Enhancements to the BlackRock Canada LifePath and Balanced Index fundsSeptember 30, 2013
Plan sponsors may wish to consider whether this investment update has any implications for the investment options available within their plan. Sun Life Assurance Company of Canada purchases units of the funds listed below, which are established as segregated funds in accordance with the Insurance Companies Act (Canada).
BlackRock Asset Management Canada Limited (BlackRock) will be making changes to the BlackRock LifePath® Index funds and BlackRock Balanced Index funds, described in further detail below. BlackRock expects these changes to increase the investment and operational efficiencies of these strategies by implementing the most appropriate asset class exposures through the most appropriate investment vehicles available.
BlackRock LifePath® Index Series of Target Date Funds
The change to the benchmark for underlying long bond exposure is expected to occur on or around November 29, 2013.
Certain BlackRock LifePath® Index Funds invest in units of the BlackRock Canada Long Bond Index Fund (the “Fund”); currently this excludes all bonds rated "BBB" or lower. The Fund is changing its benchmark to the DEX Long Term Bond Index, which includes all investment grade bonds, including bonds rated "BBB". This change is intended to help the Fund capture the full investment grade opportunity set of the DEX Long Term Bond Index, a benefit which BlackRock expects will extend to the LifePath® Funds through its investment in units of the Fund. As of July 31, 2013, "BBB"- rated bonds made up 7.7% of the DEX Long Term Bond Index. The Fund will also aim to match the benchmark allocation to "BBB" rated securities.
Reminder of target date fund maturity process
BlackRock and Sun Life Financial reminds plan sponsors who offer the BlackRock LifePath® Index 2010 Retirement Fund that this fund is still expected to merge with the BlackRock LifePath® Index Retirement Fund I on or before December 31, 2014, as previously communicated. As the BlackRock LifePath® Index 2010 Retirement Fund was the first fund in the LifePath® series to reach its target date, BlackRock provided a grace period of up to five years to help taxable investors manage their withdrawals over time. Going forward, BlackRock expects to merge the applicable maturing fund with the BlackRock LifePath® Index Retirement Fund I on or before December 31 of the year immediately preceding the applicable fund’s target date. For example, the BlackRock LifePath® Index 2015 Fund is currently expected to merge with the BlackRock LifePath® Index Retirement Fund on or before December 31, 2014.
How will these changes impact you and your plan members?
No action is required by you or your plan members as a result of the long bond change, or when a fund reaches its maturity year. Going forward, the maturing fund will automatically transfer to the BlackRock LifePath® Retirement Fund which has the most conservative investment mix available in the target date fund series. This investment mix of the Retirement Fund is designed to provide income and moderate long-term growth of capital for investors beginning to withdraw their money.
BlackRock Balanced Index Series of Target Risk Funds
Real Estate: The change of investment vehicle and index is expected to occur on or around November 29, 2013.
The three BlackRock Balanced Index Funds: Conservative, Moderate and Aggressive, currently achieve their exposure to the real estate asset class by investing in iShares®; exchange-traded funds (ETFs) managed by BlackRock or its affiliates, specifically in the iShares S&P®/TSX® Capped REIT Index Fund (ticker XRE) and iShares Dow Jones U.S. Real Estate Index Fund (IYR). BlackRock will expand the opportunity set within this asset class by moving from the current North-American exposure to a global approach. Consequently, the holdings in XRE and IYR are expected to be redeemed and exchanged for exposure to the global REITs asset class by investing in units of a pooled fund called the BlackRock CDN Global Developed Real Estate Index Fund, which tracks the FTSE EPRA/NAREIT Developed Index.
This enhancement is expected to increase efficiency and improve tracking against each Balanced Index Fund’s respective benchmark, as well as broadening REIT exposures in each Balanced Index Fund. This same change was implemented to the LifePath Series of Target Date Funds in August 2012 and resulted in improved tracking versus the benchmark and a reduced fund management fee, as detailed below.
How will this change impact you and your plan members?
The ETF fees associated with the real estate asset class, which are reported as part of the fund management fees (FMFs) disclosures, are expected to be reduced, with the move away from ETFs into a pooled fund for real estate. BlackRock will continue to use ETFs for other areas such as emerging markets equities, citing the preference for liquidity and transparency which the ETFs provide as compared to investing directly in a pooled index fund.
Please contact your Sun Life Financial Group Retirement Services representative.