Sun Life Investment Management Inc. is launching three pooled funds that focus on private fixed income, commercial mortgages and real estate assets, to be available starting April 1, 2014.
The funds are being launched with portfolios of assets totaling approximately $650 million contributed by Sun Life Assurance Company of Canada and Sun Life Financial Inc., demonstrating their commitment to the company and its funds.
“We typically see funds launched with a very small amount of assets,” said Eugene Lundrigan, chief operating officer at Sun Life Investment Management. “We are unique in that we are launching funds with diversified portfolios that are consistent with the investment objectives of the new funds, along with significant asset bases.”
He added, “This shows Sun Life’s commitment to the funds in Sun Life Investment Management. It also provides a diversified portfolio right out of the gate.”
The funds will be offered for sale to Canadian institutional investors who qualify as "permitted clients" under applicable securities legislation.
"We have seeded the three funds with a set of quality assets consistent with the mandates of the funds," said Steve Peacher, president of Sun Life Investment Management and chief investment officer at Sun Life Financial. "With the size and seasoned nature of the portfolios, we believe these funds offer excellent new opportunities for defined benefit plans and other institutional investors interested in private asset classes that offer attractive risk-adjusted returns over the long term."
The Sun Life Private Fixed Income Plus Fund will invest primarily in a diverse portfolio of private fixed income ("PFI") and public fixed income assets. The fund has been seeded with approximately $150 million at March 19, 2014.
The Sun Life Canadian Commercial Mortgage Fund will invest primarily in a portfolio of fixed-rate first mortgage loans secured by high quality income-producing office, retail, industrial, and multi-family rental properties located in Canadian urban markets. The fund has been seeded with approximately $200 million at February 28, 2014.
The Sun Life Canadian Real Estate Fund will invest primarily in a portfolio of high quality, income-producing real property located in growing Canadian urban markets. The fund has been seeded with approximately $300 million at February 28, 2014.
The focus of Sun Life Investment Management is to offer to pensions and other institutional investors what Sun Life does in its insurance business. “We have strong capabilities in private fixed income, mortgages, and real estate, as well as liability-driven investing,” Lundrigan said. “Based on our conversations with people in the market about the problems that pensions and other institutional investors are having, we think this offering will be compelling.”
Sun Life Investment Management is a separate legal entity, and has been licensed to sell and manage asset management services in Canada. “Asset management is an important pillar of our overall strategy at Sun Life,” Lundrigan said.
Lundrigan identified two broad trends that Sun Life Investment Management is positioned to take advantage of. One is the trend toward alternative investments. “Pension plans are understanding that alternative investments can provide them with additional yield over traditional asset classes,” he said.
The other trend is toward reducing risk in pension plans. “Given the volatility in the markets, we are having lots of conversations with people who are looking to reduce risk,” said Lundrigan. “LDI is about managing your assets and liabilities in tandem, to reduce funding and earnings volatility.”
