Updated Investment Policies for the CC&L Canadian Small Cap, CC&L Group Balanced Plus and CC&L Q Group Global Equity Funds

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. They are established as segregated funds under the Insurance Companies Act (Canada).

Connor Clark & Lunn (“CC&L”) announced changes to the Statement of Investment Policies and Procedures (investment policies) of the funds below.

CC&L updated the CC&L Canadian Small Cap fund’s investment policy. It now allows the fund to buy companies that go public through a reverse takeover process (RTO). An RTO allows a private company to become publicly-traded without going through an initial public offering (IPO). In an RTO, a private company buys enough shares to control a publicly-traded company. It then exchanges its own shares for shares in the public company.

CC&L also made a change to the value-added target for the CC&L Q Group Global Equity fund.  They reduced the target from 2.5% to 2.0%. As a result, the updated objective of the fund states the following:

“Generate returns equal to or greater than the return of the MSCI ACWI Index (CAD) (net) (the “Benchmark”) plus 2.0% per annum over a market cycle.”

CC&L stated that this new target is in line with the results achieved by peers. CC&L defines its peers as the global active manager eVestment universe. The majority of these peers have value-add targets of 2% in their respective investment policies. In addition, this target better represents the returns CC&L delivered over the past several years, out to a decade.

Lastly, the CC&L Q Group Global Equity fund is an underlying component of the CC&L Group Balanced Plus fund. As a result, CC&L updated the balanced fund’s investment policy. It now reflects the change to the value-added target. The balanced fund’s investment policy also includes limited partnerships as a permitted investment.

Our View

The CC&L Q Group Global Equity fund has outperformed its benchmark over the last ten years. However, it hasn’t been able to achieve the 2.5% (annualized) value-added objective over this period. The new reduced target reflects the difficulty of achieving this level of outperformance over the long-term. Less than 5% of funds in the Morningstar global equity peer universe achieved this goal over the ten-year period ending December 31, 2020 (annualized). We note that most funds on Sun Life’s core platform do not have explicit value-added targets in their investment policies. CC&L’s investment approach for this fund will not change as a result of the lower value-added target.

Sun Life’s GRS Investment Solutions team has reviewed the other changes. The team does not have any concerns about them at this time.

How does this influence plan sponsors and plan members?

Plan sponsors or plan members do not have to take any action as a result of these changes.

Questions?

Please contact your Sun Life Group Retirement Services representative.

Copies of the changed SIP&Ps are available on Sun Life’s Plan Sponsor Services website at sunlife.ca/sponsor.  When logged into the website, under the Administration and reporting tab, choose Group Retirement Services. Then, on the top navigation menu, choose Investments>> Governance reports.