Record assets for Sun Life as it tackles investor outflows and preps for ETF launch in December
Sun Life Financial Inc. reported record-high assets under management in the third quarter, reaching $1.52tn, according to BNN Bloomberg.
CEO Kevin Strain noted that the 13 percent asset growth from the previous year’s third quarter secures Sun Life’s position as Canada’s largest asset manager.
Despite this milestone, the company faces persistent outflows, as both institutional and retail clients moved a net $19.1bn out of its MFS Investment Management division by September 30, adding to the $47.2bn in outflows from the prior three quarters.
“Outflow challenges remain,” Strain stated during an earnings call, acknowledging ongoing issues with investor withdrawals.
Institutional outflows, Sun Life reported, stemmed primarily from portfolio rebalancing, while retail clients favoured high-growth tech stocks—primarily concentrated in the ‘magnificent seven’—and shorter-term interest-bearing products.
MFS CEO Mike Roberge explained that recent quarters have been affected by a strategy underweight in these tech stocks but expressed optimism, noting momentum in fixed income that could ease outflow pressures.
The trend toward ETFs has also impacted Sun Life, with retail investors increasingly shifting funds from traditional mutual funds to ETFs.
In Canada, ETFs attracted $33bn in new assets in the first half of the year, while mutual funds experienced $8bn in outflows, as reported by TD Securities.
While MFS, known for creating the first mutual fund nearly a century ago, currently does not offer ETFs, Strain announced that Sun Life is preparing to launch five actively managed ETFs in December to align with client needs.
“We are confident in the long-term strategy of MFS and the actions they are taking to address these headwinds,” Strain said, emphasizing the company’s commitment to adapting to changing client demands.
Sun Life expects that its active ETFs and fixed-income products will maintain fee structures comparable to its current offerings, thus mitigating potential revenue loss from lower-fee ETF products.
Alongside expanding its ETF offerings, Sun Life’s asset management team is advancing into alternative investments, such as private credit and equity. However, this shift remains in early development stages, according to the company.
Sun Life’s third-quarter earnings showed resilience despite outflows. The company reported a profit of $1.35bn, up from $871m in the same quarter last year.
Underlying net income also rose to $1.02bn, compared to $930m a year prior, supported by higher fee income at MFS. The company announced an increase in its quarterly dividend by three cents to 84 cents per share and continued its share buyback program.
