Toronto-based Sun Life Financial Inc. has plunged back into the competitive mutual fund arena with a new family of 12 funds offered through both its own network of affiliated financial advisors and the independent broker-dealer channel.

“The launch of the new funds gives us an opportunity to expand our wealth-management platform in Canada,” says Rick Headrick, president of Sun Life Global Investments (Canada) Inc., the firm’s wholly owned fund-management subsidiary.

Sun Life is no stranger to the fund business, having once owned Toronto-based Spectrum Investments Inc. and Clarica Diversico Ltd. before selling both fund families to CI Financial Corp. in 2002 in exchange for a 30% stake in CI. During the height of the financial crisis in the autumn of 2008, Sun Life sold what had become a 37% stake in CI to Bank of Nova Scotia, ending Sun Life’s participation in the fund industry.

“Since we sold our stake in CI,” Headrick says, “we have not participated [in the mutual fund business], from a distribution perspective. The new funds harness the strength of Sun Life with top global expertise in product development and asset management.”

SLGI Canada brings together talent from within the Sun Life network and a number of global strategic partners in the investment-management business. The family of 12 Sun Life funds include seven that are subadvised by MFS Investment Management — Sun Life’s Boston-based asset-management arm, which has about US$200 billion in assets under management.

Established in 1924, MFS was a pioneer in the fund industry and, Headrick says, there has been advisor demand in Canada for access to MFS for their clients. MFS is ranked by Morningstar Canada as being among the top five mutual fund companies in the U.S., based on a measurement that reflects three-year returns, fund stewardship and manager tenure.

In terms of AUM, MFS is the 14th-largest fund company in the U.S. It has offices in 19 countries, with assets managed by more than 150 investment professionals around the world.

Sun Life’s fund lineup also includes a Canadian money market fund run by McLean Budden Ltd., a Toronto-based money management firm that is 67% owned by Sun Life. There are also four “target-date” funds under the Sun Life Milestone name, managed by Sun Life Capital Advisers LLC. @page_break@The Milestone funds have maturity dates of 2020, 2025, 2030 and 2035; they offer a guarantee of principal if they are held to maturity. These funds also offer a monthly reset feature to lock in gains along the way. Investors who hold units until maturity are guaranteed the highest month-end net asset value achieved between the start date and the scheduled maturity date.

“The target-date funds tap into the older demographic that is saving for retirement,” says Rudy Luukko, investment funds and personal finance editor with Morningstar Canada. “They tap into the preference that many investors have for balanced products, as opposed to straight equity funds. The guarantees appeal to the prevailing risk-averse nature of the investing public.”

Much like other target-date funds, the Milestone funds have a balance of fixed-income and equities exposure, but move toward reduced equities exposure and a heavier weighting in fixed-income as the funds approach maturity.

“The mutual fund industry is mature,” says Luukko, “which makes it difficult for newcomers to break in at this stage of the game. But Sun Life has the benefit of being a large financial services company with a lot of experience in the fund area. The company has devoted a lot of resources to researching investment managers and can leverage its capabilities, both inside and outside Canada.”

Sun Life’s research team oversees abut $90 billion in investment assets for various Sun Life operations and conducts research on more than 4,000 money-management firms, Headrick says. As Sun Life continues to expand its Canadian lineup of funds, it will be carefully adding new subadvisors to complement the skills of MFS and McLean Budden.

Currently, the new Sun Life fund lineup emphasizes global investing, with the Canadian money market fund the only one focusing strictly on Canadian assets. The MFS lineup includes global, U.S. and international equity funds, as well as one global balanced fund. Headrick says Sun Life plans to add to this initial lineup, and will include more Canadian offerings.

“We are mindful that a number of people are approaching retirement,” he says., “and the introduction of an income fund is top of mind for early next year. We are looking forward to introducing more products with McLean Budden, as well as our global partners.”

Although Sun Life will now be competing with CI in the mutual fund business, the two companies continue to enjoy a working relationship and recently partnered on the launch of the SunWise Essential Series, a lineup of segregated funds.

CI funds are well represented in the Sun Life advisor channel because of Sun Life’s past ownership of a chunk of CI — Sun Life accounts for about 13% of CI’s gross sales — and CI executive chairman Bill Holland says he isn’t concerned about CI losing its foothold within Sun Life because of the new competition.

Says Holland: “We continue to be on the list of preferred mutual fund providers at Sun Life.” IE