BGO Canadian Real Estate Plus and BGO Prime Canadian Benchmark 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 funds listed below. They are established as segregated funds under the Insurance Companies Act (Canada).

Effective October 1, 2024, BentallGreenOak (BGO) will implement a benchmark change for the Canadian Real Estate Plus Fund (REP Fund) and BGO Prime Canadian Property Fund (Prime Fund). The REP Fund invests in the Prime Fund as the direct commercial real estate component.

The REP Fund is available on Sun Life’s core investment platform, for Capital Accumulation Plans (CAPs) as well as Defined Benefit plans. The Prime Fund is available on our Defined Benefit platform and for custom CAP portfolios which can invest a small portion of assets in non-daily valued and traded funds.

BGO will update the benchmark for the Prime Fund from CPI+4% (an inflation-based benchmark) to the MSCI/REALPAC Canada Quarterly Property Fund Index (MSCI/REALPAC).

The Statement of Investment Policies and Goals (SIP&G) for the Prime Fund already lists the MSCI/REALPAC as a secondary performance objective, in addition to CPI + 4%. So, there will be no change to the SIP&G for this fund.  It is important to note that for the Prime Fund, while there is no SIP&G change, the benchmark returns will change going forward from the inflation-based benchmark to the MSCI/REALPAC benchmark.

BGO will update the benchmark for the REP Fund from: 70% CPI+4% + 20% Average Yield on Government of Canada 1-month T-bills + 10% S&P/TSX Capped Canadian Real Estate Income Trust (REIT) Index to: 70% MSCI/REALPAC + 20% Average Yield on Government of Canada 1-month T-bills + 10% S&P/TSX Capped Canadian Real Estate Income Trust (REIT) Index. BGO has updated/will update the SIP&G for the REP Fund to reflect the new benchmark.

The new benchmarks will apply on a go-forward basis starting on October 1, 2024. Both funds’ benchmark returns will therefore show a blend of old CPI-based returns until September 30, 2024, and new MSCI/REALPAC based benchmark returns after October 1, 2024.

BGO believes that the MSCI/REALPAC represents a more appropriate benchmark for the REP Fund's allocation to the Prime Fund. The MSCI/REALPAC tracks the performance of core, open-ended, unlisted, Canadian real estate funds.

Sun Life GRS Investment Solutions team’s view

The GRS Investment Solutions Team doesn’t have concerns with this change. There are no changes to the investment process as part of this benchmark change. The Prime Fund already uses the MSCI PFI benchmark in its SIP&G. The purpose of a benchmark is to act as a reasonable measure for performance comparisons. 

While it was historically fair to expect the Fund to achieve its CPI +4% benchmark component, high inflation can increase the absolute return target to a level that may be unattainable with reasonable risk. We have seen a few other managers on the platform change from inflation-based benchmarks to other benchmarks over the last 12-28 months.

The funds’ objective is to provide stable income returns primarily through investment in Prime Canadian, a real estate fund that invests in a diversified mix of office, industrial, retail, multi-family, land and other income producing properties located in Canada. We believe the MSCI/REALPAC benchmark provides a reasonable return target on a go-forward basis. 

Do you have to take any action?

You and your members don’t have to take any action as a result of these changes.

A copy of the changed SIP&P is available on Sun Life’s Plan Sponsor Services website at sunlife.ca/sponsor.  When logged into the website, under the Administration and reporting tab, choose Group Retirement Services. Then, on the top navigation menu, choose Investments>> Governance reports.

Questions?

Please contact your Sun Life Group Retirement Services representative*.

*In Quebec, Group annuity plans advisor.