(Bloomberg) -- Canada’s government plans to launch new, guaranteed securities for investors early next year to seed a sovereign wealth fund, which will be able to use the money to buy equity stakes in companies including technology firms.
The sovereign vehicle, called the Canada Strong Fund, will co-invest in projects the federal government is already involved in, such as the buildout of electrical generation capacity or other energy infrastructure. But the fund will also have the flexibility to buy shares in “high-potential companies” in tech, artificial intelligence and other sectors, as long as they’re Canadian, according to a document released by the government Thursday.
Prime Minister Mark Carney announced the wealth fund in April but gave few details on how it would work. Finance Minister François-Philippe Champagne’s budget on Thursday says more about the vehicle, which will have a Canada-only investment mandate.
The government will hand C$25 billion ($17.9 billion) to the fund – which hasn’t yet hired an executive team or board members – and will add the proceeds from the sale of principal-protected notes to retail investors. The securities will have downside protection, but holders will be able to participate in equity upside if the fund does well.
Similar notes are marketed today by Canadian banks to their wealth management clients. Investors accept a limit on their gains and a lockup period in return for the principal guarantee. The government suggested the Canada Strong notes may have maturities of five, seven or 10 years.