TORONTO Feb 6 Sun Life Financial Inc launched
an asset management business on Thursday to provide private
asset class pooled funds for pension plans and other
institutional investors looking to boost yield with alternative
investments like real estate.
Sun Life Financial, Canada's third-largest life insurer,
which already has a big defined benefit pension business, said
the new business, Sun Life Investment Management Inc., will
offer the full services of an asset manager to institutional
investors seeking access to the hot alternatives market.
Like many other investors, defined benefit pension plans
have struggled to earn the returns they need to meet their
payout obligations in the current low-yield environment, and are
looking for options.
Sun Life's initial product suite includes three pooled
funds, including a private fixed-income fund, a Canadian
commercial mortgage fund, and a Canadian real estate fund, which
will try to increase the rate of return investors can typically
get with corporate bonds, with less downside risk.
Sun Life's chief investment officer, Steve Peacher, said Sun
Life has been able to get an extra 150 basis points over and
above corporate bonds by investing in private fixed income, and
the new funds will seek that kind of additional yield for
defined benefit pension plans.
While the asset management company is new, the investment
team will be the same one that already manages about C$100
billion in assets for Sun Life Assurance Co of Canada.
Peacher said there is a big hole in the market right now for
Canadian pension funds and other institutional investors looking
to shift some of their portfolio into alternative asset classes,
which typically include real estate, private equity and debt,
"In today's commercial mortgage market, you can make a loan
against a solid commercial building ... and get paid yields that
are 180 or 200 basis points over government of Canadas, in
assets where your downside protection is very, very good because
you are lending against quality commercial real estate," Peacher
said in an interview.
"That's an attractive market to be in, yet it's a market
that is hard for pension plans to access."
While Sun Life has been a strong player for pension funds
looking to shift risks as they become fully funded and approach
the annuity stage, it has not previously chased clients looking
to boost yield with alternatives.
Peacher said the company would focus first on the C$1
trillion Canadian pension plan market but expects to grow into
the U.S. pension plan market, since everyone is looking to both
boost yield with alternative investments and to de-risk.
"We fully expect we'd have AUM measured in the billions over
the next few years," he said.