A campaign to compel Canadian pension funds to invest a larger portion of their holdings domestically is gathering steam with the publication of an open letter signed by more than 90 prominent business executives.

The initiative, if adopted, would result in Canada’s pension plans limiting their investments abroad, potentially lowering the billions of dollars in real estate holdings they have in the United States and other countries.

The movement, spearheaded by Daniel Brosseau and Peter Letko of Montreal-based Letko Brosseau Global Investment Management, got underway with a letter last week that urged the federal government “to amend the rules governing pension funds to encourage them to invest in Canada.”

The letter was signed by some prominent names in Canadian business, including former Blackberry Chief Executive Jim Balsillie, Couche-Tard founder Alain Bouchard, former Scotiabank CEO Brian Porter and Quebecor CEO Pierre Karl Péladeau. Signatories from the real estate community include George Armoyan of G2S2 Capital and hotelier Howard Pechet of Stagewest Hospitality.

The letter notes that Canada’s pension funds hold 37% of all institutional savings in Canada — and have reduced their stake in publicly traded Canadian companies from 28% in 2000 to 4% at the end of last year. That decline coincides with a decrease in Canada’s gross domestic product per capita from 95% of U.S. GDP per capita in 1980 to 75% of the U.S. GDP per capita at the end of last year.

The letter did not propose any specific measures to limit pension funds from investing abroad. But Brosseau told the House of Commons Standing Committee on Finance last September that he prefers a reserve system that compels the funds to set aside 20% for Canadian investments for every 80% in international investments.

Canada’s federal government has not indicated whether it will comply with the request. However, the federal government stated last fall that it would collaborate with Canadian pension funds to increase investment of its $3 trillion in pension fund assets under management within Canada.

Canadian pension funds typically hold a variety of real estate holdings both in Canada and abroad. That's exemplified by numbers posted online by one of Canada’s largest pension funds, the British Columbia Investment Management Corp., a manager of about $233 billion in gross assets. The fund's real estate holdings, managed by its affiliate QuadReal, have about $4.1 billion in real estate assets in the United States and about $1.5 billion in Canada.

The Ontario Municipal Employees' Retirement System which invests about $130 billion for its Ontario contributors, issued a statement following the publication of the letter noting that about 25% of its assets are invested in Canada, even though Canada only accounts for 3% of global GDP.

OMERS’ real estate wing, Oxford Properties, reports managing $87 billion in real estate assets globally. “We remain very interested in finding new and exciting investment opportunities in Canada that meet our required risk and return profile,” read the note published by parent company OMERS.

Not all onlookers have expressed support for the motion. Some argue that pension funds would be best to simply remain focused on obtaining the highest possible returns for their Canadian stakeholders.

“Pension plans should choose their investments to maximize their returns subject to maintaining a prudent exposure to risk,” Angelo Melino, professor of economics at the University of Toronto, told CoStar News in an email. “Their first responsibility is to fund future pensions, not to provide cheap capital to targeted beneficiaries.”

Another analyst said that pension funds bidding on the same limited pool of Canadian companies could lead the prices of those assets to balloon.

“Canada is also a small market on a global scale and our institutional players have lots of dry powder available,” said Mitch Strohminger, Montreal-based director of market analytics at CoStar Group. “But if they all are searching more for returns locally, this likely will lead to local assets getting bid up higher than they might otherwise have been, which would lead to lower returns over the life cycle of their investment.”

Strohminger acknowledged that the higher investment in Canada might be tempting: “Trying to oblige Canadian pensions to invest locally is politically enticing but risks resulting in lower risk-adjusted returns in the long term.”

Brosseau, one of the leaders behind the movement to get more pension funds invested locally, said in a telephone interview that he concurs with the view that Canadian pension funds should always aim to maximize their returns, without elaborating.

In his address to Parliament last fall, Brosseau said: "Canada distinguishes on being the developed country that invests the least in its own economy," and urged "appropriate regulations to constructively deal with the problem."

Canada’s pool of pension funds has been estimated to total $3 trillion, with the biggest pension fund, the Canada Pension Plan Investment Board, having $570 billion in assets at the end of last year, including a real estate portfolio that includes office towers in New York and Chicago. Canada’s second-largest pension fund, Montreal-based Caisse de dépôt et placement du Québec, or CDPQ, controls $434.2 billion in assets.

CDPQ, OMERS and the Ontario Teachers' Pension Plan Board all reported negative returns on their real estate investments last year. The losses might hurt the overall funds more than they would for pension plans in other countries since Canadian pension funds tend to invest a higher percentage of their assets into real estate investments, according to one study.