Governance up: Four principles for designing the Canada Strong Fund

New ports in the Arctic. A proposed pipeline for Alberta’s oil sands. Mining projects in the North, and an underground cavern carved out of northern Ontario rock to bury spent nuclear fuel.

Building big things is the core of Prime Minister Mark Carney’s plan for a rejuvenated Canadian economy.

But look at a map of where these projects and others like them are planned and you can see the seeds of political and financial risk.

Most are far from the southern cities where the vast majority of Canadians live. How do you give millions of people a sense that they have a stake in infrastructure they will likely never see or touch? And how do you find a way for individual Canadians to share in the financial benefits the government says will flow from this 21^st century wave of nation-building?

The government’s answer, in part at least, is the Canada Strong Fund, a national investment entity initially capitalized with $25 billion in public money over three years. Carney announced it on April 27, calling it “the people’s fund.”¹ Ottawa’s Spring Economic Update tabled the next day (title: “Canada Strong For All”), described the initiative as Canada’s “own sovereign wealth fund” that will invest alongside private capital on a “fully commercial basis.”²

But what exactly does the government mean by a “sovereign wealth fund”? Analysts were quick to point out that sovereign wealth funds are usually in the business of channeling a share of time-limited, non-renewable resource revenues into a vehicle that can develop and diversify the economy for the day its resource revenues run dry.³ Norway’s sovereign wealth fund, the marquee example with over CAD$3 trillion in assets,⁴ grew out of oil and gas revenues.⁵

By comparison, the Canada Strong Fund will be “endowed,”⁶ to use the prime minister’s term, with $25 billion while Ottawa is running a deficit, so no surplus stands behind it. Its balance sheet will have to beat the government’s borrowing costs just to break even for taxpayers.

The federal government has also pledged that its Fund will have a retail component, providing a way for individual Canadians to play their own (modest) role in nation-building and extract their own direct benefits. “If you have a bit of extra money, we’ll make it easy for you to invest,” Carney said, promising that initial capital would be protected while investors share in “the upside, the additional return when these projects realize their potential.”⁷

The Fund’s governance rules and the retail product have yet to be announced. But when the details do come, they will have to, among other things, reconcile an investment vehicle meant to operate on a fully commercial basis with a promise to protect investors’ original capital from loss.

The principles behind sovereign wealth funds are well known. Governments have been building state-owned investment funds since the 1950s, and in 2008, an international working group of sovereign wealth funds, in collaboration with the International Monetary Fund, agreed on a set of voluntary standards for how they should behave. Known as the Santiago Principles, they run to 24 in all and cover a fund’s legal framework, governance, accountability, disclosure and investment practices.⁸

Ottawa has not committed to the Santiago standards. But its principles provide as good a set of criteria as any with which to pan and assess the new Canadian initiative. Pension funds and other institutions the government hopes will invest alongside it will want evidence the Fund meets a set of standards. So will individual investors.

What follows are four design criteria, drawn from the Santiago Principles and from the specific tensions in what’s been announced, that the Canada Strong Fund’s enabling legislation should look to resolve.

1. Give the Canada Strong Fund a clear mandate that differentiates it from other public financing instruments

Different sovereign wealth funds (SWFs) have different mandates, and the Santiago Principles call for a fund’s “policy purpose” to be “clearly defined and publicly disclosed.”⁹ Some SWFs are stabilization funds that insulate national economies against budget shocks; others are savings tools for future generations. A fund’s purpose dictates how it is managed. Norway’s Government Pension Fund Global, built to save oil wealth for the long term, invests entirely outside Norway, which keeps oil money from overheating the economy at home and out of reach of political pressure to invest in favourite causes.¹⁰

The Canadian government’s backgrounder says the Canada Strong Fund will be a Crown corporation focused on building Canada, with “a clear objective to achieve commercial returns.” It will pursue that by focusing “primarily on equity investments.”¹¹

But the government’s description of the Fund in its Spring Economic Update says its initial deal flow will come from projects referred to the Major Projects Office and “projects or firms that receive other federal support.”¹² That could put the Fund alongside investments made by a host of federal institutions, from the Canada Infrastructure Bank and the Canada Growth Fund to the Business Development Bank of Canada, whose mandates include policy goals and, in some cases, an explicit willingness to accept less than market returns to make projects happen.

In a project where the Infrastructure Bank has lent below market, the Fund’s equity can earn a market return partly because another federal institution accepted less. Ottawa would be on both sides of the same deal.

There are other models. The Caisse de dépôt et placement du Québec has a declared dual mandate to earn optimal long-term returns for its depositors, which include pension and insurance plans, while contributing investment to Quebec’s economic development.¹³ Yet about 80 percent of its holdings are outside the province. A fund that must earn market returns for millions of pensioners cannot keep most of its money in one provincial or even national economy.^{14, 15}

The Canada Strong Fund’s charter should explain what the Fund does that the Infrastructure Bank and the Growth Fund do not, and how it intends to achieve market-level returns on its investments (if that’s the case). The Caisse can look outside Quebec when its goals diverge. The Canada Strong Fund, confined to Canadian projects and companies, will have no such outlet.

2. Write the Fund’s governance into its statute and require regular disclosure

Ottawa’s Spring Economic Update said the Canada Strong Fund would be a sovereign wealth fund operating as “an independent, professional Crown corporation focused on performance.” That structure, it said, is widely regarded as global best practice because it strengthens transparency, credibility and long-term performance.¹⁶

Those promises must be written into the statute that creates the Fund.

