Canadian companies are issuing second and third-class paper. Canadian pension funds are buying it, often at inflated prices, because they have no option.
This is the hot-house effect of the Canadian tax law, which allows the pension funds to keep their income tax exemptions only if they invest 90% of their portfolio inside Canada.
So strictly is this interpreted that any investment in the Canadian operations of IBM, General Motors or Chrysler must count as pan of the 10% permitted foreign investment, because these Canadian subsidiaries are wholly-owned by their US parents.
The description of Canadian equity issues as “second and third-class” was given to Euromoney by a Toronto investment adviser, William S.
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