CI Canadian Investment Portfolio Management Change
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 is established as a segregated fund in accordance with the Insurance Companies Act (Canada).
On July 22, 2019, CI informed Sun Life that the firm terminated the lead portfolio manager of the CI Canadian Investment Segregated Fund, Ryan Fitzgerald. The change was effective July 31, 2019. CI decided to replace Mr. Fitzgerald with Peter Hofstra. The sub-advisor for the Fund remains Harbour Advisors (“Harbour”). Peter Hofstra joined Harbour in 2017. He has over 15 years of investment experience managing Canadian and U.S. equities with a fundamental, value style.
Rationale for changes
The CI Multi-Asset Management team (“CI MAM”) conducts ongoing monitoring of their respective investment managers to ensure they maintain their stated investment mandate and style. CI MAM noticed an ongoing trend of a style drift for the Fund (from value to growth), coupled with performance results which were inconsistent with the Fund’s stated objective and style. As a result, CI terminated Mr. Fitzgerald.
CI appointed Mr. Hofstra given his more disciplined value investment philosophy and approach. More specifically, the firm expects the following differences for the Fund:
- Less cash within the portfolio (i.e. less than 10% compared to the previous limit of 20-30%);
- Less stocks in the Fund with higher conviction ideas.
There is no change to the Fund’s overall investment objective.
Sun Life commentary
CI had only appointed Mr. Fitzgerald as the lead portfolio manager for CI Canadian Investment Fund in 2017. That was when Harbour assumed management of the strategy from Tetrem Capital Management. Mr. Fitzgerald’s termination within a short period of time suggests that CI’s decision in 2017 was sub-optimal.
Like many of CI’s strategies, the CI Canadian Investment relies heavily on the lead portfolio manager to make all of the key investment decisions within the Fund. This approach means that there is a heightened level of key person risk and makes the Fund subject to significant changes when the lead manager is replaced. This second major change in portfolio management since 2017 decreases our confidence in CI’s ability to put in place a stable, consistent team and approach for this strategy.
We’re also concerned with the fact that CI Canadian Investment strategy assets under management overall have declined by 35% from $2.41 billion to $1.57 billion since the beginning of 2018. Moreover, this latest change may lead to more redemptions.
During our February 2019 governance meeting with CI, they indicated that a significant fund consolidation would occur in 2019. This will impact Harbour strategies and staff. In addition to Mr. Fitzgerald, three other senior investment professionals have departed recently from Harbour. Two associate portfolio managers, namely Gurveer Kehal and Chris Lichtenheldt, were also terminated for style-related reasons. Lastly, the firm terminated Roger Mortimer, Senior Portfolio Manager, and reassigned his strategies to other CI managers.
For these reasons, the Sun Life Investment Solutions team has placed the CI Canadian Investment fund on the Watch List, under the Suggested For Removal category. Sun Life’s governance activities for this fund is expected to end within one year. Clients should consider removing or replacing this fund with another fund option. We’ll continue to communicate with plan sponsors who currently offer this fund in their plan about their options over the next year.
Please contact your Sun Life Group Retirement Services representative.