By Ben Dummett
TORONTO-- Sun Life Financial Inc. launched a new
money-management business Thursday aimed at tapping pension funds'
growing appetite for real estate and other private investments.
Sun Life, Canada's third-largest insurer by market
capitalization and owner of U.S. money manager MFS Investment
Management, said the new business will offer an investment fund
focused on private debt, another that holds commercial mortgages
and a third that invests in commercial real estate in Canada's
urban centers.
The Toronto-based company is betting these funds will attract
money from Canadian defined benefit pension plans with assets of 10
billion Canadian dollars ($9 billion) or less, and other
institutional investors looking for reliable long-term,
yield-generating investments.
The new business is consistent with the company's strategy of
expanding its asset-management business, one of three core
operations that also include insurance and wealth management.
Canada Pension Plan Investment Board, Caisse de dépot et
placement du Québec and other Canadian pension companies that
manage in some cases over 100 billion Canadian dollars in assets
are already investors in real estate and other private asset
classes. The long life of these investments and the steady income
they generate match up well with the funds' long-term pension
liabilities. And their large size means they can afford to hire the
analysts needed to identify potential investments that often
require considerable due diligence because of the complexity of
their structures and a lack of available public information on
them.
Sun Life is targeting smaller pension plans that can't afford
their own big investment staff, but are big enough to require a
sophisticated asset mix, betting its in-house experience will help
attract business.
Its in-house investment team of about 200 currently oversees
around 110 billion Canadian dollars in assets, and like pension
funds, is focused on generating yield over long periods that
correspond with the payout of the firm's life insurance policies.
About 38 billion Canadian dollars of these assets are in
private-market investments including real estate, private debt and
mortgages.
"We think pension funds have exactly the same challenge we do,"
Steve Peacher, Sun Life's chief investment officer, said in an
interview. "They've got long liabilities...They need yield [and]
reliable investments" and the new funds offer "higher yields than
they can get in the public markets," he said.
Sun Life's new fund products also help reduce risk by cutting
exposure to the public markets, Mr. Peacher said.
Private-market investments often take longer to sell than
publicly traded securities, but pension funds' long-term
liabilities allow them to accept that liquidity risk, the executive
added.
Write to Ben Dummett at ben.dummett@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
