Sun Life managing record assets of over $1.5 trillion despite outflow challenges

Hey there, time traveller!
This article was published 05/11/2024 (397 days ago), so information in it may no longer be current.

TORONTO – Sun Life Financial Inc. says market gains helped it reach an all-time high for assets under management in the third quarter, even as it continues to struggle with investors pulling out funds.

Chief executive Kevin Strain said Tuesday that the gains, with assets up 13 per cent from the third quarter last year, make it the largest asset manager in Canada with about $1.52 trillion under management.

The growth came even as Sun Life is still facing outflows from both institutional and retail clients, who moved a net $19.1 billion out of the company’s MFS Investment Management division in the quarter ending Sept. 30. The outflows add to $47.2 billion in net outflows it saw from MFS in the three quarters prior.

“Outflow challenges remain,” said Strain on an earnings call.

Institutional outflows were largely because of portfolio rebalancing, the company said, while retail outflows are happening as investors continue to prefer high-growth tech stocks, concentrated in the so-called magnificent seven, and shorter-term interest-bearing products.

“The last couple of quarters have been impacted by a particular strategy that is underweight mag seven,” said MFS chief executive Mike Roberge.

He said the firm is seeing momentum in fixed income and expects the outflow trends to moderate and improve from here.

The outflows also come as retail investors heavily favour exchange-traded funds (ETFs), while MFS, which created the first mutual fund a century ago, doesn’t yet offer any ETFs.

In Canada, ETFs attracted $33 billion in new assets in the first six months of the year, while mutual funds, which generally come with higher management fees, saw outflows of $8 billion, according to a report by TD Securities.

Strain said the company is taking action to address the issue by offering a diverse range of products to meet evolving client needs, including the planned launch of five actively managed ETFs in December.

“We are confident in the long term strategy of MFS and the actions they are taking to address these headwinds.”

While the company is expanding into ETFs, it doesn’t expect to take a hit on lower fees as it expects its active ETFs and fixed income offerings to have management fees similar to its existing products.

Sun Life’s asset management side is also pushing further into alternative investments like private credit and equity, but the company said it was in the early innings of that expansion.

While the company struggles somewhat with outflows, overall Sun Life reported a third-quarter profit of $1.35 billion, up from $871 million during the same quarter last year.

Sun Life says underlying net income for the quarter was $1.02 billion, up from $930 million a year earlier, driven in part by higher fee income at MFS.

The company also increased its dividend by three cents to 84 cents per common share and continues with a share buyback program.

This report by The Canadian Press was first published Nov. 5, 2024.

Companies in this story: (TSX:SLF)