Back in 2002, Sun Life Financial handed CI Financial the keys to its Canadian mutual fund franchise.

Six years later, CI is poised to drive away with that fabulous franchise. Is this something the insurer can tolerate?

CI was built in part on the back of a deal in 2002 that saw Sun Life sell it two fund companies - Spectrum Investment Management and a unit of Clarica Life Insurance. In exchange for these units, Sun Life took a 30-per-cent stake in CI. At the time, the transaction added $13.2-billion of assets to CI's portfolios, taking the company up to $39-billion.

Right now, that looks like a great trade. Sun Life acquired a stake valued at $860-million, and 30 per cent of the country's No. 3 mutual fund company is now worth $2-billion, reflecting the fact that CI is now home to $102-billion in assets.

However, that 2002 deal takes on a whole different look if Sun Life entrusted its domestic mutual fund strategy to CI, only to see the company end up in the arms of another financial institution. And that just may be happening.

CI confirmed Friday that it is in talks with “a number of parties over possible strategic combinations.” A deal that would see Bank of Nova Scotia emerge with a minority stake in the mutual fund company is said to be among the options on the table.

Having to share CI with a rival is a terrible strategic development for Sun Life. Yet there's not much the insurer can do. There is speculation Friday that Sun Life has minimal rights attached to its CI holding. It's quite possible CI cuts a deal with a new partner that doesn't require shareholder approval.

The scenarios get even worse for Sun Life if the mutual fund company does end up attracting a full-blown takeover offer - the dream outcome for unitholders in CI.

CI has a $6.4-billion market capitalization. Even with a sizeable existing stake, buying the whole company would put an enormous strain on Sun Life. CEO Don Stewart and the board will face difficult decisions on what to do with what's now a 37 per cent postion in CI.

Buying CI is likely not the best use of Sun Life's capital - the insurer has a $22-billion market capitalization and has made international expansion its priority. But letting go of high ground in the domestic mutual fund field, even at a premium price, is not an attractive option for a life insurer in a mature, consolidating sector.