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Copies of the 2015 federal budget are pictured on Parliament Hill in Ottawa on Tuesday, April 21, 2015. Tuesday’s budget included plans for a public consultation on whether to change rules that limit federally regulated pension funds from owning more than 30 per cent of the voting shares of a corporation.Sean Kilpatrick/The Canadian Press

The federal government is reigniting a debate over whether to ease investment restrictions on some Canadian pension funds.

Tuesday's budget included plans for a public consultation on whether to change rules that limit federally regulated pension funds from owning more than 30 per cent of the voting shares of a corporation. Pension groups and other stakeholders will now have a chance to weigh in on the merits and perils of reducing ownership restrictions that bind many pension funds across the country.

The so-called 30-per-cent rule is a part of the Pension Benefits Standards Regulations, although certain investments in real estate, resources and investment companies are already exempt. The rules apply to federal funds, but have also been rolled into some provincial legislation, meaning pension funds in provinces such as Ontario are also subject to these restrictions.

The limitations have come under fire from plans in recent years for hurting returns as well as making deals cumbersome and expensive as pension funds seek to work around the rules.

"The Government will issue a consultation paper, expected later this year, and we will seek input on both the benefits and the potential impact of any change to the rule," David Barnabe, a spokesman for Finance Canada, said in a statement. He added that it is too soon to say which funds might be affected by the change.

In the budget document, Ottawa said it hoped to "reduce red tape and improve the investment climate in Canada." It also highlighted the strength and experience of the country's private sector infrastructure investors.

In recent years, institutional investors including, large pension funds, have increasingly looked beyond stocks and bonds to bolster their returns and diversify their portfolios. Other assets, such as real estate and global infrastructure projects, have been attractive because they can be held for many years and often match well with the long-term liabilities of pension funds.

Canada is among the countries seeking more infrastructure investment by pension funds. Ontario recently proposed an amendment to current regulations aimed at encouraging infrastructure in the province. The new rules would allow pension plans to bypass the 30-per-cent rule if they were investing in an infrastructure corporation, with comments on the proposal due in January. Similarly, Quebec has proposed removing the rule for investments in infrastructure.

But the language in the 30-per-cent rule is directed at the voting shares of a corporation and do not prevent companies from investing in infrastructure, said Hrvoje Lakota, principal at consulting firm Mercer Canada Ltd. "To me, this is a broader policy question of do we want pension plans to take control of companies?" He added that many of the country's smaller pension funds that invest primarily in pooled funds would be unlikely to change their strategy.

Many major pension plans were reluctant to discuss the move, saying they would participate in commenting. Some, such as the Public Sector Pension Investment Board, a federal Crown corporation, said they would welcome an end to the 30-per-cent limit.

Ottawa last addressed the restriction in 2010, with the finance department saying the limitation was still appropriate.

At the time, the Ontario Teachers' Pension Plan released a statement calling the rule burdensome, saying it put the pension plan – and others like it – at a disadvantage to foreign investors when bidding for assets both in Canada and abroad.

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