Fiera U.S. Equity Segregated Fund - investment compliance breach

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. It is established as a segregated fund under the Insurance Companies Act (Canada).

Fiera Capital (Fiera) reported an investment compliance breach in the Fiera U.S. Equity Fund (the Fund) from July 3, 2023 to July 25, 2023. The Fund exceeded the maximum exposure limit of 10% to a single issuer during this period. An initial position in Microsoft was established at below 10% of the Fund at the time of purchase, but the market rally in July pushed the holding in Microsoft to a peak of 10.55% over a period of three weeks.

Fiera initially considered the breach not to be material and therefore didn’t report it. The breach later became material due to changing market conditions. However, the investment team and trading desk failed to recognize the need to sell down the Fund’s holdings in Microsoft, as the market adjusted.

Subsequently, Fiera implemented additional controls within the Chief Investment Officer (CIO) and Compliance teams to ensure more timely action in the future.

Sun Life GRS Investment Solutions’ view

Although the breach was limited to a 0.55% excess weight in Microsoft, we have concerns that the investment team and trading desk overlooked the need to reduce the position in the stock, as the market adjusted. The Fund is sub-advised by PineStone, an investment management firm that formed in 2021. Fiera is responsible for trading and identification of compliance breaches and PineStone is responsible for resolving the issue. We are comforted that additional controls have now been established to reduce the likelihood of future breaches of a similar nature.

We will provide further updates as needed.

Questions?

Please contact your Sun Life Group Retirement Services representative.