Key Takeaways
- • Sebastien Betermier, executive director of the International Centre for Pension Management (ICPM), says significant institutional capital allocations to the defence sector will depend on "investable windows" that align government objectives with pension fund needs.
- • ICPM has published a new paper examining how governments can bring defence assets into the investable window of pension funds, drawing on European examples.
- • Betermier argues investors respond to structure and incentives rather than political priority, meaning policy must create clear pathways into the market.
- • The paper finds defence investment is moving from the periphery of investment policy to its centre, driven by structural defence spending demand, fiscal constraints on governments, and growth in private capital.
- • Canada's September investment summit, attended by Prime Minister Mark Carney and drawing about $500 billion in pension and bank commitments, may offer a test case for the investable window concept.
Summary
Significant capital allocations to the defence sector will require appropriate "investable windows" that align government objectives with the needs of institutional investors, according to Sebastien Betermier, executive director of the International Centre for Pension Management (ICPM). Speaking to Benefits Canada, Betermier said pension funds do not respond to political priority but to structure and incentives that open pathways to markets.
The ICPM recently published a paper examining how governments can bring defence assets into the investable window of pension funds, using examples from European cases. The organization had previously proposed the investable window concept in response to growing calls for pension funds globally to allocate more capital domestically.
Betermier linked the defence opportunity to broader pressures on pension capital. "Pressures to invest at home from the funds keep growing," he said, noting that funds have been accumulating increasing amounts of capital while governments remain fiscally constrained in other areas. He suggested that following Canadian Prime Minister Mark Carney's investment summit in September, and increased commitments from several "Maple 8" pension funds to Canadian investments, the defence sector could serve as a test for the investable window theory. Benefits Canada separately reported that the summit drew $500 billion from pension funds and banks.
The paper argues that defence investment is shifting from the periphery of investment policy to its centre. Drivers cited include rising defence spending as a structural feature of many countries amid current geopolitical uncertainty, governments' need for private capital given fiscal limits, continued growth in private capital pools, and the evolving nature of defence investment opportunities.
The ICPM recently published a paper examining how governments can bring defence assets into the investable window of pension funds, using examples from European cases. The organization had previously proposed the investable window concept in response to growing calls for pension funds globally to allocate more capital domestically.
Betermier linked the defence opportunity to broader pressures on pension capital. "Pressures to invest at home from the funds keep growing," he said, noting that funds have been accumulating increasing amounts of capital while governments remain fiscally constrained in other areas. He suggested that following Canadian Prime Minister Mark Carney's investment summit in September, and increased commitments from several "Maple 8" pension funds to Canadian investments, the defence sector could serve as a test for the investable window theory. Benefits Canada separately reported that the summit drew $500 billion from pension funds and banks.
The paper argues that defence investment is shifting from the periphery of investment policy to its centre. Drivers cited include rising defence spending as a structural feature of many countries amid current geopolitical uncertainty, governments' need for private capital given fiscal limits, continued growth in private capital pools, and the evolving nature of defence investment opportunities.
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