If projects lose money, who pays?

In my report last week, I referenced Prime Minister Carney’s recently announced so‑called “sovereign wealth fund.” I used the term “so‑called” because there are important differences between what most Canadians would recognize as a traditional sovereign wealth fund and the model now being proposed.
 
Most well‑known sovereign wealth funds—such as Norway’s—are built from surplus revenues, often generated by natural resources like oil and gas, and are invested globally across stocks, bonds, and real estate. This approach helps grow national wealth over time while reducing exposure to the domestic economy. By contrast, Canada is currently running significant deficits, and it is widely expected that a substantial portion of the initial funding for this new fund will come from government borrowing rather than surplus revenues. In addition, the proposed Canadian fund is designed primarily to invest in domestic infrastructure and major projects alongside private investors, rather than focusing on globally diversified assets.
 
Following my report, I received a considerable amount of feedback from residents across our riding. Many expressed surprise that several media organizations described this initiative simply as a “sovereign wealth fund,” without explaining how its structure differs from more traditional models.
Among that feedback, one particularly detailed submission stood out. A retired Kelowna resident with extensive experience in the financial sector offered several thoughtful observations that are worth considering.
 
First, he noted that for any investment product offering a fixed or predictable rate of return, that rate must effectively be determined in advance. He questioned how that could be done reliably in large infrastructure projects, which often experience cost overruns, supply chain disruptions, and changing economic conditions.
 
Which brings up a second concern: risk. Major infrastructure projects inherently involve uncertainty, and historically those risks have often materialized in the form of higher‑than‑expected costs. Taken together, this raises a fundamental issue. If returns to investors are structured to be stable or protected, while the underlying projects carry significant uncertainty, then that risk must be absorbed elsewhere. And in a government‑backed fund, that can ultimately mean taxpayers.

While the government has stated the fund will aim to deliver market‑rate, commercial returns, important details about how risk will be allocated—and whether some investors may receive protections such as principal protection—have not yet been fully clarified. If such protections are included, it could result in taxpayers bearing a disproportionate share of the downside risk if projects fail to perform as expected.
 
Connected to this is the question: since governments can typically borrow at lower interest rates than private investors, what is the rationale for bringing private capital into public infrastructure projects at all—particularly if those investors are offered favourable or protected terms? It is a question many Canadians are now asking.

The resident concluded that, in his view, the proposal risks becoming a poor use of borrowed public funds and could result in a transfer of wealth toward those who already have the ability to invest. Whether one agrees with that assessment or not, it reflects a broader concern being voiced in the community.

Taken together, these differences in structure, funding, and risk allocation leave many questioning whether this proposal truly reflects what Canadians would expect from a sovereign wealth fund. I was also planning to address the recent announcement of $2 billion in federal support for a private telecommunications company to help fund AI infrastructure, but I will leave that topic for another day.
 
My question to you this week:

How comfortable are you with the federal government taking on a larger role in investment—particularly where public funds may be exposed to risk while private investors participate in potential returns?
 
Your feedback helps me do my job. You are always welcome to share your thoughts on my Facebook page, by email at Dan.Albas@parl.gc.ca or by calling toll‑free at 1‑800‑665‑8711.