Key Takeaways
- • KPMG Canada's Andras Vlaszak says Canadian pension funds keep investing in toll roads because of long-dated, inflation-linked cash flows, and Ontario's 407 ETR remains one of the most sought-after infrastructure assets in the country.
- • Vlaszak argues that toll roads connecting major metropolitan areas have high longevity, high barriers to entry, and traffic that is largely insulated from technological change and competing transport modes.
- • Portfolio manager Ryan Gubic of MRG Wealth warns that private infrastructure carries lighter reporting, governance demands, and gating risk, since there is no instant exit for investors.
- • Canada's toll road market is thin, with British Columbia having none, because governments typically recover infrastructure costs through taxation rather than user fees.
- • Vlaszak suggests that introducing tolling on existing public infrastructure could create more revenue-generating assets for private capital and help governments address fiscal deficits.
Summary
Canadian pension funds continue to put capital into toll roads, both at home and abroad, and the 407 Express Toll Route in Ontario is among the most coveted infrastructure assets in the country, according to a Benefits and Pensions Monitor (BPM) article. Several pension funds hold stakes in the highway. Andras Vlaszak, senior director of infrastructure, capital projects and sustainability services lead at KPMG Canada, attributes this to the asset's size and to the long-term liabilities of pension plans. He said the presence of multiple pension investors signals a belief that these assets have very long-term viability.
Vlaszak says the 407 connects major metropolitan areas and serves a mode of transport not currently expected to face major technological disruption. He described an asset with high longevity, barriers to entry for competitors, and toll revenues that are typically inflation-indexed. Toll road performance depends on traffic volume, and the strongest assets link large population centres, where sustained demand is close to certain. He added that competing modes such as aviation or high-speed rail do not undermine the cost competitiveness of driving. The obvious risk, he acknowledged, is a pandemic-scale disruption that causes traffic to fall sharply, though he said conservative underwriting at the point of investment makes the difference across cycles.
From a pension perspective, the appeal of private infrastructure lies in long-dated, predictable cash flows combined with inflation protection. The article notes these assets are usually treated more like fixed income than public equities, with smoother returns that compound over decades. Vlaszak also distinguished metropolitan toll roads from those built to serve industrial or agricultural sites in South America, which are more exposed to commodity and sector cycles. He described Highway 407 as a low-risk part of the supply chain because its traffic is tied to daily urban life.
Ryan Gubic, portfolio manager and founder of MRG Wealth, cautioned that private infrastructure requires a higher bar for trust and governance because of lighter reporting requirements than public markets. He stressed liquidity risk, noting that when too many investors seek to exit at once, funds may gate redemptions until cash flow is available. He also said toll roads can show resilience in downturns because drivers continue to use them.
On political and regulatory risk, Vlaszak said an Ontario pension fund investing in Ontario assets creates a natural hedge, since governments are unlikely to undermine revenues on projects owned by local workers' pension plans. He added that funds stress-test assumptions across multiple interest rate scenarios before bidding.
Canada's toll road landscape is limited. Vlaszak said British Columbia, where he is based, has none, because the government recovers infrastructure costs through taxation rather than user fees, which effectively shuts out private capital. The 407 exists because it was delivered under a model in which the project generates its own revenue and can be privatized. He said this explains criticism that Canadian pension funds lack domestic investment opportunities, since few revenue-generating government projects are available for sale. He suggested that introducing tolling on existing infrastructure could create such opportunities and help governments recycle assets to address fiscal deficits.
Vlaszak says the 407 connects major metropolitan areas and serves a mode of transport not currently expected to face major technological disruption. He described an asset with high longevity, barriers to entry for competitors, and toll revenues that are typically inflation-indexed. Toll road performance depends on traffic volume, and the strongest assets link large population centres, where sustained demand is close to certain. He added that competing modes such as aviation or high-speed rail do not undermine the cost competitiveness of driving. The obvious risk, he acknowledged, is a pandemic-scale disruption that causes traffic to fall sharply, though he said conservative underwriting at the point of investment makes the difference across cycles.
From a pension perspective, the appeal of private infrastructure lies in long-dated, predictable cash flows combined with inflation protection. The article notes these assets are usually treated more like fixed income than public equities, with smoother returns that compound over decades. Vlaszak also distinguished metropolitan toll roads from those built to serve industrial or agricultural sites in South America, which are more exposed to commodity and sector cycles. He described Highway 407 as a low-risk part of the supply chain because its traffic is tied to daily urban life.
Ryan Gubic, portfolio manager and founder of MRG Wealth, cautioned that private infrastructure requires a higher bar for trust and governance because of lighter reporting requirements than public markets. He stressed liquidity risk, noting that when too many investors seek to exit at once, funds may gate redemptions until cash flow is available. He also said toll roads can show resilience in downturns because drivers continue to use them.
On political and regulatory risk, Vlaszak said an Ontario pension fund investing in Ontario assets creates a natural hedge, since governments are unlikely to undermine revenues on projects owned by local workers' pension plans. He added that funds stress-test assumptions across multiple interest rate scenarios before bidding.
Canada's toll road landscape is limited. Vlaszak said British Columbia, where he is based, has none, because the government recovers infrastructure costs through taxation rather than user fees, which effectively shuts out private capital. The 407 exists because it was delivered under a model in which the project generates its own revenue and can be privatized. He said this explains criticism that Canadian pension funds lack domestic investment opportunities, since few revenue-generating government projects are available for sale. He suggested that introducing tolling on existing infrastructure could create such opportunities and help governments recycle assets to address fiscal deficits.
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