Governments around the world are increasingly urging pension funds to invest more money domestically to boost infrastructure, reduce reliance on foreign capital, and stimulate national economies.
But while large public pensions are keen to invest in public infrastructure assets — particularly airports, transmission grids, and utility companies — the International Centre for Pension Management sees a disconnect in many countries between the assets the pensions want, and the ones governments are willing to sell.
“In many countries these assets are government owned, and governments are reluctant to sell these assets,” Sebastien Betermier, executive director of the ICPM, recently told Institutional Investor, adding that such mismatches between these needs and wants can lead to “a toxic situation.”
Betermier said this is notably the case in Canada: Funds have openly expressed a desire to invest in airports (as they do in other countries), like Toronto Pearson. But even as the Canadian government calls on its $2.1 trillion pension system to invest more domestically, it has not made such assets available. The McGill University finance professor has warned that keeping these public assets under government ownership will lead the Canadian plans to look abroad for these assets.
While Betermier acknowledged the “multiple advantages to investing domestically” — the lack of currency risk, little worry about interest rates or inflation rates — the funds are still looking for competitive, investible opportunities. “Hopefully we’ll see more of an alignment,” he added.
Other regions have found ways to keep pension capital close to home. In Australia, where pensions often invest in unlisted infrastructure like ports and airports, AustralianSuper plans to commit $26 billion over five years to local projects in housing, energy, health, and AI. In the U.K., 17 pensions will invest $66 billion in local businesses and infrastructure. And in the Middle East, Saudi Arabia’s $925 billion Public Investment Fund signed a deal with Macquarie to explore joint investments in digital infrastructure, EV infrastructure, and energy storage.
“This topic is not unique in Canada. I’ve heard this discussion word for word in the Netherlands, Australia, the U.K.,” Betermier said. “Governments look at these pools of pension savings as a potential resource to invest in domestic priorities.”
A More Fragmented Model in The U.S.
The U.S. offers a more fragmented model of this growing form of economic nationalism. Rather than federal mandates, individual states are increasingly steering pension capital into local infrastructure projects. State plans in Maryland and Michigan, as well as Alaska's sovereign wealth fund, have partnered with managers like Barings to target local infrastructure investments.
“From a U.S. perspective, I absolutely am a big believer in states investing in their own backyards,” said Mina Pacheco Nazemi, head of the diversified alternative equity team at Barings.
While Pacheco Nazemi and Betermier are strong advocates for pensions investing domestically, they caution that this new wave of economic nationalism — encouraging pensions to fund domestic priorities — must be grounded in sound governance. Without the right belts and suspenders to protect fiduciary standards against crony capitalism or politically driven bets, pensions can end up in a real pickle.
“I’m not against pushing it,” Betermier said. “But I like it to be more on the incentive part than on the idea of enforcing it.”
Pacheco Nazemi echoed that sentiment: “Any of these types of programs that you're doing — it has to be done for financial returns and having a fiduciary helping make those decisions.”
