Japan vs. Canada: How Large Pension Funds Approach Tech Investing Differently

Both Japan and Canada are home to some of the world’s largest pension funds and institutional investors, managing trillions of dollars in assets that have a major impact on global capital markets.

Japan’s Government Pension Investment Fund (GPIF) is the largest in the world, managing over $1.4 trillion in assets.

Canada’s largest pension fund, the Canada Pension Plan Investment Board (CPPIB), oversees about $600 billion in assets, while other major funds like the Ontario Teachers’ Pension Plan and Alberta Investment Management Corporation collectively manage hundreds of billions more.

Despite their comparable scale, these institutional giants take markedly different approaches when it comes to investing in technology and supporting their domestic innovation ecosystems.

Japan: Strategic, Ecosystem-Driven Investing

Japan’s institutional investors and government-backed organizations take a proactive role in building a domestic innovation ecosystem closely connected with the global venture capital and startup landscape.

• Agencies like JETRO (Japan External Trade Organization) have been instrumental in bridging Japanese startups with top international accelerators and VCs. For example:
• JETRO collaborates with famous global programs such as Techstars, Global 500, and Alchemist Accelerator to provide Japanese entrepreneurs with access to mentorship, capital, and international networks.
• These partnerships help Japanese startups break into foreign markets and tap into Silicon Valley’s tech ecosystem while bringing global know-how back to Japan.

JIC, YC, and Transpose

Japan Innovation Capital (JIC) itself does not directly invest in or manage Y Combinator. However, in June 2024, JIC announced a significant LP investment of USD $30 million in Transpose Platform BOV II, L.P. Transpose is a US-based fund that has a deep relationship with Y Combinator (YC) and invests in YC-managed funds.

This reflects a broader strategy where government-linked entities facilitate Japanese startups’ entry into premier global accelerators and VC networks rather than trying to replicate those models domestically.

Canada: Return-Focused, Market-Driven Investing

Canada’s large pension funds, while substantial in size, operate under a very different governance and cultural environment.

Canadian funds like CPPIB and Ontario Teachers’ prioritize fiduciary duty, focusing on maximizing risk-adjusted returns for their beneficiaries without imposing geographic or strategic conditions.

Their tech investments are primarily channeled through top-tier global venture capital and growth equity funds, including many U.S.-based firms like Sequoia Capital, Andreessen Horowitz, and Tiger Global.

This means Canadian LPs often provide indirect support to Canadian startups, but their main goal is portfolio diversification and return generation, rather than direct ecosystem building.

Instead, Canadian governments use grants, subsidies, and innovation programs (e.g., IRAP, SD Tech Fund) to foster domestic tech development, keeping pension fund investments free from explicit “local content” mandates.

Why the Difference?

Several factors explain these divergent approaches:

What This Means for the Future

Japan’s model offers the potential for targeted, long-term industrial development but can limit flexibility and returns if mandates are too rigid. Canada’s approach maximizes financial returns and global exposure but relies heavily on government programs outside pension funds to nurture domestic innovation.

Both strategies have merits and trade-offs, reflecting each country’s history, economic priorities, and governance philosophy.

In conclusion, while Japan’s pension funds wield their massive capital as instruments of national tech strategy, Canadian pension funds take a more hands-off, market-driven approach, leaving ecosystem building largely to governments and startups themselves.