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 a segregated funds under the Insurance Companies Act (Canada).

Annually, SLGI Asset Management (SLGI)’s Multi-Asset Solutions Team reviews the long-term strategic allocations in the Sun Life Granite Target Risk Series of Segregated Funds (Granite TRFs). In December 2023, SLGI announced changes to the Granite TRFs.

We've outlined the changes below. 

Increased strategic equity allocation in some funds:

SLGI has increased the strategic equity allocations in the Sun Life Granite Conservative Fund (“Conservative Fund”) and the Sun Life Granite Moderate Fund (“Moderate Fund”). The increases in equity reflect the Multi-Asset Solutions Team’s updated views on the return potential and risk of the major asset classes. SLGI believes that higher equity levels in the more conservative funds will improve the risk-return profile of these funds and align with similar mandates and expectations across the industry.

Strategic equity allocation weight (%)
  Conservative Moderate Balanced Balanced Growth Aggressive
Previous 27 47 60 70 80
New 35 50 60 70 80
Change +8 +3 No Change No Change No Change

Changes to underlying asset classes

SLGI has also made several small changes to the underlying asset classes of the Granite TRFs. The most significant of these are:

  1. A decrease to U.S. corporate bonds across the Granite TRFs (except Aggressive).
  2. An increase to emerging markets equity across all Granite TRFs.
  3. An increase to emerging markets bond across all Granite TRFs.
  4. An increase to listed real assets across the Granite TRFs (except Aggressive).
  5. A decrease to small and mid-cap global equity across all Granite TRFs.

All changes to the target asset allocation are provided in the table below:

  Conservative Moderate Balanced Balanced Growth Aggressive
Asset Class: Fixed Income New Old Change New Old Change New Old Change New Old Change New Old Change
Cash 5.0 5.0 0.0 5.0 5.0 0.0 2.5 2.5 0.0 2.5 2.5 0.0 2.5 2.5 0.0
Canadian Bonds 31.2 34.4 -3.2 23.4 23.2 0.2 19.0 17.4 1.6 13.9 11.9 2.0 7.4 6.6 0.8
U.S. Corporate Bonds 16.3 22.9 -6.6 10.9 15.4 -4.5 9.5 11.6 -2.1 7.0 8.0 -1.0 4.4 4.4 0.0
High Yield Bonds 3.7 3.5 0.2 3.4 3.2 0.2 2.8 3.0 -0.2 2.1 2.8 -0.7 1.9 2.5 -0.6
EM Bonds 5.5 3.5 2.0 5.0 3.2 1.8 4.2 3.0 1.2 3.1 2.8 0.3 2.9 2.5 0.4
Global Bonds 3.2 3.8 -0.6 2.3 3.0 -0.7 2.0 2.5 -0.5 1.5 2.0 -0.5 0.9 2.5 -0.6
Asset Class: Equity New Old Change New Old Change New Old Change New Old Change New Old Change
Canadian Equity 8.4 6.6 1.8 12.6 11.5 1.1 15.0 14.6 0.4 17.5 17.0 0.5 20.1 19.4 0.7
U.S Equity 9.6 7.7 1.9 14.2 13.4 0.8 17.0 17.0 0.0 19.8 19.9 -0.1 22.8 22.7 0.1
International Equity 6.3 5.7 0.6 10.2 10.1 0.1 13.0 12.8 0.2 15.2 14.9 0.3 17.5 17.0 0.5
Global Equity 2.2 2.4 -0.2 3.2 4.2 -1.0 3.2 5.4 -2.2 3.7 6.3 -2.6 4.3 7.2 -2.9
EM Equity 3.6 1.9 1.7 4.8 3.3 1.5 5.4 4.3 1.1 6.2 5.0 1.2 7.2 5.7 1.5
Real Assets 5.0 2.6 2.4 5.0 4.6 0.4 6.4 6.0 0.4 7.5 7.0 0.5 8.0 8.0 0.0

New sub-advisor

SLGI also made a change to the international equity funds in Granite TRFs in July 2023. SLGI added the Acadian International Equity Fund. The Fund is managed in a quantitative value style. SLGI will be adding the Fund in phases through November 2024. At the same time, the MFS International Value Fund will be gradually removed from Granite TRFs. SLGI believes that Acadian will provide increased manager diversification and a unique representation of value-style investing.

With the exception of the sub-advisor change, SLGI implemented all changes to the Granite TRFs in December 2023.

Plan member communication

Sun Life will be posting a message to the plan member web site to inform plan members invested in Granite TRFs of these changes.

GRS Investment Solutions View:

We met with SLGI in January 2024 to discuss these changes.

The increase in equity in the Conservative and Moderate funds mirrors changes that SLGI is currently making to the Sun Life Granite Target Date Series of Funds. SLGI believes that moderately higher equity levels in the more conservative funds will provide a significant boost to expected returns and only a moderate increase in risk. The new target equity levels move the two funds closer to their industry peers.

For example, the equity levels in other Conservative target risk funds on our core platform range from 38% to 40% - in comparison to Granite Conservative’s new 35% target.

Changes to asset class targets underlying equity and bonds reflect SLGI’s revised market outlook in response to the new, higher interest rate environment. SLGI has reduced credit risk in the Granite TRFs, by reallocating from U.S. Corporate Bonds and High Yield Bonds to Canadian government and corporate investment grade bonds.

The global equity allocation in the Granite TRFs is focused on mid-cap equities. The reduction in the global equity allocation, therefore, reflects SLGI’s preference for large cap equities over smaller cap equities. The increase in Emerging Market Equities reflects SLGI’s improved outlook in this asset class.

We are comfortable with SLGI’s changes. We’ll track their implementation, and we will provide further updates as necessary.

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.