The name sounds impressive: Canada Strong Fund, Canada’s first national sovereign wealth fund.
A sovereign wealth fund is fundamentally a vehicle for managing accumulated public wealth. Norway’s is the classic example. Its Government Pension Fund Global, a.k.a. Norway’s Oil Fund, was created to manage the country’s oil and gas revenues for the benefit of current and future generations. Rather than concentrating that wealth at home, Norway invests globally to diversify risk and protect its domestic economy from overheating.
The principle is straightforward: wealth comes first, the investment fund comes second.
Norway is not alone. Several Gulf states have followed similar models, using oil and gas revenues to build enormous investment funds. In this country, the Alberta Heritage Savings Trust Fund was established in 1976 to save part of the province’s non-renewable resource revenues for future generations.
The Canada Strong Fund turns that logic on its head. Ottawa announced the fund in April with an initial government contribution of $25 billion over three years, to be used in partnership with private investors to fund Canadian infrastructure and strategic industries.
A government investment vehicle designed to mobilize private capital is not really the same thing as a sovereign wealth fund. Ottawa is capitalizing the new fund even as it continues to run deficits — deploying public capital while borrowing to finance its operations.
That changes the economic calculation. If Ottawa borrows at four per cent and invests in a project expected to earn six per cent, it may make money. But the relevant comparison is not simply the project’s gross return. It is the risk-adjusted return relative to the government’s cost of capital.
If the investment earns only two per cent, taxpayers still have to service the debt. The investment therefore has to generate enough return not merely to cover the government’s financing cost, but also to compensate taxpayers for the risk being assumed. Government investment is not free money.
Then there is the question of diversification. One of the great strengths of the Norwegian model is precisely that it does not concentrate Norway’s wealth in Norway. Its fund invests globally across equities, bonds, real estate and renewable infrastructure.
Canada’s large public investment institutions understand this principle. Consider CPP Investments. Its 2025 annual report says only seven per cent of its base CPP strategic portfolio was allocated to Canada, compared with 77 per cent to developed markets outside Canada and 16 per cent to emerging markets.
That is not an accident. Canada represents a relatively small part of the global investment universe. More importantly, Canadians are already heavily exposed to Canada. Their jobs, businesses, housing, tax revenues and much of their economic future depend on the Canadian economy. Concentrating another large pool of national capital in Canada does not diversify that exposure. It reinforces it.
So, we have interesting comparisons:
- Norway: resource wealth, government savings, global diversification, wealth for future generations.
- Alberta: resource revenues, savings fund, investment, intergenerational wealth.
- CPP Investments: pension contributions, professionally managed portfolio, substantial international diversification.
- Canada Strong Fund: public capital, domestic projects, private co-investment.
Which doesn’t fit? The Canada Strong Fund looks much more like a government investment and industrial-policy vehicle than a conventional sovereign wealth fund.
Britain provides an interesting comparison. When Mark Carney was governor of the Bank of England, he served on the task force that helped develop Britain’s National Wealth Fund. Despite its name, it’s essentially a government-backed policy bank designed to mobilize private capital toward infrastructure and strategic industries. Its financial record illustrates the risks involved. The fund’s 2024–25 annual report recorded a £152.2-million loss before tax, following an £85.6-million loss the previous year. Its 2024–25 adjusted return on equity was negative 14.2 per cent.
To be fair, losses in a young institution do not automatically mean the concept is a failure. But the lesson remains: government-backed investment involves real financial risk. Projects can lose money. Infrastructure can be overvalued. Political priorities can influence investment decisions. Private investors may also be inappropriately protected from some downside risks.
That becomes particularly important if Canadians are invited to invest directly in the Canada Strong Fund. If the fund makes money, Canadians presumably will share in the returns. That’s good. But what happens if it loses money? Will Canadian investors simply be told that investing involves risk? Or will political pressure eventually lead to taxpayers absorbing some of the losses? If the government says the fund will operate on a fully commercial basis, then the same principle should apply to both profits and losses.
Canada needs more private capital, better infrastructure and higher productivity. A government-backed investment vehicle may help achieve those objectives. But that does not make it a sovereign wealth fund.
A genuine sovereign wealth fund takes wealth a country already possesses and invests it, normally with a long-term objective and substantial diversification. The Canada Strong Fund is a government-backed vehicle designed to deploy public capital and attract private investment, primarily to finance projects within Canada, with its initial funding coming from a government that is running deficits.
It may turn out to be a very good investment vehicle. It may even make money. But it’s not a sovereign wealth fund.
It’s a semantic innovation: public capital deployed as investment, borrowing presented as wealth and a government investment vehicle given the more impressive name of a sovereign wealth fund.