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).

MFS recently announced changes to the investment process and portfolio management team for the MFS LifePlan target date series (Target Date) and three MFS Asset Allocation funds (Target Risk).

Adding tactical changes to the asset allocation

Effective September 29, 2023, the MFS Target Date and Target Risk funds will have the discretion to tactically change the asset class allocations (equity, bonds, cash) relative to their long-term targets. Currently, the MFS Target Date and Target Risk funds regularly rebalance to their long-term strategic asset class targets.

The long-term strategic asset allocations for the MFS Target Date and Target Risk funds are based upon MFS’ analysis of the historical performance of the asset classes. MFS also generates forward-looking return projections through analysis of economic and market conditions and asset class valuations. MFS will use these return projections to tactically change the asset mix in the short-term, with the objective of improving performance.

MFS will constrain the tactical deviations to a band of +/- 10% from the long-term strategic allocation. For example, the LifePlan 2035 fund currently has a long-term strategic allocation of 67.3% to Equity and 32.7% to Bonds. Under the new tactical approach, MFS could allocate between 57.3% and 77.3% to Equity and between 22.7% and 42.7% to Bonds.

MFS also announced other changes related to the addition of tactical capabilities:

  • MFS will add the MFS Canadian Money Market Fund as an available underlying fund in the Target Date and Target Risk funds, in the event that the Portfolio Manager team decides to make an allocation to cash.
  • MFS will increase the ending equity weight of the LifePlan glidepath from 27% to 29%. Accordingly, MFS will increase equity levels in the LifePlan Retiree Fund from 27% to 29%.

Additions to the Portfolio Management team

Effective August 28, 2023, Ben Nastou and Erich Shigley were added to the Portfolio Management (PM) team for the MFS Target Date and Target Risk funds. They will share responsibility for the funds with current PM’s Joe Flaherty and Natalie Shapiro. Nastou joined MFS in 2001 and is a co-Director of the Quantitative Solutions team that oversees Target Date and Target Risk. Shigley joined MFS in 2013 and serves as a quantitative research analyst and a member of the PM team for the MFS Global Alternative strategy and the MFS Global Tactical Allocation strategy. He has 22 total years of investment experience.

GRS Investment Solutions View:

We have no concerns with MFS’s decision to introduce a tactical element to its management of their Target Date and Target Risk funds. Most multi-asset class funds (target date, target risk, balanced) have the discretion to tactically change their asset class allocations. MFS has significant experience developing capital markets expectations and its Quantitative Solutions team has the resources and skills to apply this information to tactical asset allocation decisions.

LifePlan has a conservative glidepath (target level of equities over time) in comparison to other target date series. The small increase in the ending equity weight (27% to 29%) isn’t a significant change to that conservatism. The tactical discretion and its wide permissible range (+/- 10%), however, could result in more meaningful changes to equity levels at times. As with other funds with tactical components, we will monitor the size and performance impact of the tactical deviations to the MFS Target Date and Target Risk funds.

The addition of Ben Nastou and Erich Shigley to the current PM team of Joe Flaherty and Natalie Shapiro is a minor change that will provide more depth and continuity. Both Nastou and Shigley are experienced. The PM team is responsible for strategic and tactical asset allocation decisions, as well as the selection of the underlying funds.

We will provide further updates on these changes if needed.

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.