Changes to the Sun Life Target Date Funds in the Voluntary Retirement Savings Plan

August 19, 2024

Sun Life Assurance Company of Canada purchases units of the funds listed below, which are established as segregated funds in accordance with the Insurance Companies Act (Canada).

SLGI Asset Management Inc. (“SLGI”) will implement the following changes to the Sun Life Target Date Funds (the Funds) on November 1, 2024: 

  • Increase equity allocation across all maturities.
    • The equity allocation at the starting point (for the fund with the longest maturity) will increase from 91.5% to 93%.
    • The equity allocation at maturity (for Retirement fund) will increase from 35.0% to 41.5%.

The current and new asset mixes are shown in the chart below:

The chart shows the changes in equity weighing through time as members near retirement age. This is normally referred to as the glidepath of the fund.
  • Also, there will be a change in the frequency of the Funds’ asset mix and benchmark rebalancing from semi-annually to quarterly.

These changes won’t result in taxable gains or losses because your members invest in registered plans.

Rationale for changes

SLGI’s Multi-Asset Solutions Team reviews the strategic asset allocation of the Funds on an annual basis. The most recent review included stress testing to evaluate the outcomes of higher equity levels against the risk of significant market downturns in later years. The test indicated that plan members would be better off with higher equity levels in more than 95% of potential scenarios.  The higher equity allocations reflect a growing emphasis on the need to continue to grow savings in retirement that may span three decades.

In target date funds, the asset mix changes as members approach retirement. Historically, SLGI has updated the asset mix and benchmark every six months. Going forward, SLGI will update the mix every quarter. The benefits of more frequent rebalancing are:

  • The Funds’ asset mix will be closer to the target asset mix. As the rebalance happens over a shorter period, SLGI can bring the Funds’ asset mix that has diverged due to market movements back to the target asset mix faster.
  • Reduced risk as the size of assets that SLGI buys or sells is smaller. Therefore, the impact on the Funds’ performance from any market movements on the rebalancing date will be smaller.

About the Sun Life Target Date Funds

The Sun Life Target Date Funds are a series of funds that correspond to different target retirement years. The asset mix for each Fund gradually shifts to become more conservative as the Fund approaches its target year. 

  • The Funds with longer maturity (e.g. Sun Life 2060 Fund) seek to maximize asset growth potential to ensure members can save enough for a comfortable retirement. They have higher allocation to riskier investments with higher growth potential (like equities). 
  • The Funds with shorter maturity (e.g. Sun Life 2025 and Sun Life Retirement Funds) seek to protect the money that members have saved. They have higher allocation to more conservative investments (like fixed income). 

SLGI decreases the amount of equities and increase the amount of fixed income following a “glidepath” to provide a smooth experience.

SLGI also reviews the Funds’ asset mix and underlying funds regularly. The review ensure that the Funds can adapt to different market environments and help members grow their retirement savings.  

Do you have to take any action?

You and your members don’t have to take any action as a result of these changes. However, we encourage your members to review their investments and make sure they continue to align with their savings goals.

Questions? We’re here to help.

Please contact your Group Retirement Services representative.