Canada to set up $25 bilion sovereign wealth fund

The Globe & Mail earlier reported that Canada would be setting up a sovereign wealth fund to back major projects and now we're getting some details. It will be endowed with $25 billion initially, which is a decent chunk of borrowing for a country Canada's size, and could be notable for the bond market, depending on how the money is raised. Carney said the fund will grow via asset recycling and reinvestment; he also noted that individual Canadians will be able to invest in the fund. It will be operated as an arm's-length crown corporation. The announcement comes one day ahead of Tuesday's spring economic statement, with Finance Minister François-Philippe Champagne running a parallel event in Montreal aiming to get bank CEOs, pension chiefs, and construction heavyweights on board with the fund. Alberta and Newfoundland already run provincial versions of sovereign wealth funds and people often cite the Norwegian example. The fiscal optics are improving. Ottawa's deficit ran $25.5 billion through 11 months of the fiscal year, and the senior official briefing reporters says Tuesday's update will show smaller deficit projections for current and future years — partly thanks to GDP statistical revisions that have nothing to do with policy, along with higher oil prices lately. Carney's been globe-trotting hunting Middle Eastern sovereign capital and hosting 100+ major investors in Toronto this September. He's well connected and this kind of thing is right up Carney's alley and he probably sees it as a legacy issue. Moreover, the government investing alongside private capital is no longer taboo as Trump repeatedly does it and is considering an investment in Spirit Airlines at the moment. The loonie is strong to start the week and I'd suggest this is a portion of it, in part because much of this money is going to find its way into Canadian stocks. For reference, the total market cap of the TSX Composite is USD$3.23 trillion so it's not a needle-mover on its own but the investments will be leveraged into resources, infrastructure and some tech. Also note that Canadian parliament is back and Carney now has a majority so we could be seeing a torrent of announcements in the days ahead. The weekly USD/CAD chart shows the pair is near the bottom of the range. This article was written by Adam Button at investinglive.com.