Change in Sub-adviser and investment objective for the Sun Life Multi-Strategy Target Return Segregated Fund
Plan sponsors may wish to consider whether this investment news has any implications for the investment options available within their plans. Sun Life Assurance Company of Canada purchases units of the fund listed below, which are established as a segregated fund in accordance with the Insurance Companies Act (Canada).
Following up on the GRS Matters message from March 14, 2019, the Sun Life Multi-Strategy Target Return Segregated Fund (the Fund) will change its sub-adviser and investment objective effective 4:01 p.m. ET May 24, 2019.
Sun Life Global Investments (SLGI) manages, and Aviva Investors Limited (Aviva) currently sub-advises, the Fund. In March 2019, SLGI announced its intention to terminate Aviva due to regulatory constraints. Since then, Sun Life’s Group Retirement Services (GRS) worked with Aviva to access the Aviva Multi-Strategy Target Return strategy directly. GRS tried this directly through a Canadian feeder fund investing in Aviva’s underlying European SICAV fund. GRS’s aim was to preserve plan sponsors’ relationship with Aviva and maintain the same investment strategy.
Aviva’s Canadian feeder fund, along with all other options proposed by Aviva, did not meet GRS’s operational standards. Aviva can’t provide the current day Net Asset Value (NAV) by our daily deadline of 6:30 p.m. ET. There would be a one day valuation lag which would create a difference in the rate of return between the Sun Life segregated fund and the underlying Aviva fund. Secondly, Aviva would not be able to process trades at the current day’s price.
SLGI will continue to manage the Fund. Effective 4:01 p.m. ET May 24, 2019, Wellington Management Canada ULC (Wellington) will sub-advise the Fund.
New investment objective
The Fund’s new investment objective targets long-term capital appreciation and income by investing in a diversified mix of global fixed income securities. Specifically, the fund seeks to maximize total return by providing timely and dynamic exposure to high conviction global fixed income ideas in global government, inflation-linked, corporate, securitized, high yield, bank loan, emerging markets, and convertible securities.
Although the fund invests opportunistically in higher yielding sectors, risk is managed to provide a long-term volatility profile in line with a core fixed income portfolio (i.e. as defined by its benchmark, the Bloomberg Barclays Global Aggregate Bond Index (Hedged to CAD)). Wellington also manages risk through diversifying across multiple asset types, geographies, credit tiers, styles and time horizons. Wellington expects the resulting portfolio to have an overall investment grade rating.
With approximately US $2.8 billion in assets (as at December 31, 2018), Wellington’s Opportunistic Fixed Income composite track record dates back to February 2000 in the U.S. The fund utilizes a benchmark agnostic approach, targeting a return of 5-7%, gross of fees over the course of a full market cycle (typically defined as 3-5 years)*. The Fund uses three main return drivers as part of the investment approach: strategic sector themes, market neutral strategies and tactical trading. The Fund will be fully hedged to the Canadian dollar, however it can allocate up to 30% in active currency positions.
What does this mean to plan sponsors and plan members?
GRS will rename the fund as the Sun Life Opportunistic Fixed Income Segregated Fund on June 1, 2019.
This change in sub-advisor and investment mandate does not require immediate action by you or your plan members. If your plan’s Statement of Investment Policies & Guidelines (SIP&G) provides details on the specific investment options available in your plan, you may consider updating the document to reflect this change. GRS will update all of the materials for the Fund, including name, objectives and fact sheets to reflect the new sub-advisor and investment objectives. SLGI will revise its Statement of Investment Policies and Procedures (SIP&P) which is available on the Plan Sponsor site.
Given plan sponsors will continue to remain invested in the same Sun Life segregated fund, there will be no direct tax implications for non-registered investors as a result of this change. However, if the underlying fund incurs a capital gain because of trading activities, this capital gain will be distributed to the segregated fund, and then ultimately allocated to the members invested in the fund based on their unit holdings. All of the trading activities in the underlying fund will be combined for the year, as they do with all other segregated funds.
The investment management fees for the fund will also decrease.
It’s a good idea to review the investment options available in your plan to ensure they continue to meet your plan members’ needs.
Based in Boston, Massachusetts, Wellington traces its history back to 1928. Today, Wellington is one of the largest asset managers in the world, with an array of strategies across every major fixed income sector and geography. Wellington is a private partnership with a singular focus on investment management.
- US$1.3 trillion in total client assets under management
- 750+ investment professionals
- US$404 billion in fixed income assets under management
- 243 dedicated fixed income professionals
Information presented above is for Wellington Management Group of companies as at December 31, 2018, the parent company of the sub-advisor, Wellington Management Canada ULC.
Please contact your Group Retirement Services representative.
*SLGI does not guarantee that any fund will achieve the target return or volatility target. Investors’ capital is always at risk. Performance targets are gross of all fees and expenses. If SLGI reflects all fees and expenses, the performance target would be lower.