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, which is established as a segregated fund in accordance with the Insurance Companies Act (Canada).

We are thrilled to announce the addition of the BlackRock MSCI ACWI Islamic Equity Index Segregated fund (“BlackRock Shariah Fund”) to the Core investment platform. The Fund will be available for addition to your plan(s) on April 15, 2022.  At inception, the Fund will be available for Registered (non-taxable) plans only.

The BlackRock Shariah Fund will also be available in Group Choices Plans.

Shariah funds invest the assets in accordance with the Islamic principles. The addition of this fund supports Sun Life’s sustainable investment strategy and focus to offer plan sponsors and their members investment options that consider community wellness and promote diversity, equality and inclusion. We have heard from plan sponsors and members that they are looking to for investment options which are aligned with their principles.

The BlackRock Shariah Fund was recently launched and invests in units of the BlackRock CDN MSCI ACWI Islamic Equity Index pooled fund (“underlying pooled fund”). Shariah funds currently available to Canadian institutional investors are generally structured as Exchange Traded Funds (ETFs), which have some operational challenges in group plans and usually have higher operating expenses. This fund is structured as an institutional pooled fund.

The underlying pooled fund’s investment objective is to replicate the return of the MSCI ACWI Islamic Equity Index (“Index”). The Index reflects Islamic investment principles and provides diversified exposures to global equity markets.  

The Index applies screens to exclude securities based on business activities and financial ratios derived from total assets. The Index does not allow investments in:

  • Companies that are directly active in or derive more than 5% of their revenues from alcohol, tobacco, pork related products, conventional financial services, defense/weapons, gambling or adult entertainment.
  • Companies which derive significant income from interest or companies with excessive leverage.

As of February 28, 2022, the Index consists of 642 companies in large and mid capitalization segments, across 23 developed markets and 25 emerging markets.

Shariah funds share similar objectives to socially responsible investments, such as:

  • Social justice
  • Equality and inclusion
  • Being a good steward of society and environment

We also still offer the Zero Interest Account on our platform. The Zero Interest Account’s investment objective is capital preservation and it isn’t designed to provide any return. It’s best suited for investors seeking preservation of capital while maintaining liquidity. The Zero Interest Account meets only one of many Shariah principles (prohibition of interest). If you already offer the Zero Interest Account in your plan, you can choose to replace it with the BlackRock Shariah Fund or add the BlackRock Shariah Fund as another option for your members.

Rationale for offering BlackRock Shariah Fund for Registered plans temporarily

At inception, the BlackRock pooled fund will initially invest in the following 2 ETFs: i) iShares MSCI World Islamic UCITs ETF and ii) iShares MSCI Emerging Markets Islamic UCITs ETF. Once the underlying pooled fund reaches a larger scale, the fund will invest directly in securities and seek to replicate the same index.

The trading activities to switch from ETFs to securities in the underlying pooled fund may result in capital gains or losses. These gains or losses are distributed to the segregated fund. In turn, the gains or losses allocated to members who sell the segregated fund units (if any). The remaining are allocated to members who hold the segregated fund units as of December 31 in the year the switch happens. The gains or losses from the switch may have a tax impact for Non-Registered (taxable) members.

As such, we offer the BlackRock Shariah Fund only for Registered plans temporarily until the switch to securities in the underlying pooled fund is complete. The objective is to prevent a tax impact from the switch for Non-Registered (taxable) members.

We’ll inform you when the BlackRock Shariah Fund is available for Non-Registered plans.

Changes in pooled fund operating expenses

The underlying pooled fund’s operating expenses will change over time. We anticipate the operating expenses will change as follows:

  • Step 1: When the underlying pooled fund invests in the ETFs, the operating expenses will decline as the fund’s assets grow as they are distributed across a larger asset base.
  • Step 2: When the underlying pooled fund starts investing in securities (instead of ETFs) and/or BlackRock implements Shariah compliance review, the operating expenses will increase due to higher custody costs and Shariah board review fees.

We expect the pooled fund’s operating expenses will decline after BlackRock completes step 2 and assets continue to grow.

 

We’re excited to offer a Shariah solution for the Group plans in response to your and your members’ growing interest. As the BlackRock Shariah Fund’s assets grow, the investment structure will evolve to ensure that the Fund meets its investment objective.

For more information about Shariah investment and the BlackRock Shariah Fund, please refer to the Frequently Asked Questions and other supporting documents here.

Do you and your plan members have to take any action?

You may want to consider whether the new fund is suitable to add to your lineup, to provide an investment option to your members who wish to invest in a Shariah fund.  

If you already offer the Zero Interest Account in your plan, you can choose to replace it with the BlackRock Shariah Fund or add the BlackRock Shariah Fund as another option for your members.

About BlackRock

BlackRock is a global asset manager that offers passive and active investment solutions across traditional and alternative asset classes. 

As of December 31, 2021, BlackRock had US$10 trillion of assets under management. The assets consist of US$3.4 trillion in active strategies (including cash) and US$6.6 trillion in index and ETFs.

Questions?

Please contact your Sun Life Group Retirement Services representative.