Two organizations representing the interests of Canadian pension funds are asking the federal government to bring back Canada’s real return bond program.
In a joint letter, the Pension Investment Association of Canada and the Association of Canadian Pension Management, which speak on behalf of organizations managing more than $3 trillion in assets under management, asked Finance Minister François-Philippe Champagne to reconsider the use of real return bonds.
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“Reinstating [real return bond] issuance now is a timely, strategic economic decision for Canada,” the letter said. “Restoring the [real return bond] program supports the ‘invest in Canada’ momentum to drive long-term domestic growth, and to anchor and protect long-term institutional pension investment.”
A 2024 report from the C.D. Howe Institute said the feds cited a lack of investor support as part of a 2022 decision to stop issuing real return bonds. It noted that demand among institutional investors was weak because few bonds were issued and they only carried a 30-year maturity.
The letter said pension funds were “natural buyers” of real return bonds, which function as hedging tools against Canadian inflation risk. Since the removal of the investment option, pension plan sponsors have had to look for alternative markets outside Canada, adding complex, administratively expensive and less liquid real assets, it added.
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