The Santiago Principles provide a playbook to get there. They call for a sovereign wealth fund’s accountability framework to be written into its legislation or charter. If decisions are subject to “other than economic and financial considerations,” the principles say, these should be “clearly set out in the investment policy and be publicly disclosed.”¹⁷ They call for its governance, and the way its management stays independent of the owner, to be disclosed as well. And they call for an annual report and an annual audit under recognized accounting and auditing standards.

The Canada Strong Fund’s holdings are expected to be stakes in ports, pipelines, and mines that have no daily market price. Someone must put a value on them. The statute should say who values holdings that have no market price, and by what standard that is arrived at.

Participation of retail investors will make that need even more important. If their investments are to be liquid, Canadians must know what their units are worth. Mutual funds sold to Canadians are priced daily.

Finally, Santiago is silent on executive pay, but incentives matter. Compensation should rest on performance from audited returns over several years, not on the amount of capital deployed. No one should be rewarded for saying yes to an investment.

3. Give the board and investment committee a binding test of what “a fully commercial basis” means, and give them the independence to say no

The Spring Economic Update names two sources of initial deal flow: projects referred to the Major Projects Office, and projects or firms that receive other federal support.¹⁸ Both channels start with a government decision. A project that arrives with Ottawa’s blessing, or with Ottawa’s money already in it, is the hardest kind to turn down.

The Canada Strong Fund says it will invest “on a fully commercial basis.”¹⁹ But it hasn’t said how a project qualifies or who decides. Without a board and management test of its own, referral by Ottawa could end up meaning de facto approval by the Fund.

Santiago Principles supply a starting point to check that. They call for a governing board with “adequate authority and competency” to do its job, and management that carries out strategy “in an independent manner.”²⁰ The Canada Strong Fund’s statute should require an arm’s-length nominating panel for directors, with staggered terms and removal only for cause.

The harder part is making that independence real. The Crown corporation structure requires statutory steps to insulate it from political pressure. Under the Financial Administration Act, the federal government can direct a parent Crown corporation to act if it considers the directive to be “in the public interest.”²¹

Preventing political interference requires an exemption from that section of the act, same as the one applied in 2006 to Canada Pension Plan Investments, also a Crown corporation.²² The statute should exempt the Fund from that section.

The charter would therefore do several things. It would set a minimum return for the risk taken on any venture and spell out the degree of concentration it is prepared to accept in the portfolio of investments. It would require private investors to put their own capital into each deal alongside the Fund, on the same terms, as the update promises. An investment committee, answerable to the Fund’s independent board, would have the authority to decline projects referred by Ottawa. And it would report each year how many referrals the Fund received, accepted, and declined.

Ultimately, the test for the Fund’s design is simple: When a project arrives with Ottawa’s blessing, can the people on the investment committee say no?

4. Settle who pays for the guarantee to individual investors and how the Fund treats its earnings

The Spring Economic Update promised that as the Fund succeeds, “investors will be able to share in the upside, while their initial invested capital will be protected.”²³ It does not say who provides the protection.

There are three possibilities.

• Investors can pay for the protection themselves, through fees or a cap on their returns, which leaves less upside to share.
• The Fund can pay for it from its own capital, using the government’s $25 billion – plus any further funds that accrue from asset sales – as a cushion against losses. That would erode the seed money and limit how much of the portfolio can sit in equity.
• Or Ottawa can guarantee principal, which makes taxpayers the backstop: a contingent liability on top of the $25 billion already borrowed.

The statute should say which it is, and the Fund should disclose what the protection is expected to cost. If the retail product turns out to be a bond rather than units in the Fund, the question does not go away. A bond is a promise to repay, and someone will have to stand behind it.

The same discipline applies to the Fund’s earnings. The update lists three destinations for the Fund’s returns: reinvestment in more projects, payments to retail investors, and “return to taxpayer.” It also says the Fund will grow “from the returns that it generates.”²⁴

Those goals can compete with each other, and the final design must establish the order of priority. Santiago asks for “clear and publicly disclosed” rules on a fund’s “general approach to funding, withdrawal, and spending operations.”²⁵ Norway’s fiscal rule shows what that looks like: It caps the government’s draw on the fund at its expected long-term return, currently estimated at about 3 percent.²⁶

Alberta’s experience with its Heritage Savings Trust Fund shows the alternative. It stopped regular deposits to the fund in 1987, and for years much of the income was diverted into the provincial budget, directed toward short-term consumption rather than long-term investment. It’s one reason the Heritage Fund’s end of 2025 value of $31.9 billion²⁷ is a fraction the size of Norway’s more than CAD$3 trillion fund. And it’s why Alberta created the Heritage Fund Opportunities Corporation in 2025 to re-orient the investment strategy towards reinvestment of returns.²⁸

The Canada Strong Fund’s statute should set the order in which gains and losses are shared among retail investors, the Fund and the Treasury, and cap what the government can take out in any year.

Canadians are being invited to buy into a “people’s fund.” The prime minister has made clear that the purpose of Canada’s first national sovereign wealth fund is to give all Canadians a stake in the nation-building projects his government has set in motion.

But a stake is only as sound as the structure that holds it up. The government’s challenge now is to design the architecture with the care that turns a sovereign promise into lasting wealth for future generations.

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