(Bloomberg) — Canada’s government plans to launch new, guaranteed securities for investors early next year to seed a sovereign wealth fund, which will be able to use the money to buy equity stakes in companies including technology firms.
The sovereign vehicle, called the Canada Strong Fund, will co-invest in projects the federal government is already involved in, such as the buildout of electrical generation capacity or other energy infrastructure. But the fund will also have the flexibility to buy shares in “high-potential companies” in tech, artificial intelligence and other sectors, as long as they’re Canadian, according to a document released by the government Thursday.
Prime Minister Mark Carney announced the wealth fund in April but gave few details on how it would work. Finance Minister François-Philippe Champagne’s budget on Thursday says more about the vehicle, which will have a Canada-only investment mandate.
The government will hand C$25 billion ($17.9 billion) to the fund – which hasn’t yet hired an executive team or board members – and will add the proceeds from the sale of principal-protected notes to retail investors. The securities will have downside protection, but holders will be able to participate in equity upside if the fund does well.
Similar notes are marketed today by Canadian banks to their wealth management clients. Investors accept a limit on their gains and a lockup period in return for the principal guarantee. The government suggested the Canada Strong notes may have maturities of five, seven or 10 years.
Canada has struggled to boost capital spending for years, and the Bank of Canada has previously called the country’s meager productivity gains an emergency. It’s also suffered the loss of many promising tech startups that have moved their headquarters to Silicon Valley or other hubs where it’s easier to find risk capital.
Carney’s government is trying to use Ottawa’s financial muscle to help kickstart a cycle of private-sector investment, partly through tax measures but also by direct financial involvement in projects or firms. The goal is to mobilize C$1 trillion worth of private and public investment over five years.
Last week, the government said it will invest as much as C$1.6 billion in Cohere Inc. in a financing round that values the AI developer at more than $20 billion. The government said the Cohere stake is an example of the type of investment the Canada Strong Fund could do once it’s established.
The budget documents also shed more light on the government’s plan to sell long-term concessions in its largest airports, which Carney unveiled in September.
The government said it will sell 40- to 50-year concessions under a bidding process that would select an operator by early 2029. The sovereign wealth fund and local Indigenous communities would participate in those deals through equity stakes.
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