Two views on the privatization of public assets

Financial Post-6 hours agoShare

The first was that a number of Canadian pension funds are bidding on a toll road in Indiana. The second was the results of a survey conducted by the National Union of Public and General Employees on the public’s view of privatization of publicly held assets and services.

The survey, which focused on general concerns and not on the sale of particular assets, found “Canadians are deeply mistrustful of privatization schemes,” because the country’s core values are weakened “when we allow the wealthy few to profit from public services.”

So how can these seemingly contrasting positions – pension funds and other investors want to buy assets normally owned by governments and the public which is wary of either selling off assets or privatizing services – be reconciled?

First, alternative assets such as toll roads are attractive because they function like an annuity, and the cash flow keeps coming: in general there are no surprises.

Accordingly they are a suitable asset for a pension fund because of the reliability of such cash flows are a suitable offset to their long-term liabilities. It is because of those characteristics that pension funds – and, according to the report, CPP Investment Board, OMERS and AIMCo are all interested in the Indiana Toll Road – have bought such assets around the world.