Canadian pension funds, which collectively manage nearly CAD 2.5tn (USD 1.8tn) – roughly equivalent to the country’s annual economic output – are sharpening their focus on domestic investments as Ottawa looks to draw more private capital into major projects, particularly in natural resources and infrastructure.

A shift in political tone, including the launch of the Major Projects Office (MPO) and Canada’s first sovereign wealth fund, is lifting confidence in domestic opportunities. However, pension funds remain constrained by fiduciary obligations, a limited pipeline of large-scale deals, and a preference for lower-risk, revenue-generating assets, sector advisers said.

The sovereign wealth fund, Canada Strong Fund, launched in April, could provide a backstop to help pension funds de-risk greenfield exposure if executed effectively, said Vince Imerti, a partner in Stikeman Elliott’s real estate, corporate, and tax groups. “But pension funds will still want capped exposure. They won’t sign blank checks. And they’ll need sufficient returns to justify development risk, which current concession models may not deliver,” he added.

Government’s efforts to facilitate domestic pension investment have reinforced confidence in allocating more capital locally. “There’s a lot more political will for projects to be successful … and that drives more certainty,” said Maxine Ethier, partner and co-head of McCarthy Tetrault’s national infrastructure group.

The Healthcare of Ontario ‌Pension Plan (HOOPP), which manages about CAD 132bn (USD 94.2bn), is prepared to deploy capital into Canadian infrastructure and other nation-building projects, Chief Investment Officer Michael Wissell told Reuters in in March. The fund already allocates roughly 49% of its portfolio domestically.

Despite this, pension funds remain bound by fiduciary mandates and are not shifting their overall allocation approach. “Pension funds have an obligation to their beneficiaries … and need to stay within their mandate,” said Ethier, who worked at the Canada Pension Plan Investment Board (CPP Investments), Canada’s largest pension fund.

Imerti went even further: “The Canadian model – strong governance and independence – is key. If you interfere with that, you break the system.”

Canadian pension funds currently invest about 41% of their assets under management (AUM) domestically, though allocations vary widely. CPP Investments allocates only about 12% of its CAD 793.3bn to Canada.

In December, CPP Investments announced a CAD 1bn commitment to form a joint venture with Dream Industrial Real Estate Investment Trust and Dream Asset Management Corporation to acquire approximately CAD 3bn of last-mile industrial properties across major Canadian markets. As part of the venture, the partners agreed to acquire a portfolio of 12 industrial assets in Ontario, Québec, and Alberta from Dream Industrial for CAD 805m.

Only one pension fund, La Caisse (previously branded as CDPQ), has a dual mandate: to generate optimal long-term returns for the public pension plans and insurance programs it manages, while also contributing to Québec’s economic development. On 9 June, it agreed to acquire Transurban’s remaining 50% stake in the A25 Concession, becoming sole owner. The asset comprises a 7.2-kilometer highway and toll bridge that plays a key role in Greater Montréal’s transportation network.

“I’m pleased the government hasn’t imposed strict mandates like in Québec. That would handcuff CIOs and constrain decision-making,” said Imerti, referring to a 2024 open letter signed by 92 business leaders urging federal and provincial governments to amend the rules to encourage more domestic investment.

At the time, this news service reported that while the federal government could face pressure to promote domestic investment, a formal mandate remained unlikely.

Deal flow still the main bottleneck

The main constraint remains the limited pipeline of large-scale investment opportunities. “These institutions write CAD 250m, CAD 300m, even billion-dollar checks, and there simply aren’t enough large-scale opportunities in Canada,” Imerti said.

Where opportunities do arise, asset type and risk allocation remain critical. Pension funds continue to favor established, revenue-generating infrastructure, with a strong preference for brownfield assets such as airports, said Ethier.

The government late last year floated the possibility of privatizing Canada’s airports – an idea that has circulated since at least 2015.

“The fact that privatization of airports is being discussed shows they’re listening.” said Imerti. “If you look back, Australia did this 15 years ago – privatizing toll roads, ports, transmission assets. That created opportunities and I think Canada may follow that path.”

Large greenfield developments, including those identified by the MPO, remain challenging due to risk exposure. Governments would need to ring-fence development and regulatory risk to make such projects investable, Ethier added.

Projects identified by the MPO include an LNG pipeline expansion in British Columbia, a nuclear project, an expansion of a container terminal at the Port of Montréal, and a copper mine.

The federal government could de-risk these through existing vehicles or the Canada Strong Fund, though operational details remain limited, Either said. She pointed to a similar approach in which government-backed funds, such as the Canada Growth Fund and the Building Ontario Fund, make equity investments in projects at the high-risk development stage.

In October 2025, Ontario announced the Building Ontario Fund would invest CAD 1bn, alongside CAD 2bn from the federal Canada Growth Fund, to support t the construction of the Darlington Nuclear Station. The project is expected to produce 1,200 megawatts of electricity – enough to power about 1.2 million homes.

“There’s a lot of chatter. I think activity could pick up late this year or early 2027. These are large, complex projects,” said Imerti, noting Prime Minister Carney’s investment banking background. “He understands how these deals work.”

Carney previously worked 13 years at Goldman Sachs and two years at Brookfield Asset Management.

“You see a market shift in how institutional investors, whether pension funds or foreign investors, are thinking about Canada and the opportunities that are here,” Ethier said.