VANCOUVER, British Columbia (Reuters) ¿ As foreign takeovers and private equity buyouts strip the Toronto Stock Exchange of some of its biggest names, institutional investors are increasingly shifting their gaze outside Canada.

Those investors with mandates to invest domestically, such as "pure" Canadian mutual funds, say they might at some point ask their fundholders to let them rejig their limits so that they too can follow their peers to greater choice offshore.

"There is little doubt that it is becoming harder and harder to run a fund that is forced to invest exclusively in Canada when there are fewer and fewer names available," said David O'Leary, manager of fund analysis at Morningstar Canada.

"A lot of the funds in that space begin looking more and more like the index as there are not as many names to be able to differentiate themselves from their benchmark," O'Leary told Reuters.

The 126-year-old Canadian Pacific Railway Ltd., a central force in the nation's economic development, is the latest household name to come into the sights of private equity buyers.

CP confirmed on July 18 it had rejected an "inquiry" earlier this year from Brookfield Asset Management, which is reported to be leading a private equity consortium interested in buying out Canada's second biggest railroad.

The Toronto market also stands to lose Alcan Inc., after the Montreal-based aluminum producer agreed to be bought by Anglo-Australian miner Rio Tinto.

If Alcan, the market's ninth biggest stock by value, goes it will follow a phalanx of other big names that have delisted in the past two years.

These include storied Canadian retailer Hudson's Bay Co., hotel groups Fairmont and Four Seasons, steelmakers Dofasco and Algoma, along with Falconbridge and Inco two of the world's biggest nickel producers.

With a shrinking domestic market to choose from, the easing of federal tax rules on foreign investments in recent years has taken some pressure off institutional investors.