Toronto-based Sun Life Global Investments (Canada) Inc. (SLGI) is pulling out of the ETF market with the termination of Excel Funds Management Inc.’s ETFs, the company announced on Monday.
Excel Global Balanced Asset Allocation ETF and Excel Global Growth Asset Allocation ETF will be closed effective May 30, SLGI revealed. No further direct subscriptions for units of the ETFs will be accepted, effective immediately.
SLGI acquired Excel in a transaction that closed in January. Since then, SLGI has made some changes to Excel’s investment funds lineup. Excel, in addition to these two ETFs, offers a range of mutual funds with a focus on emerging markets.
SLGI, Excel to streamline mutual fund lineup
The closure of the ETFs doesn’t mean SLGI will be permanently out of the ETF game, though. The company plans to eventually launch its own suite of ETFs, according to Sadiq Adatia, chief investment officer at SLGI.
“We believe that for a client, ETFs are part of the tool set,” Adatia says. “We decided that we wanted to have a more measured approach to the ETF strategy, so we would launch somewhere down the road, but with a better strategy around it — something that fits in with our investment philosophy, our approach, and understanding what our clients are looking for from an ETF standpoint.”
Excel’s ETFs, Adatia says, didn’t fit into that mould.
Excel launched the two actively managed ETFs in May 2017. Excel Global Balanced Asset Allocation ETF invests in globally listed ETFs, equities and fixed-income securities, and seeks to provide a conservative return for unitholders. Excel Global Growth Asset Allocation ETF invests in globally listed ETFs, equities and fixed-income securities, and seeks to provide unitholders with a superior total return.
Excel Global Balanced Asset Allocation ETF had approximately $1.94 million in total assets under management (AUM) and Excel Global Growth Asset Allocation ETF had total AUM of approximately $1.96 million as of Mon. March 19.
Both ETFs are subadvised by London, U.K.-based Alken Asset Management Ltd. Alken employs an investment model that is different from the approach taken in SLGI’s other investment funds, Adatia says. Maintaining the Excel ETFs in a way that more closely reflected SLGI’s investment philosophy, he says, would have required considerable changes to the ETFs.
“It didn’t make sense to change them dramatically, especially since the [ETFs] were still in their infancy,” Adatia says. “It made more sense to close them, work more on the strategy, and then relaunch something at some point down the road.”
SLGI’s decision to acquire Excel was based on Excel’s mutual fund offerings and its expertise in emerging markets, Adatia says, not its ETFs.
SLGI doesn’t currently have a specific timeframe planned for introducing ETFs, Adatia says: “We’re trying to make sure that when we come out [with an ETF lineup], it’s meaningful and it’s in the right way. We don’t want to rush it. This isn’t a short-term game for us, by any means. This is a long-term strategy.”
SLGI already offers a lineup of funds, called Sun Life Granite Managed Solutions, that hold ETFs within them, he notes.
May 24 is expected to be the last date on which redemption requests for the Excel ETFs may be placed. Units of the ETFs are expected to be delisted from the Toronto Stock Exchange at the close of business on May 25.
Alken will cease as subadvisor to the Excel ETFs effective at the close of business on March 27, according to SLGI. Excel Investment Council Inc. will be responsible for the management of the ETFs until their termination.
Excel announced in November 2017 that Alken had revealed its intention to terminate its subadvisory agreement for the two Excel ETFs. At that time, Excel said it intended to explore other options for the portfolio management of the ETFs, but in the interim, it said Alken would remain responsible for overseeing the ETFs’ investment strategies.