Sun Life Sentry Value 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 Sun Life Sentry Value Segregated Fund (“discontinued fund”) on June 5, 2020. Sun Life Global Investments (“SLGI”) is the manager of the Fund with Sentry Investments Inc. (“Sentry”) acting as the sub-advisor.
We have decided to close the discontinued fund because we have lost long-term confidence in Sentry’s capabilities in Canadian Equities. Here are some of our concerns:
- Portfolio manager changes, specifically the termination of Michael Simpson (the former lead portfolio manager of the Sentry Value fund) in September 2019. This was followed by the appointment of Aubrey Hearn and Bryan Brown as the new portfolio managers. We have some concern with the level of portfolio management experience in Canadian equities. That’s because the new team has more experience with U.S. stock research and portfolio management. The new PM team also intends to increase US exposure from 10% under Simpson’s management to around 49%, which is the maximum allocation under the fund’s investment guidelines.
- Significant changes and turmoil over the last several years, including:
- the departure of Chief Investment Officer (CIO) Dennis Mitchell in 2015,
- the Ontario Securities Commission’s investigation and the related departure of CEO Sean Driscoll in 2017, and
- the firm’s acquisition by CI Financial Corp. in 2017.
SLGI has placed this strategy on Watch since November 2019 following Simpson’s departure. GRS Investment Solutions team had also designated the strategy as Suggested For Removal in December 2019.
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 June 5, 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. We expect the investment management fees for the replacement fund will be the same, or lower, than those for 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 May 8, 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 June 5, 2020, we will automatically transfer to the replacement fund any assets remaining in – and any future contributions directed to – the discontinued fund. When the changes take effect, 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 the money is transferred 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 June 5, 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 May 8, 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.