Action may be required - BGO Canadian Real Estate Plus Segregated Fund to only accept Registered (non-taxable) money
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).
Sun Life designated the BGO Canadian Real Estate Plus Segregated Fund (“BGO Plus Fund”) as accepting Registered Assets (non-taxable) only effective December 31, 2024. This means that the BGO Plus Fund is no longer available for addition to Non-Registered (taxable) and Tax-Free Savings Account (TFSA) plans for plan sponsors who don’t already offer it in their line-ups. Sun Life will also transfer existing Non-Registered money from the BGO Plus Fund on July 24 2025.
We are limiting the BGO Plus Fund to Registered (non-taxable) assets only, in order to prevent tax reporting issues for members with Non-Registered assets (including TFSA plans).
The BGO Plus Fund’s underlying investments have a Limited Partnership (LP) structure. The LP structure makes it difficult to issue correct tax slips for members with Non-Registered assets within the required timeframes. Sun Life requires the final tax information from investment managers by the end of January each year, so that we can provide the tax slips to members in February or March.
Many managers who offer LP structures provide only an estimated T3 slip (RL-16 for Quebec residents) in January and can’t provide the final T3 tax slip amounts until later in the first quarter. Therefore, the tax slips that Sun Life provides to the members with Non-Registered assets also reflect estimated amounts. The tax amount in the final T3 slip may be different from the amount in the estimated T3 slip due to various reasons. If this happens, Sun Life has to revise the tax slips for the members with Non-Registered assets and members have to amend their tax return.
Why does this change affect TFSA plans?
A TFSA is considered a Registered product from the Canadian tax perspective. However, a TFSA is viewed as a Non-Registered product by the US tax authority, Internal Revenue Service (IRS), because it’s not included in the US-Canada tax treaty. The IRS requires foreign investors (including Sun Life and other Canadian recordkeepers) to report tax on Non-Registered products. The tax reporting becomes challenging when we can’t get the final tax information in timely manner. As such, Sun Life and other Canadian recordkeepers classify TFSA as a Non-Registered product to avoid the tax reporting issue with the IRS.
How will this change affect your Non-Registered or TFSA plan(s)?
On July 24, 2025, we’ll transfer any money in – and any future contributions directed to - the BGO Plus Fund to the MFS Global REIT Segregated Fund (“replacement fund”). The investment management fees for the replacement fund will be the same, or lower, than those for the BGO Plus Fund. Please note that the replacement fund’s performance history (and potentially going forward) is different than the BGO Plus Fund, given its structure. Please read the section below (Important) for other considerations.
The replacement fund provides exposure to real estate through publicly listed Real Estate Investment Trusts (REITs) (as opposed to private assets which the BGO Plus Fund invests in). The replacement fund also has broader geographical exposures than the BGO Plus Fund. The replacement fund has exposures to the US, Asia Pacific, UK/Continental Europe and Canada, while the BGO Plus Fund only invests in Canada.
Your plan(s) may not currently offer the replacement fund in the lineup. In that situation, we’ll automatically add the replacement fund to the lineup before the asset transfer occurs.
If you also offer the BGO Plus Fund in Registered plan(s), this change won’t affect your Registered plan(s).
Action may be required
The transfer from BGO Plus to MFS Global REIT will happen, unless we explicitly receive different instructions from you (see next paragraph).
You may want to transfer the Non-Registered and TFSA plans money in the BGO Plus Fund into either:
- another fund(s) currently in your line-up, or
- another real assets fund from the Core investment platform
- a fund on the Core investment platform which better suits your plan’s needs.
If you wish to select a different replacement fund(s) and/or asset transfer date, you need to make this selection and inform Sun Life of your decision by May 25, 2025.
Important – Franklin Global Real Assets Fund as another option
If you want to continue to offer a fund with exposure to direct real assets, including real estate (similar to the current BGO Plus Fund), you may instead consider the Franklin Global Real Assets Fund (FGRAF) instead of the MFS Global REIT fund, as a replacement for the BGO Plus Fund. From a historical performance perspective (and potentially going forward), the FGRAF has (and we anticipate that it will have) a more similar performance/risk profile to the BGO Plus Fund, given it invests in direct real assets. Like BGO Plus, FGRAF will require plan sponsors to review and agree to additional operational requirements, highlighting the risks associated with investing in direct (non-daily valued/traded) funds.
Please note that the FGRAF also has underlying investments with an LP structure. While the manager of the Fund, Franklin Templeton, hasn’t made any revisions to the T3 slip amounts to date, it’s possible that T3 revisions could occur in the future. This is why we opted for the default (automatic) replacement option to be the MFS Global REIT fund, which invests in listed securities.
You don’t have to take any action if you’re satisfied with the automatic replacement fund and the transaction date specified above.
How will this affect your members?
On July 24, 2025, we’ll automatically transfer any Non-Registered and TFSA plans’ money remaining in – and any future contributions directed to – the BGO Plus Fund to the replacement fund. When the change happens, your members will see a sale of the BGO Plus Fund and the purchase of the replacement fund in their account. These transactions may result in a taxable capital gain or loss for your members invested in a Non-Registered plan.
These transactions, however, will not have a tax implication for your members in a TFSA.
We’ll send an email communication to members who currently hold this fund in Non-Registered plans (including TFSAs) on or around June 16, 2025. Here is a copy for your reference.
Plan members can also move their money to any other funds offered in the plan. They can do so at any time before or after the transfer automatically takes place on July 24, 2025.
Sun Life will provide the applicable tax slip(s) in February or March 2026. The tax slip(s) will reflect all income from your members’ Non-Registered investments.
For more information on how capital gains can occur in segregated funds within Non-Registered plans, please read the article. Members can find their ACB on Plan Member Services website mysunlife.ca and selecting Check on Account > Balances.
About the MFS Global Real Estate Segregated Fund (automatic replacement fund)
The MFS Global REITs Fund invests primarily in Real Estate Income Trusts (REITs). The portfolio management team approach real estate as a hybrid asset class that must be considered from equity, fixed income and commercial real estate perspectives. They place emphasis on both durable current income and durable free cashflow growth as the key drivers of capital appreciation. The Fund is a concentrated portfolio that invests in 45-65 holdings.
The benchmark for this fund is FTSE EPRA/NAREIT Developed Real Estate (CAD).
More information on the MFS Global REIT Fund can be found in the launch announcement.
About the Franklin Global Real Assets Fund (FGRAF) – (Alternate replacement)
FGRAF invests in both private and publicly-traded real assets, including real estate, infrastructure, and agriculture, timber and water. The Fund provides a globally diversified exposure across asset class, sector, geography, and revenue sources.
The benchmark for this fund is 5-year rolling average Canadian Total CPI + 4%.
Performance comparison
For the five-year period ending December 31, 2024, the funds’ annualized performance was as follows:
- BGO Plus: 3.4%
- MFS Global REIT: 3.9%
- Franklin Global Real Assets: 4.0%
Questions?
Please contact your Sun Life Group Retirement Services representative*.
*In Quebec, registered as a Group annuity plans advisor.