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).
SLC Management (the Manager) has announced the following changes to the Offering Memorandums governing the Long Corporate Bond, Long Term Private Fixed Income Plus and Canadian Commercial Mortgage Funds, effective August 1, 2023:
Long Corporate Bond: The Fund’s excess return target over the benchmark increased from 30 basis points (bps) to 50 bps, on a rolling four-year basis, gross of investment management fees and net of fund operating expenses. This change better reflects the fund’s expected excess returns, based on the historical track record of the fund. There is no change to the fund’s investment strategy or process.
Long Term Private Fixed Income Plus: The maximum foreign currency limit at time of purchase increased from 30% to 40%. This change provides the Manager with additional flexibility to take advantage of attractive loan opportunities outside of Canada. The Manager will continue to hedge foreign currency exposure Aback to the Canadian Dollar.
Canadian Commercial Mortgage: The maximum allocation to Industrial property types increased from 45% to 55%. This change provides the Manager with additional flexibility to take advantage of opportunities in the Industrial sector.
In addition, the Manager has removed the 10% limit on participation structures. Participation structures represent a contractual agreement whereby the Fund may purchase an interest in a commercial mortgage from Sun Life without assuming the role of registered lender. In the Canadian mortgage market, participations involve having a single lender of record on a mortgage title (such as Sun Life) and the lender of record will then sell an interest in the mortgage debt to the Fund. The Fund assumes effectively the same legal rights and interest in the debt as it would have otherwise in a co-lending structure.
With participation structures widely accepted in the Canadian mortgage market, the removal of this limit gives the Manager additional flexibility to invest by way of either co-lending or participation structures. This flexibility will allow for potentially enhanced diversification, reduced investment costs and greater efficiencies.
GRS Investment Solutions View:
We don’t have any concerns with these changes. Diversification opportunities continue to evolve in fixed income markets, and these changes provide the Manager with additional flexibility to participate.
We’ll continue to monitor the funds’ investments and performance, but we do not anticipate any change to risks associated with investing in these funds.
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.
