After an absence of eight years, Toronto-based Sun Life Financial Inc. is returning to the mutual fund business this autumn, a decision driven mainly by demand from the company’s distribution network of 3,500 financial advisors.

“Advisors have been asking us to do this,” says Rick Headrick, president of the new fund firm, whose name cannot yet be revealed, in Toronto. “They have been asking for access to MFS Investment Management [a Boston-based subsidiary of Sun Life] in Canada. They’ve also asked for access to some of the innovative solutions that we’ve launched elsewhere, in our group retirement business as well as outside Canada.”

Demand from advisors, combined with Sun Life’s ability to broaden its product offerings, are the main reasons the insurer has returned to the mutual fund industry, says Headrick, who admits the firm has come full circle: “We’re in a position today to reach out across the company globally and get back in.”

Sun Life had owned Spectrum Invest-ments Inc. and Clarica Diversico Ltd. until 2002, when it sold them to Toronto-based CI Fund Management Inc. in exchange for a 30% stake in the fund company.

In October 2008, Sun Life exited the mutual fund business entirely when it sold its 37% stake in Toronto-based CI Financial Corp., the parent of the fund-management arm, to Bank of Nova Scotia.

However, Sun Life still maintains its relationship with CI, as the latter provides investment-management services for Sun Life’s SunWise family of segregated funds. As well, Sun Life advisors continue to sell CI products.

SERVICES TO AFFILIATES

Sun Life, by selling its own family of funds, will have the opportunity to offer the services of its affiliated firms: MFS; Toronto-based McLean Budden Ltd.; and India-based Birla Sun Life Asset Management Co., a joint venture between Sun Life and India’s Aditya Birla Group of Cos. There are some other strategic partners, as yet unnamed.

Because of regulatory constraints, Headrick could not reveal the name of the new fund company, its fund lineup or whether it will emphasize domestic or global products. “We are going through the licensing process,” he says. “But we are on track to make the funds available in the fall, which is right around the corner.”

Sun Life will sell the new funds through its advisory network, its group retirement business and a new Sun Life unit, direct distribution. The funds will also be available through independent advi-sors.

Headrick believes the product lineup will cut through the clutter of the thousands of funds sold in Canada: “We can reach out across the company globally, to bring back the best of what we do with MFS, McLean Budden, Birla Sun Life and our strategic partners to bring some unique solutions to our advisors and their clients.”

Sun Life will not restrict itself in the type of offerings, adds Headrick: “We will be taking the best of what our affiliates do.”





@page_break@MFS, which has US$195 billion in assets under management, is a global player and the 14th-largest fund manager in the U.S. In May, it was named the British Equity Fund Manager of the Year, says Headrick. In the U.S., MFS Global Total Return Fund earned the 2009 Lipper Leader Award for Total Return and Consistent Return. Many of MFS’s funds have earned Morningstar Inc.’ s four- and five-star ratings.

“MFS has a global presence in its approach to managing money,” says Headrick. “We’re also bringing the strength of McLean Budden in the high net-worth and institutional market to Canada.”

McLean Budden, which has been in business for 60 years, has $35 billion in AUM.

Headrick’s new company is tapping the resources of sister firm Sun Life Global Investments, which is headed by Kevin Dougherty, who is also president of Sun Life Financial (Canada) Inc. “We will be collaborating with our colleagues globally,” says Headrick, “and designing and launching new investment products.”

The initiative is not expected to affect Sun Life’s strategic partnership with CI, says Headrick: “We have a strong partnership with CI, and it’s going to continue. From our Sun Life advisors’ perceptive, we expect it will be business as usual. We’re bringing to them something in addition to what they already have. It’s not taking anything away. Are we competing with CI? We’ll be competing with all mutual fund companies. At the same time, advisors will continue to have access to CI’s funds and services.”

MORE CHOICE

This move is all about providing more choice and more products for advisors and their clients, adds Headrick: “Advisors have been asking for more choices, and we’ve listened. We really believe this will be a win-win — for Sun Life, for our advisors and, ultimately, the inves-tors. We’re very excited at the opportunity to bring our global strengths to Canada and are convinced this will be a success.”

Gordon Pape, a fund analyst and publisher of www.buildingwealth.cain Toronto, says Sun Life is responding to Toronto-based Manulife Financial Corp., which rebranded its Elliott & Page Ltd. family as Manulife Mutual Funds.

“When Manulife took the initiative to enter the conventional mutual fund field, Sun Life, as its main competitor, must have felt it had no option but to go along,” Pape says. “Otherwise, it would risk losing a share of this quite lucrative wealth-management field to its rivals. It seems like the logical response, having seen how aggressively Manulife is entering that retail market.”

Also, insurance companies have watched the banks successful accumulate assets, adds Pape: “Asset accumulation remains the name of the game. Fees generated from mutual funds represent a pretty lucrative business.”

Mutual fund analyst Dan Hallett, director of asset management with Oakville, Ont.-based HighView Asset Management Inc. , says Sun Life would have preferred to keep its stake in CI. He notes that Sun Life sold its CI stake to bolster its capital during the 2008 financial crisis and to ensure its ability to fund future acquisitions. “But, clearly,” he says, “[Sun Life] wants to be in the fund business. It decided this is best way to do that.”

Spectrum and Clarica had $12 billion in AUM until the CI takeover, Hallett points out — and it could take some time for the new mutual fund subsidiary to reach that size. Yet, the new firm has one major advantage, Hallett says: “It has a large distribution network on its side.” IE