Just six months after acquiring Excel funds, Sun Life Financial has decided to take a step back from the exchange-traded funds industry as it closes the door on the firm's two global ETFs.
Last September, Sun Life's mutual-fund division, Sun Life Global Investments (Canada) Inc., which has $21-billion in assets under management (AUM), purchased all of the outstanding shares of both Excel Funds Management Inc. and Excel Investment Counsel Inc., including Excel's newly launched $4-million ETF business. The financial terms of the transaction were not disclosed.
In acquiring Excel's mutual-fund family, which at the time consisted of 10 funds, Sun Life gained approximately $700-million assets under management, including two ETF offerings: Global Balanced Asset Allocation ETF and Excel Global Growth Asset Allocation ETF. As of Monday, Excel Global Balanced has $1.95-million in AUM, while Excel Global Growth has $1.96-million in AUM.
The move last year added Sun Life to a growing number of mutual-fund players jumping onto the ETF bandwagon. But now, unlike many of its competitors who continue to increase their ETF businesses, Sun Life will exit this segment – at least for now – at the end of May.
"We continue to assess the ETF market and our clients' needs as we explore the best potential approach for entering the ETF space," says Sadiq Adatia, chief investment officer for Sun Life Global Investments. "When we acquired Excel, the ETF business was just part of the package and not the main reason behind the purchase. As we took a closer look at these two funds, it was clear that they did not fit our overall business strategy."
At the time of the acquisition, Rick Headrick, president of Sun Life Global Investments told The Globe and Mail said he was not on the hunt for an ETF provider and that the ETF side of the Excel business was not the primary driver behind the acquisition as the discussions between two companies had started well before Excel entered the ETF market. The two companies have a well-established relationship that spans more than 19 years, when India-based asset manager Birla Sun Life Asset Management began to sub-advise the Excel India Fund.
Mr. Adatia says the exit from the ETF industry is only temporary, although an exact date on when the firm would relaunch an in-house ETF strategy has not been determined – and is unlikely to be in 2018. "We want to be able to take our time when exploring the ETF space and make sure it works for our clients," says Mr. Adatia in an interview with The Globe and Mail. "Many of the players entering the ETF industry from the mutual-fund business has done so because their current strategy hasn't been working and they decide to pivot. That is not us. Our mutual-fund platform has been quite strong."
Mr. Adatia said the main goal of acquiring Excel Funds was to become an emerging markets leader in Canada, as countries such as India represent an important growth opportunity for investors. The Excel brand has been well known among Canadian investors who are looking for opportunities in the emerging market space; it includes one of the oldest India-focused mutual funds in Canada – the popular Excel India fund. The fund reported an annualized 15-year return of 14.9 per cent as of Dec. 31, 2017.
Several other Excel funds were merged into existing Sun Life funds at the beginning of March. The Excel Money Market Fund merged into the Sun Life Money Market Fund, Excel Emerging Markets Fund merged into the Sun Life Schroder Emerging Markets Fund, and the Excel China Fund merged into Sun Life Schroder Emerging Markets Fund.
In addition, as part of the ETF closures, Alken Asset Management Ltd. will cease as sub-adviser to the ETFs on or about March 27. Excel Investment Council Inc. will continue to be responsible for the management of the ETFs until the end of May.