October 28, 2019

PH&N Balanced Pension Trust Asset Mix Enhancements

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 funds listed below, which are established as segregated funds in accordance with the Insurance Companies Act (Canada).

Starting this fall, PH&N will implement changes to the target asset mix of the PH&N Balanced Pension Trust Segregated Fund. PH&N's changes seek to provide Clients with increased diversification across asset classes, geography and strategies. PH&N also aims to better utilize RBC Global Asset Management's global investment capabilities.

Asset Mix Enhancements

  • Including global bonds within the Fund's fixed income allocation to increase diversification and broaden the opportunity set.
  • Adding a small position in the RBC Canadian Core Real Estate Fund. This provides Clients with access to a core income-producing direct real estate offering that's comprised of high-quality properties diversified by geography, sector, and industry; sourced from cash and fixed income allocations.
  • Rebalancing the overall equity exposure to reduce the Canadian equity allocation and increase the global equity allocation.  This way, there's access to a larger opportunity set abroad. It also reduces home country bias within the Fund.
  • Splitting the Canadian equity allocation between three funds:
    • the existing Canadian Equity underlying fund,
    • new allocations to the PH&N Canadian Equity Value Fund, and
    • the PH&N Small Float Fund.

This change establishes broader diversification, using the same multi-strategy approach PH&N employs within the Fund's global equity allocation.

Summary of Changes
Asset Class Old New
Cash 2% 1%
Fixed Income 38% 36%
PH&N Bond Fund 38% 29.5%
RBC High Yield Bond Fund 0% 1.5%
RBC Global Bond Fund - 5%
Canadian Equities 30% 20%
PH&N Canadian Equity Underlying Fund 30% 9%
PH&N Canadian Equity Value Fund - 9%
PH&N Small Float Fund - 2%
Global Equities 30% 40%
RBC Global Equity Focus Fund 13% 21.6%
RBC QUBE Global Equity Fund 13% 14.4%
RBC Emerging Markets Equity Fund 4% 4%
Direct Real Estate - 3%
RBC Canadian Core Real Estate Fund - 3%
Total 100% 100%

Benchmark Changes

Because of the changes to the fund, the benchmark will also be altered to reflect asset mix changes. The new benchmark weights will be:

  • 1% FTSE Canada 30 Day T Bill
  • 39% FTSE Canada Bond Universe Index
  • 20% S&P/TSX Capped Composite TR Index
  • 36% MSCI World TR Net Index (CAD$)
  • 4% MSCI Emerging Markets TR Index (CAD$)

Implementation Timeline

The re-weighting of equity and fixed income strategies will happen gradually at the end of the third quarter. Afterwards, on October 31, 2019, PH&N will add an allocation to direct real estate upon the initial closing of the RBC Canadian Core Real Estate Fund. Depending on demand for the first tranche of the real estate fund, PH&N may not achieve the 3% desired target initially. But they will build the allocation up over subsequent tranches.

Sun Life's Investment Solutions team is comfortable with these changes and believes they will have an incremental positive impact to the return and risk of the fund.

Please contact your Sun Life Group Retirement Services representative.

Copies of the revised SIP&Ps are available on Sun Life's Plan Sponsor Services website at sunlife.ca/sponsor.  When logged into the website, under the Administration and reporting tab, select Group Retirement Services, then on the top navigation menu select Investments>> Governance reports.