Canadian Fund Recommends Yen, Gold and Franc After Souring on US

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(Bloomberg) — One of Canada’s biggest institutional investors is recommending the Swiss franc, Japanese yen and gold as potential alternatives to the US dollar as President Donald Trump’s policies pressure the greenback. 

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The US dollar slid even as Treasury yields rose after Trump’s April 2 tariff announcements, potentially signaling that investors no longer view the currency as a safe haven, Investment Management Corp. of Ontario said Wednesday in its annual World View report. And the dollar’s recent performance reinforces the message that the US may no longer be a stable partner, according to the pension manager.

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“The acceleration in US efforts to address global imbalances, combined with Trump’s unpredictable and unconventional approach, could weigh on the USD in the years ahead while potentially lifting inflation and bond yields,” the pension said in the report. A spokesperson for IMCO said the document doesn’t necessarily indicate what actions the fund is taking on its currency exposures. 

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The US dollar had its steepest one-day drop since last year’s tariff rollout after Trump said on Tuesday he didn’t think the currency had weakened excessively — fueling speculation the greenback is at the precipice of a longer-term decline. Some money managers have been seeking shelter elsewhere.

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In recent days, some European pension plans, such as AkademikerPension and Alecta, said that they’re cutting US Treasury holdings amid concerns that Trump’s policies have created credit risks too big to ignore. 

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IMCO — which manages about C$86 billion ($63.5 billion) on behalf of public-sector workers, government bodies and schools — said that, in addition to looking at other currencies, investors can consider physical assets tied to strategically vital areas such as artificial intelligence and energy-related infrastructure.

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“Given that you ‘need stuff to make stuff,’ opportunities could arise in commodities, materials, energy and other natural resources as governments look to build their country’s productive capacity while securing supply chains,” the pension said in the report.

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Canadian pension funds are among the world’s largest holders of US assets, meaning that unfavorable movements in the exchange rate between the loonie and the greenback can hurt investment results. More than half of IMCO’s assets were invested in the US as of Dec. 31, 2024. 

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The pension’s latest report for investors suggested that they can shift their geographic exposures away from the US to manage risk. Canada’s responses to US trade pressures, including a focus on big infrastructure projects, could broaden the range of investment opportunities in that country, the report said.

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The biggest Canadian funds have significant investments in infrastructure around the world, including ports, renewable power, airports and energy infrastructure. Prime Minister Mark Carney’s government has launched a push to increase the country’s exports to non-US markets, and is promoting major new initiatives such as port expansions that may encourage the nation’s pension funds to invest more domestically.

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