Update to the CI Portfolio Series Maximum Growth Fund
Plan sponsors may wish to consider whether this investment news has any implications for the investment options available within their plans. Sun Life Assurance Company of Canada purchases units of the fund listed below. It is established as a segregated fund under the Insurance Companies Act (Canada).
In the third quarter of 2024, CI Global Asset Management (CI GAM), announced investment strategy changes to the CI Maximum Growth Fund (the Fund). The Fund is part of the CI Portfolio Series target risk funds and is the most growth-oriented fund, with a 100% allocation to equities.
The changes to the Fund are outlined below:
- Region/Country exposures: the Fund will have a significantly higher allocation to US equities and lower allocation to Canadian equities. US equity will increase to 66% from 31% and Canadian equity will decrease to 11% from 30%. There will also be lower investment in European countries.
- Sector exposures: the allocation to the Information Technology sector will be increased to 38% from 18%. The Health Care sector will be increased to 27% from 8%. The combined allocation to Consumer Staples, Materials and Utilities sectors will be decreased to 3% from 16%.
The Fund will continue to have a 100% allocation to equities. The Fund’s benchmark will be changing from 50% S&P/TSX Composite, 50% MSCI World (C$) to 100% MSCI World Index (Net) in order to reflect the changes to the strategy.
CI GAM indicated that the transition to the new strategy is ongoing, and the portfolio will fully reflect the new strategy by the end of Q4 2024. Below is the current and enhanced (new) asset allocation of the fund:
CI Portfolio Series Maximum Growth Fund: Current vs. Enhanced Asset Allocation
| Current | Enhanced | |
|---|---|---|
| United States | 31.4% | 65.8% |
| Japan | 10.7% | 17.1% |
| Canada | 30.2% | 11.1% |
| Western Europe | 11.1% | 2.4% |
| Emerging Markets | 12.2% | 2.0% |
| United Kingdom | 3.2% | 1.5% |
| Asia Pacific | 1.1% | 0.0% |
| Current | Enhanced | |
|---|---|---|
| Info. Tech. | 17.6% | 37.7% |
| Health Care | 8.3% | 26.9% |
| Energy | 9.1% | 10.6% |
| Cons. Disc | 10.0% | 6.6% |
| Comm Srvs. | 6.3% | 6.0% |
| Financials | 19.2% | 4.8% |
| Industrials | 12.5% | 4.1% |
| Materials | 5.9% | 1.8% |
| Cons. Staples | 6.7% | 1.4% |
| Utilities | 2.9% | 0.0% |
| Real Estate | 1.4% | 0.0% |
FOR ILLUSTRATIVE PURPOSES ONLY. Source: CI Global Asset Management. “Current” corresponds to the portfolio look-through exposures as of April 2024. “Enhanced” is illustrative-in-nature and aims to provide target exposures.
CI GAM states that the change is a modernization of the Fund intended to provide greater exposure to the ‘mega-trend’ of artificial intelligence and high-speed computing. The investment strategy change is intended to appeal to clients who have long-term investment horizons and are able to handle more volatility.
Sun Life GRS Investment Solutions’ view
We have significant concerns with the changes to the Fund. The reduction in the allocation to Canadian equities is reasonable and in line with other changes we’ve seen in multi-asset class funds over the past decade. However, allocating most of the Fund to the U.S and Japan, and concentrating the sector exposure into IT and Health Care (sector weight increases are not solely a consequence of region/country changes), will reduce diversification. There will be a distinct thematic element to the fund and a pronounced tilt towards a narrowed set of growth opportunities.
Before the announced changes, the Fund was already an outlier among other Target Risk funds on our platform. Even the most aggressive target risk funds in other series have some allocation to fixed income. While the changes may result in a higher expected return, we also expect them to further increase volatility and downside risk.
When we met with CI GAM, they indicated that the changes were designed to turn around underperformance and to appeal to younger investors. However, not all younger investors will expect the large swings in both absolute returns and benchmark-relative performance that will come with this new approach. Additionally, while artificial intelligence is undoubtedly an area of great opportunity, many AI and AI-adjacent stocks have already reached high valuations, and this change may prove to be more reactionary than visionary. Plan sponsors may wish to consider whether offering Maximum Growth within the CI Portfolio Series remains suitable for their plan members.
The CI Portfolio Series funds, including Maximum Growth, remain on our Watch List under the ‘On Watch’ category. The funds were placed ‘On Watch’ in Q3 2022 due to significant changes to the personnel and strategies as a result of the elimination of CI’s boutique brands and their consolidation into CI GAM. We will continue to monitor the funds and provide updates as necessary.
Do you have to take any action?
You and your members don’t have to take any action as a result of these changes. They will receive a message via the Sun Life message centre. You can see the message here.
Questions?
Please contact your Sun Life Group Retirement Services representative*
*In Quebec, registered as a Group annuity plans advisor.