Canadian Companies Need Cash. Is a Sovereign Wealth Fund the Answer?

Over the last year, Prime Minister Mark Carney has articulated a clear vision to build a stronger and more resilient economy for Canadians. Public investment and co-investment with the private sector are at the heart of the new government’s mission, with about $115 billion earmarked in the 2025 federal budget for major projects in infrastructure, energy, resources and transportation.

The spring 2026 economic update added another arrow to the federal government’s nation-building quiver: the $25-billion Canada Strong Fund. Details are still limited, but the CSF is intended to make equity investments in Canadian projects and companies. Unlike other federal investment vehicles, like the $15-billion Canada Growth Fund, the Canada Infrastructure Bank and the Business Development Bank, the CSF will receive deposits directly from Canadians to supplement government resources and share its returns widely. The minimum size of these contributions is likely to be small enough for average Canadian households to participate and earn the market returns the CSF is meant to generate.

Related: Time Is Ticking for Mark Carney

When the CSF was announced, critics immediately pushed back on its initial billing as a novel Canadian sovereign wealth fund. Canada already has large public pension funds that invest Canadians’ retirement savings in public and private assets at home and abroad. Additionally, it’s somewhat nonsensical to call the CSF a wealth fund when the federal government doesn’t have surplus revenue to invest in it: the initial three-year seeding of the fund with public monies will implicitly add to the federal government’s $1.3 trillion debt stock.

Fine: score points for the pedants, myself included, on both fronts, but only a half-credit on the borrowing issue. If the government can earn more on the CSF’s investments than it pays to borrow money, the fund could still make sense. But this could be a big if. 

More substantive commentary on the CSF has argued that it’s a vague solution in search of an ill-defined problem. What market failure is the CSF designed to address and how? And why build a new government organization when this work could arguably be done through one of the aforementioned federal institutions? At this early stage, though, the CSF’s open-endedness is a strength. It gives Canada’s entrepreneurs and investors a chance to tell Ottawa what they need, and for the government to shape the CSF accordingly.

There are real signs that promising Canadian companies are struggling to find the capital they need to grow at home. The National Angel Capital Organization found that investment in early-stage startups in 2025 was the smallest in five years, while the Canadian Venture Capital Association reported that new financings for more established, scaling companies fell to a nine-year low in the first quarter of 2026. When capital is hard to find here, Canadian companies are forced to seek foreign investment, which has often resulted in head offices, decision-making and controlling interests migrating south of the border.

Related: If Canada Wants to Build, It Needs Immigrants

Canada’s reliance on foreign capital is nothing new. From our colonial beginnings onward, we’ve been a relatively small population on a huge landmass with abundant resources. Such a small labour force has never stood much chance of generating the surpluses needed to finance the growth that has made us into a G7 economy. Foreign capital has allowed us to punch consistently above our weight. And for over a century, foreign investors have always poured large sums into Canada’s stable public debt and equity markets. 

But over the last decade, Canadian direct investment in foreign companies has exceeded foreign direct investment in Canadian ones. A widely cited RBC report noted that between 2015 and 2024, two dollars of Canadian direct investment left the country for every dollar of foreign direct investment that came in. A small market, interprovincial trade barriers, onerous regulation and a limited pool of talent, have all been cited as causes. The CSF could make it more attractive for Canadian capital to stay and be invested here at home. 

It’s a good time to be bold in addressing this challenge. Canada’s reputation for stability and integrity is burnishing our national brand, and recent moves by the Carney government have put Canada at the head of the Q2 2026 poll by the Global Infrastructure Investor Association on “most attractive markets for infrastructure investment.” With the right products and approaches, the CSF could help us retain at home more of the roughly $10-trillion pool of capital controlled by Canada’s pension funds and asset managers. 

To keep more capital in Canada, the CSF shouldn’t limit itself to taking ownership stakes in Canadian companies. It could also make local investments less risky by offering various forms of insurance, guarantees and advance commitments. These tools would allow the CSF to assist a wider range of Canadian companies without requiring more public or private funding. 

Related: Canada is Funding its Own Economic Decline

Ottawa gets to decide where the CSF will be built. It could be housed inside an existing public institution or set up as a new agency; both options have recent precedents. Wherever the CSF lands, it needs to be shaped to ensure that it attracts the retail deposits that would differentiate it from other public investment pools. Initial demand is likely to be modest: the Canada Savings Bond program was retired in 2017 after interest faded, which implies that households may not rush to sign up for the CSF unless it offers a clear and compelling reason to do so.

However the CSF is ultimately configured, it won’t dampen the need for Canada’s three levels of government to continue moving quickly on three key reforms to improve our investment environment. Firstly, while the federal government has taken decisive action to remove the internal trade barriers under its control, its provincial counterparts have done relatively little to make it easier to do business across Canada. Secondly, Canada needs to return to its successful track record of attracting highly trained and richly skilled professionals via our points-based immigration system. We need a deep local pool of talent to support our companies’ development and growth. Lastly, we need to ensure our public procurement programs buy what we build here. In a world with uncertain and volatile trading conditions, the stability of local supply chains matters. Government purchases also give comfort to domestic and foreign backers of our start-ups. 

The persistent drain of start-ups, talented innovators and investment south of the border is a call to action. The CSF won’t fix this problem on its own, and it won’t remove the need for broader reforms to make Canada a better place to build and scale companies. But if it helps draw more capital into Canadian firms—and gives more of them a reason to grow here rather than leave—it will have been a worthwhile experiment. We don’t need the Canada Strong Fund to be perfect for it to be good. 

Brett House is a Canadian professor of professional practice in economics at Columbia Business School in New York City, and a senior fellow at the University of Toronto’s Massey College and Munk School of Global Affairs and Public Policy, as well as the Public Policy Forum. 

What did you think of this story? Send a comment for publication to letters@macleans.ca, and supply your name and address. Comments should be fewer than 200 words, and may be edited for length and clarity.