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 under the Insurance Companies Act (Canada).

In April 2024, BlackRock Asset Management Canada Ltd. (BlackRock) changed the team responsible for managing BlackRock’s Balanced Index Funds (Target Risk Funds). The Target Risk Funds include the - BlackRock Conservative Balanced Index Fund, BlackRock Moderate Balanced Index Fund and BlackRock Aggressive Balanced Index Fund.

Until April 1, 2024, the Target Risk Funds have been managed by BlackRock’s Retirement Solutions team (RS). Going forward, the Target Risk Funds will be managed by BlackRock’s Model Portfolio Solutions Team (MPS). Both RS and MPS are part of BlackRock’s Multi-Asset Strategies & Solutions group (MASS). MASS is responsible for constructing and managing asset allocation strategies and whole portfolio solutions.

BlackRock indicated that the change was due to a lack of resources to manage the Target Risk Funds in the RS team. The RS team manages the Blackrock LifePath funds, which have assets under management of $55 billion, in comparison to $3 billion for the Target Risk Funds. BlackRock stated that there are no changes to the investment objectives, strategy or investment processes of the Target Risk Funds as a result of the change in portfolio management team.

The MPS team is part of a bigger group known as the Multi-Asset Strategies & Solutions group. MPS develops and manages the strategic and tactical asset allocation models using Exchange Traded Funds (ETFs) and active funds. The MPS team manages US $110B and has 11 staff members.

Christopher Downing, PhD, Managing Director, leads an eight-person team within MPS and is the new Lead PM for the Target Risk funds. Downing has been part of MPS since its inception in 2011 and has 16 years of tenure at BlackRock. He has held roles focused on investment research and product development across various teams at BlackRock. Ibrahim Gassembe, Director, supports Downing in a Co-PM role. Downing and his team are based in San Francisco. Downing reports into Lisa O’Connor, the Global Head of the MPS team.

GRS Investment Solutions View:

We met with the MPS team in April 2024 to evaluate the new PM team and better understand the impact of the change. The change makes sense since MPS has a focus on balanced and target risk mandates. The new team is well staffed and has experience managing multi-asset portfolios. The Balanced Risk Funds are much smaller than LifePath and have not materially grown in recent years – and would’ve been a lesser priority for RS. Given the lack of growth, BlackRock may look to review their viability at some point in time.

The primary responsibilities of the PM team are to set the strategic asset allocation, monitor risk and performance, and rebalance the assets as necessary. All asset class exposures are implemented through passively managed funds (index pooled funds or ETFs). The Target Risk Funds’ static asset mix and passive management approach are fairly straightforward to manage. The allocations for the Target Risk funds are based upon long-term capital markets expectations and have not changed in many years. The new MPS team has indicated that they would be reviewing the allocation to Canadian inflation-linked bonds (Real Return bonds), since the Canadian government has announced it will no longer issue new bonds of this kind. Otherwise, there are no immediate plans for changes to the asset mix of the Target Risk Funds.

As part of our ongoing due diligence, we note that the Sun Life segregated fund assets held in the Target Risk Funds represent, in aggregate, 78% of the underlying BlackRock Target Risk Fund assets. While this is not cause for concern given the large asset base in the BlackRock Target Risk Funds (nearly $3B as of March 31, 2024), we are monitoring the asset levels, and any changes, over time.

We have placed the BlackRock Target Risk Funds on our Watch List under ‘Additional Monitoring’ (the least severe category). We will monitor the new team and review changes to the asset mixes when they occur. We will communicate significant updates as appropriate.

Do you have to take any action?

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

Questions?

Please contact your Sun Life Group Retirement Services representative.