Canadian pension fund investment in Asia Pacific has plunged in recent years, partly due to the cease in investment in China, according to a Vancouver-based think tank.
Pension funds took up about 30 per cent of all Canadian investment flows in the Asia Pacific from 2003-23. However, investment peaked in 2021 at $22 billion and declined to $2.6 billion in 2023, according to the Canadian Pension Fund Investments in the Asia Pacific report released by Vancouver-based Asia Pacific Foundation of Canada (APF Canada) in late May.
Australia has been the region’s top recipient of Canadian pension fund investment, taking up around half of total investment. China, the second-largest recipient from 2003-18, saw a sharp decline in Canadian pension fund investment in the last five years.
“In the past, China had been seen as a desirable investment destination because of its rapid economic growth and large market,” said the report.
The percentage of pension fund investment in China in the region dropped from 19 per cent from 2003-18 to three per cent from 2019-23. In 2022, all new Canadian pension fund investment in China ceased, according to the report.
Large pension fund investment groups such as the British Columbia Investment Management Corporation (BCI), the Ontario Teachers’ Pension Plan (OTPP) and Quebec-based CDPQ have all paused their future direct investment in China in recent years.
As Canadian pension funds diversify away from China, India has replaced China to become the second-largest recipient of Canadian pension fund investment in the region, accounting for a quarter of Canadian pension funds’ investment flows in Asia Pacific over the past five years.
“Canadian pension funds are expected to benefit from India’s domestic policies aimed at boosting its infrastructure and renewable energy sectors,” said the report.
“Although Canada-India bilateral tensions worsened in September 2023, Canadian pension fund investment flows into India actually increased from $28 million in the third quarter of 2023 to $111 million in the fourth quarter of 2023.”
Despite the fall in pension fund investment flows from Canada to Asia Pacific, APF Canada anticipates further growth in the future.
“While these investments have dropped off somewhat since 2021, they are projected to grow in the future in response to Asia’s rapid economic growth and substantial need for capital,” said the report.
