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 segregated fund in accordance with the Insurance Companies Act (Canada).
Sun Life will close the CI Canadian Small/Mid Cap Managed Segregated Fund (discontinued fund) on October 5, 2022. Governance will end on December 31, 2022.
The discontinued fund is On Watch due to a change in strategy from a diversified multi-manager structure to management by a more concentrated mandate managed by a single team within CI Global Asset Management. This is a new style, process and team – essentially operating as a brand-new fund from the one clients chose. For this reason, coupled with the relatively low assets and clients in the segregated fund and to streamline our offering, we are closing this fund and replacing it with the Jarislowsky Fraser Small/Mid Cap Canadian Equity Segregated Fund.
We decided to close the discontinued fund after an announcement from CI Global Asset Management (CI GAM) and resulting placement On Watch. CI GAM’s intention is to close the underlying fund and merge it into the CI Canadian Small/Mid Cap Equity Income Fund (continuing fund). The discontinued fund has not been marketed as part of Sun Life’s Core Investment Platform for a few years and was not heavily utilized by clients.
CI GAM announced the fund merger in November 2021. Security holders approved the merger on March 14, 2022, and the transaction occurred on April 8, 2022.
CI GAM announced this merger as one of several it was undertaking. It is another step in modernizing their asset management business by removing duplicative funds and streamlining their offering.
As a result of the fund merger, the following changes to the underlying fund have occurred:
- The composition of the discontinued fund has changed. It was a fund of fund structure with allocations to three underlying funds/managers. It is now a single fund holding individual securities.
- Portfolio management of the fund has changed. Alfred Lam and Marcello Holditch previously managed the discontinued fund. Co-lead Portfolio Managers of the continuing fund Aubrey Hearn, Evan Rodvang and Jack Hall now manage the discontinued fund.
- Aubrey Hearn and Jack Hall were Portfolio Managers of one of the underlying sleeves of the discontinued fund. They will continue to serve as co-portfolio managers on the continuing fund. CI GAM discontinued the other two sleeves. Picton Mahoney Asset Management (David Picton) and QV Investors (Joe Jugovic (CIO/CEO) and Ian Cooke) managed the discontinued sleeves.
- The benchmark has changed from 50% S&P/TSX Canadian SmallCap Total Return Index, 50% S&P/TSX Completion Total Return Index to 70% S&P/TSX Completion Total Return Index, 30% S&P MidCap 400 Total Return Index. This index is more reflective of the non-Canadian exposure of up to 49%.
- A change in the Investment Objective from “long term capital growth” to “consistent monthly income and capital appreciation”.
- The changes to the discontinued fund will result in a much more concentrated portfolio of 50 – 80 securities. The previous fund of fund structure typically held around 275 holdings.
About the replacement fund
The objective of the Jarislowsky Fraser Small/Mid Cap Canadian Equity Fund is to provide superior long-term performance at relatively lower risk to its peers. Jarislowsky Fraser employs a fundamental bottom-up process in a growth at a reasonable price (GARP) style. Portfolio holdings are relatively concentrated (25-30 names) with a maximum market capitalization of $10 billion. They aim to invest in quality companies primarily in non-cyclical industries that have demonstrated strong growth and leadership within their industry or niche sector. The benchmark is the S&P/TSX Small Cap Index. The replacement fund has outperformed its benchmark by 8.88% for the 5-year period ending December 31, 2021 (Replacement Fund Return: 14.62% vs. benchmark return: 5.75%).
Action may be required
On October 5, 2022, we’ll move any money in – and any future contributions directed to - the discontinued fund to the Jarislowsky Fraser Small/Mid Cap Canadian Equity Segregated Fund (“replacement fund”). The fees for the replacement fund will be the same, or lower, than those for the discontinued fund.
The transfer will happen unless we explicitly receive different instructions from you (see next paragraph).
You may want to transfer the money in the discontinued fund into either:
- a fund currently in your line-up in a similar asset class (Canadian Equity Small Cap), or
- an alternative on the Core investment platform which better suits your plan’s needs.
If you wish to select a different replacement fund and/or date of asset transfer before October 5, 2022, you need to make this selection and inform Sun Life of your decision by August 12, 2022. You don’t have to take any action if you are satisfied with the automatic replacement fund and date suggested above.
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?
When Sun Life makes the change, your members will see a sale of the discontinued fund and a purchase of the replacement fund in their account. This change will not result in a taxable capital gain or loss for members with money in a registered plan.
Plan members in a non-registered plan, will likely experience a capital gain or loss when the transfer occurs. The members must report capital gains or losses on their tax return in the year the transfer occurs. We recommend plan members talk with a tax professional for advice specific to their situation if they have money in a non-registered (taxable) plan.
They can also move their money in the discontinued fund to any other available funds offered in the plan. This can be done at any time before the transfer automatically takes place on October 5, 2022.
Please contact your Sun Life Group Retirement Services representative.