, private and public capital markets in other industrialized countries (and especially the United States) reflect still more options. These may also prove instructive or worthy of emulation — including exclusively market-driven models, models that target assets and earnings (e.g., American ETIs) and government-private sector partnerships.

Canadian pension stakeholder groups have a potential role in bringing this about. The following is a brief overview of each in this regard:

• Pension fiduciaries — governing, managing and operating — and the community of financial and legal consultants that advise them — are currently involved in reforming governance processes and structures. If this is done in accordance with PIAC’s 1997 guidelines, the result may be more goal-oriented, informed, sophisticated and transparent organizations. This is key to addressing some of the barriers identified in the CLMPC-PIAC survey that are linked to pension governance;
• Pension funds that have successfully achieved high-yield financial returns along with collateral benefits in alternative asset/non-traditional asset programs and schemes have a great deal to say to other funds. The positive experiences of selected cases in Canada, the United States and elsewhere internationally should be widely-shared. Other financial system members that have had to contend with economic change concerns, such as lending institutions, may also make a contribution here.
• Regulators and supervisors in the federal and provincial jurisdictions have a responsibility to ensure that the law and legal interpretation is in all respects clear concerning pension investment in high-risk, illiquid asset classes. PIAC members made this suggestion in response to the CLMPC-PIAC survey;
• Business and labour constituencies possess first-hand knowledge of change and restructuring in the Canadian economy. They may be in an excellent position to advise pension fiduciaries on such issues while helping to ensure that the singular priority of all pension investing is to prudentially deliver guaranteed retirement benefits to working people and their families. For many in labour, this requires a full and equal voice at the decision-making tables of pension funds, as indicated in the OPSEU survey;
• Government at all levels can help pension funds in expanding their capital market participation where this serves public policy goals. Possible initiatives were very briefly discussed in relation to the CLMPC-PIAC survey findings. These include tax reform, facilitating infrastructure development in certain capital markets, co-investing or partnering with pension funds on certain asset-targeting projects and leveraging new asset allocations with fiscal incentives.