"Canada Strong Fund" ... Another Investment Opportunity? | Investing | Discussion forum

Not fully baked yet. Government says more details coming:

A Simple Way for Canadians to also Directly Participate

… The government intends to offer Canadians the opportunity to participate directly in the Fund through a new, retail investment product.

This means that any Canadian who wishes to can invest some of their savings into the Canada Strong Fund.

The government intends to consult on the specific design of this product, but Canadians can expect the following features:

• Broadly accessible to Canadians from coast to coast to coast;
• Easy and simple to purchase, hold, and transact;
• As the Canada Strong Fund succeeds, investors will be able to share in the upside, while their initial invested capital will be protected.

…

mordko said
Reads like an ad for a market linked GIC. Small print to come.  

That's what it looks like to me too.

Is there data comparing historical market based GIC's vs GIC's?

cgouimet said

They are being billed as GIC's with so much more upside potential. I'm just curious how much upside they have actually delivered ...  

I think you'll have to go through the FI's websites to find that. Here is the link to one of BMO's series (matured). It doesn't look good. The unmatured series look better, but mostly because of timing.

https://www.bmo.com/main/perso.....ssive-gic/

The "guaranteed" part of them is usually a small fraction of what a traditional GIC provides.

There's no practical value in a third party tracking the returns of losing strategies like market-linked GIC's and principal protected notes.

Such instruments buy options to do their market linked returns. Most options end up expiring worthless. Option buyers end up losing more than they win. Same fate with those who write options.

Quite a few funds have marketed their covered call option writing to boost returns. Instead, they all end up with inferior long term returns from capping the upside of their holdings.

mordko said
We still don’t have the small print but this particular market-linked GIC has a twist. Looks like investors in the “sovereign wealth fund” have genuine potential for actual market returns and that the downside protection is provided by the taxpayer.

The devil is in the detail but this has the potential to act like a government-backed stock and shift all (significant) investment risk to the taxpayer. And if so, it's not like a market linked GIC at all because investor’s returns are very real and someone else takes all the risk.

It could be like that ephemeral unicorn, like the market linked GICs are advertised but aren’t. Actual market returns minus the risk.  

That's kinda of what I see from the preliminary info we have. This might actually be the first government benefit I qualify for in years ... 🙂

RetirEd said
Looks to me like the fund will tank from investing in Canadian companies. Other SWFs never invest in their own countries.  

That's exactly it, a real SWF should never invest in its own country, otherwise totally defeat the purpose of such a fund. Imagine saying CPP can only invest in Canadian assets and projects and nothing else...

I agree with Mordko on his assessment. There is no wealth in a fund where it has to be actually funded with additional deficit.

I would go further saying this is a deliberate effort to deceive and manipulate Canadians into alignment with the government's attempt to arrest the flow of capital out of country by investing their own after tax capital along with taxation into projects and infrastructure that have been previously frustrated by intentional regulatory actions/obstacles.

The jury is out due to lack of details so far but this smells a lot like buying oceanfront property in Arizona. The returns will most likely be abysmal when there is going to be a so called guarantee of 'not losing money'. Likely worse than a market linked GIC.

Andrew Coyne has a well thought out Opinion piece on this in the G&M (could be behind paywall) https://www.theglobeandmail.co.....alth-fund/

AltaRed said
There is no wealth in a fund where it has to be actually funded with additional deficit. 

Just like there is no perpetual motion machine.

If such a situation existed, where the SWF could generate such returns from deficit funds, then every country should be borrowing and spending every dollar possible towards investing in them.