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. The Insurance Companies Act (Canada) establishes this fund as a segregated fund.
Invesco Canada Ltd. (Invesco) announced changes to the investment teams covering some of its Canadian-based equity and balanced strategies. These changes will influence how the investment teams manage Invesco Income Growth (“Income Growth”). Clayton Zacharias will continue as lead portfolio manager on the strategy. However, Invesco announced the following changes to supporting team members:
- Mark Uptigrove, a supporting portfolio manager who focused on U.S. mid-small cap exposure, left the firm;
- Ryan Irving, a portfolio manager who focused on Canadian equities, left the firm;
- Brian Tidd, senior portfolio manager, and David Pirie, portfolio manager with a focus on Canadian equities, joined the team and give aid on equities.
As part of the changes, Rob Mikalachki, CIO for Invesco Canada, left the firm. Kevin Cronin, Head of Equity Investments, replaced Mikalachki as CIO.
Rationale for Changes
These changes are part of a global effort by Invesco to combine strategies where there is overlap and to produce more efficiencies. Invesco has identified what it believes to be the top investment teams across a number of asset classes. They have mapped assets to these teams from other teams and strategies. Invesco’s acquisition of OppenheimerFunds was a cause in the reorganization. OppenheimerFunds expands Invesco’s set of strategies and capabilities in an environment of industry-wide fee compression pressures.
Invesco has been under pressure from an activist investor, Trian Fund Management, to gain more asset scale and realize more efficiencies. Trian is attempting to arrange a merger between Invesco and another firm, Janus Henderson. Invesco has stated that they planned these changes in Q2 prior to Trian building an ownership position in Invesco.
Sun Life’s GRS Investment Solutions team met with Invesco in Q4 2020 to discuss the changes. Invesco Canada is working to break down the “silos” between investment teams. The Income Growth Canadian equity team remains at five members after the changes. Tidd and Pirie are skilled investors and would compensate for the departures of Uptigrove and Irving. We do not expect any major changes to Income Growth’s investment strategy.
We do have some concern about the research coverage of non-Canadian stocks by the Canadian equity team. Twenty-five percent of the total portfolio is benchmarked to the MSCI World Index. The Canadian equity team are generalists, researching stocks in sectors and regions of their choice. While the entire team has familiarity with some foreign stocks, none are specialists in this broad asset class. Invesco Canada has foreign equity teams, but the Canadian equity team does not use these firm resources.
Rob Mikalachki’s departure relates to the closure of the Invesco Canadian small cap strategies.
We have placed Income Growth on our Watch List (Additional Monitoring) due to these changes. We will continue to watch Income Growth in upcoming quarters. In particular, we will see how the restructured team gels and provide further updates as necessary.
Please contact your Sun Life Group Retirement Services representative.