What We Know (and Don't) About the New Canada Strong Fund

When Prime Minister Mark Carney unveiled the Canada Strong Fund in late April,¹ he framed it as a way to help finance the country’s next generation of growth. Not all details of the fund are yet known, but Canadians are expected to have a chance to invest alongside the government and private capital in sectors such as energy, infrastructure, agriculture and critical minerals.

While the prime minister has compared the sovereign wealth fund to Norway’s Government Pension Fund Global, the federal government hasn’t revealed too many details on how it will work. Here’s a breakdown of what we know and what questions we’d like answered.

What we know

Ottawa plans to seed the fund with $25 billion over three years and establish it as a new arm’s-length Crown corporation, led by a Chief Executive Officer and independent board.² The fund will invest alongside private capital in “nation-building” companies and projects, such as ports and natural-resources development. The goal is to generate commercial returns to build national wealth.

Unlike the Canada Infrastructure Bank (which primarily provides loans)³ and other federal investment vehicles, the Canada Strong Fund will take direct ownership stakes in projects and companies – investing with the same terms as private backers. Any returns would be reinvested to help grow the fund over time.⁴

More than 100 sovereign wealth funds now operate globally,⁵ collectively managing over US$16.5 trillion in assets.⁶ Norway’s US$2-trillion pension fund, created in 1990 to invest the country’s oil and gas revenue,⁷ is the largest and it’s widely viewed as the world’s most successful sovereign wealth fund.⁸

Sovereign wealth funds are typically closed to outside investment, with governments alone using them to deploy surplus public cash.⁹ In Canada’s case, residents and foreign investors will eventually be able to invest directly and potentially share in the upside if the fund performs.

If that promise holds, the fund will give individual investors a direct stake in a class of large-scale projects that has typically been the domain of pension funds and institutional investors.

According to Paul Calluzzo, an associate professor of finance at the Smith School of Business at Queen’s University, it would also give Canadians a new long-term savings tool, one with an emotional and patriotic aspect that could encourage people to participate.

What we don’t know

The biggest unknown about the Canada Strong Fund may be the simplest. Where is the $25 billion coming from? During the announcement in April, Carney pointed to the Spring Economic Update and an improving fiscal picture as part of the answer.¹⁰ That update projected a deficit of $66.9 billion for 2025–26¹¹ (since updated to $55.28 billion),¹² easing to $56.2 billion by 2029–30.¹³

Calluzzo says that is the biggest question mark in part because the majority of sovereign wealth funds start from a surplus – a pool of money either from natural resource wealth, such as an oil windfall, or a foreign exchange surplus from international trade. But Canada is operating in a deficit, not a surplus, so one way to capitalize the Canada Strong Fund is by borrowing the money. The other is asset recycling, where Ottawa “would sell some of our public assets and then take the money from that privatization to buy a different set of assets,” adds Calluzzo.

Neither option is inherently bad, he says, noting that debt is often used to finance investment opportunities (such as a homebuyer taking out a mortgage) and that some public assets could be run more efficiently if privatized. But both scenarios have pitfalls to consider, including higher government deficits if the money is borrowed, and a range of potential impacts from asset recycling, such as the loss of long-term revenue.

It’s also not clear how Canadians might invest directly in the fund. Could it behave like a Canada Savings Bond with a fixed return, or like an ETF or mutual fund? We don’t yet know how investors will buy in, if there will be a minimum investment, whether they’ll qualify for registered accounts like RRSPs and TFSAs, or whether money will be locked in for a set period.

Ottawa has promised Canadians that their initial investment will be protected even if projects lose value, but it’s also not yet clear how that protection would work, if it will be a permanent feature of the fund and what it might ultimately cost.

Principle protection could encourage Canadians to take part, but the added cost and complexity could mean lower returns, Calluzzo notes. Typically, when investors pay for what is essentially a type of insurance, they may “end up in a worse place than if they have a similarly risk-adjusted investment that didn’t have that complexity.” If the government covers the cost, ultimately taxpayers foot the bill, creating a situation where those who don’t invest in the fund pay for those who do.

Despite these questions, Calluzzo is excited by the prospect of Canadians being able to participate: “It’s exciting if it can increase the savings rate of Canadians,” he says. “There is a moment right now where there is national pride, so this could be a real tool to encourage Canadians to save more.”

Finally, how exactly the new fund will fit with existing federal investment and financing vehicles is still unclear. Ottawa already operates the Canada Infrastructure Bank, Export Development Canada, the Business Development Bank of Canada, the Canada Indigenous Loan Guarantee Corporation, the newly formed Defence Investment Agency and, as of April, the $51-billion Build Communities Strong Fund,¹⁴ among others.

So far, the government has said the Canada Strong Fund will complement rather than duplicate what’s already in place.¹⁵

What we’re waiting for

The biggest questions we’re hoping the government will answer soon include:

• Where will the initial $25 billion come from? Sovereign wealth funds are usually funded with government reserves and surplus funds, often from oil and gas.¹⁶ Currently, Canada’s federal debt is about $1.43 trillion.¹⁷

• How will this investment fit into everyday Canadians’ investment portfolios? Much remains unknown, but consider this: it was less than a decade ago that the Canada Savings Bond program was discontinued,¹⁸ after falling out of favour with investors and becoming too expensive to run.

• How will people be able to invest? It hasn’t yet been announced where Canadians will buy into the fund, whether at a bank, through a brokerage, on a government website or in another way.

The government has promised more clarity in the coming months. When it arrives, the real question will be whether the opportunity matches the hype.