Invesco Canadian Segregated Fund closure and asset transfer
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).
Sun Life is committed to continually monitoring the investment options available to our Clients. Enhancing our Core investment platform by adding and removing funds is one of the ways that we deliver on this service commitment.
Sun Life will close the Invesco Canadian Segregated Fund (“discontinued fund”) on July 24, 2020.
We have decided to close the fund because we have lost long-term confidence in Invesco’s capabilities in Canadian Equities. Here are some of our concerns:
- Ian Hardacre, who was the lead Portfolio Manager of the Invesco Canadian Fund, left the firm in January 2016. At the time of Mr. Hardacre’s departure, Invesco stated that he had been permitted to run the strategy with excessive concentration of risk, which led to severe underperformance. The lack of organizational oversight of the strategy reduced our confidence in the Canadian equity strategies at Invesco. The current lead Portfolio Manager is Alan Mannik. Clayton Zacharias and Mark Uptigrove support him. The fund’s benchmark and constraints remain the same. However, there have been considerable changes to the holdings and a reduction in the risk posture of the fund since the transition.
- In addition to the lead Canadian Equity Portfolio Manager departure, there has been significant turnover in senior investment personnel across funds and asset classes at Invesco over the past several years.
- The departure of Mr. Hardacre as well as poor performance has seen assets under management in the strategy drop from $2.7 billion to under $1 billion over the past few years. Managing the cash flows will continue to be a distraction for the management team.
Sun Life had placed this strategy on Suggested for Removal in Q2 2018, following the organizational turnover and reduction in assets under management. Invesco Canadian has underperformed its benchmark by 4.4% on a 5-year annualized basis.
Action may be required
Sun Life will transfer the money in the discontinued fund to the PH&N Canadian Equity Value Segregated Fund (“replacement fund”) on July 24, 2020. The transfer will happen unless we explicitly receive different instructions from plan sponsors currently offering the discontinued fund (see next paragraph). The replacement fund has the same investment style (Value) as the discontinued fund.
You may want to transfer your plan’s assets into a different fund already available within your lineup. In that case, you will need to make this selection and inform Sun Life of your decision by June 26, 2020. If you are satisfied with the replacement fund suggested, you don’t have to take any action at this time.
Your plan may not currently offer the replacement fund. In that situation, Sun Life will automatically add the replacement fund to your lineup before the asset transfer occurs.
How will this affect your members?
On July 24, 2020, we will automatically transfer any assets remaining in – and any future contributions directed to – the discontinued fund to the replacement fund. When the changes are implemented, plan members will see a sale of the discontinued fund and the purchase of the replacement fund reflected in their accounts. This change will not result in a taxable capital gain or loss for plan members if their money is invested in a registered product.
Plan members with money in a non-registered product will likely experience a capital gain or loss when we transfer the money to the replacement fund. The members must report capital gains in the year the transfer occurs. Plan members can move their money at any time before the transfer automatically takes place on July 24, 2020.
We will provide communications to your members that include details about:
- the discontinued fund’s closure,
- the replacement fund, and
- what will happen to their money on the date of closure.
If you wish to have us provide a custom message to your members, please contact your Group Retirement Services representative by June 26, 2020.
About the replacement fund
The PH&N Canadian Equity Value Segregated Fund seeks to provide long-term capital appreciation. It invests in companies whose equity securities’ prices are lower than their true value. The investment team employs fundamental analysis to assess the companies’ businesses and potential long-term opportunities for growth. The team complements its analysis with quantitative and technical factors. The Fund holds between 35 and 75 securities. As of December 31, 2019, the Fund outperformed its benchmark by 0.6% on a 5-year annualized basis.
Phillips Hager & North Investment Management (“PH&N”) is the manager of the fund. PH&N is a division of RBC Global Asset Management Inc, an indirect, wholly-owned subsidiary of Royal Bank of Canada (RBC). PH&N has managed institutional assets since 1964. As of December 31, 2019, the firm managed C$ 115.3 billion of assets.
Please contact your Sun Life Group Retirement Services representative.