Foreign investment by Canadian pension plans is currently restricted to 20 per cent of the book value of the plan's portfolio. This policy increases non-diversifiable risk in portfolio returns, which entails costs for pension plan beneficiaries. To estimate these costs, we examine the effects of an early-1990s increase in the limit on the performance of mutual funds constrained by the it. The evidence suggests the limit has had a significant negative effect on risk-adjusted returns to retirement savings in Canada. We conclude an increase in the limit from 20 to 30 per cent would raise average annual returns to the current stock of retirement savings by 0.31 percentage points, or $1.4 billion annually.Published version, March 2000: PDF.