Sub-advisor changes
SLGI will make a change to the international equity funds in Granite TDFs in July 2023. Specifically, SLGI will replace the Sun Life MFS International Value fund with the Acadian International Equity fund. The Acadian fund is managed in a quantitative value style. SLGI will implement the transition to the Acadian fund in stages until Q4 2023. At the end of the transition, the Acadian fund will have a one-third weighting in International Equity, along with the current funds Sun Life JP Morgan International Equity and Sun Life MFS International Opportunities (Growth). SLGI believes that the change to Acadian will result in increased manager diversification and a unique representation of value-style investing.
Sun Life GRS Investment Solutions View
We met with SLGI in early May 2023 to discuss these enhancements. The increased allocations to equity reflect a growing emphasis on the need to continue to grow savings in an investor’s retirement that may span three decades. SLGI stress-tested the improved average outcomes of higher equity levels against the risks of significant market downturns in later years. SLGI modeling determined that plan members would be better off with higher equity levels in more than 95% of potential scenarios at retirement (looking at 5- and 10- year returns). Higher equity levels are consistent with changes that other target date fund managers have made in recent years. The addition of the Conservative and Aggressive Retirement funds will provide plan members in Granite with the option to fine tune their preferred equity levels at retirement.
We see the potential benefits of the new alternatives asset classes. We believe real assets, like direct real estate and direct infrastructure, can provide valuable diversification to equities and bonds. They can also provide returns that are positively correlated with inflation. (For more information on the role that real assets can play in a capital accumulation plan, please refer to our recent article here). Liquid alternatives are macroeconomic systematic trend-following strategies that have no fixed asset class exposures. SLGI expects that they will have a negative correlation to major asset classes and provide diversification.
We are comfortable with SLGI’s enhancements. We will be tracking their implementation over the next 18 months and we will provide further updates as necessary.
SLGI Webcast
SLGI will be hosting a webcast on the enhancements to Granite TDF featuring Chief Investment Officer Chhad Aul, Portfolio Manager Jason Zhang, and Head of Responsible Investing and Manager Research, Jenifer Rush. A replay of the webcast can be found here.
Do you have to take any action?
This update is for your information only. You don’t need to take any action. If you currently offer the Granite Multi-Risk Target Date series of funds, the Conservative and Aggressive Retirement Funds will automatically be added to your line-up in September 2023.
Questions?
Please contact your Sun Life Group Retirement Services representative.