SUN LIFE MULTI-STRATEGY TARGET RETURN FUND Aims to deliver long-term capital growth regardless of market conditions I N S T I T U T I O N A L
TABLE OF CONTENTS 02 FOCUSING ON INVESTORS 08 MANAGING AND MONITORING RISK A MULTI-STRATEGY 03 APPROACH 09 HOW THE 04 STRATEGY WORKS 10 ABOUT AVIVA INVESTORS IMPORTANT INFORMATION AND NOTES Aviva Investors Canada Inc. is the sub-advisor for Sun Life Multi-Strategy Target Return Fund. Aviva Investors Canada Inc. is a portfolio manager and exempt market dealer and commodity trading manager registered with the Ontario Securities Commission and has retained its affiliate, Aviva Investors Global Services Limited, to provide investment advice to the sub-advisor in respect of the investment portfolio of the fund. Throughout this brochure, the two firms are collectively referred to as Aviva Investors.
FOCUSING ON INVESTORS Every investor has specific objectives. Some seek higher capital appreciation, a reliable income stream in retirement or perhaps they are saving for their first home. But volatile stock markets and rock bottom interest rates make it difficult to generate the returns investors need. And that s why Sun Life Multi-Strategy Target Return Fund strives to provide positive outcomes by looking beyond traditional investments for capital growth. Backed by a thoughtful investment philosophy and robust process developed by Aviva Investors, the fund uses an absolute return strategy to deliver positive returns, whether markets are flat, falling or rising. To smooth out the investment experience, they also strive to produce those returns with 50% less volatility than found in global equities. A THOUGHTFUL INVESTMENT PHILOSOPHY COMMITMENT CREATIVITY AVIVA INVESTORS MULTI-STRATEGY COMMITMENT Company-wide focus on delivering investment outcomes that clients want C REATIVITY Bringing together global investment capabilities across a broad range of disciplines C O N S T R U C T I O N CONSTRUCTION Elevating portfolio construction and risk management to the same importance as idea generation 2
A MULTI-STRATEGY APPROACH Volatile stock markets and low interest rates are two significant challenges to investors pursuit of long-term capital growth. Sun Life Multi-Strategy Target Return Fund aims to meet both challenges head-on. KEY BENEFITS Seeks to deliver long-term capital growth regardless of market conditions Over any rolling three-year period, the fund targets an average annual return before fees and expenses of 5% above the Bank of Canada overnight rate* Free from benchmark constraints Offers investors a potentially smoother market experience by managing volatility Over any rolling three-year period, the fund targets a level of volatility that s less than half that of the MSCI All Country World Index (in local currency) Aims to reduce risk through robust yet flexible portfolio construction Implements a diverse range of strategies across global markets Aviva Investors portfolio managers combine a range of long-term investment ideas - or strategies - to help drive success. With an investment time horizon that s typically about three years long, portfolio managers are able to filter out much of the market noise that sometimes dominates the investment landscape. * The Bank of Canada overnight rate ranged from a high of 1.00% in January 2013 to a low of 0.50% in December 2015. Source: Bloomberg. 3
HOW THE STRATEGY WORKS Some portfolios focus on investing in a single asset class like equities, real estate or bonds. A diversified portfolio seeks to reduce the risk of such concentration by investing in multiple asset classes or multi-asset investing. This involves identifying investment opportunities across and within asset classes. The multi-strategy approach behind Sun Life Multi-Strategy Target Return Fund is similar to multi-asset investing in that the fund can invest in a broad range of asset classes. A multi-strategy fund typically adopts a dynamic investment approach that seeks to profit from rising and falling markets. other things, stocks, interest rates, credit markets, real estate, currencies and volatility. Aviva Investors believes this approach enables the fund to produce the kind of outcome investors want specifically, long-term capital growth regardless of market conditions. This kind of multi-strategy diversification may also help lower overall fund risk. In addition, portfolio managers are free to pursue investment opportunities without reference to a benchmark or a peer group. Sun Life Multi-Strategy Target Return Fund seeks to invest in about 25 to 35 investment ideas that may involve, among WHAT IS ABSOLUTE RETURN? Investment funds that seek to deliver positive returns in all market conditions are also sometimes referred to as absolute return funds. To provide some contrast, consider a global equity fund that seeks to deliver relative outperformance compared to a benchmark index such as the MSCI All Country World Index. Say over the course of a three-year period the MSCI All Country World Index falls 4.5% and the global equity fund falls 2.5%. Even though the fund return is negative, it still did better than the benchmark. We would say the fund outperformed the benchmark on a relative basis, and in that context it would likely be considered a success. Absolute return funds typically measure success without reference to a benchmark. They seek to deliver returns above a stated threshold such as a reference interest rate, regardless of market conditions. They aim to do this over a time horizon that s typically measured in years. In this respect, Sun Life Multi-Strategy Target Return Fund is characterized as an absolute return fund. 4
BECAUSE NO ONE CAN PREDICT THE FUTURE Portfolio managers select what they believe are the best strategies at any given time and integrate them into a cohesive portfolio, with all positions assigned to one of three groups: market strategies, opportunistic strategies and risk-reducing strategies. MARKET STRATEGIES Aviva Investors focus is on harvesting the risk premia from traditional asset markets which they believe offer attractive long-term returns. EXAMPLES: Long Japanese equities Long U.S. high yield credit Long Mexican government bonds OPPORTUNISTIC STRATEGIES These strategies aim to profit from market mispricing that may exist due to market segmentation, central bank intervention or regulatory changes. EXAMPLES: Short German rates Long U.S. multi-family housing market Long U.S. inflation strategy RISK-REDUCING STRATEGIES These strategies aim to generate positive returns if the house view does not materialize, while being flat to mildly positive in the event it proves correct. In times of market stress, these strategies can significantly boost portfolio returns, thereby helping to control risk. EXAMPLES: Long U.S. dollar vs other currencies Long Australian government bonds Long U.S. large caps vs short U.S. small caps In combining market, opportunistic and risk reducing strategies, the fund is able to seek returns from many sources, some of which perform well when markets rise and others when they fall. The above examples are provided for illustrative purposes and represent a snapshot in time as of March 31, 2016. Positions are subject to change. 5
THE INVESTMENT PROCESS Creating an inventory of approved strategies Constructing a robust diversified portfolio HOUSE VIEW Provides macro framework for wider discussion of potential investments IDEA EVALUATION Peer group review of ideas to ensure only the strongest are considered for inclusion FUND MANAGEMENT Manage cash flows Portfolio rebalancing Manage liquidity IDEA GENERATION Invite participation from all investment teams worldwide PORTFOLIO CONSTRUCTION Position sizing Pre-trade risk Stress testing Scenario analysis PREPARING FOR THE UNPREDICTABLE Investment ideas and research come from the equity, fixed income and property teams as well as the Investment Strategy Team. The Investment Strategy Team produces market research, asset allocation advice and investment ideas. In formulating investment views, the team draws on investment research capabilities from across the business as well as from select external providers. IDEA EVALUATION Investment ideas are evaluated regularly by a special group within Aviva Investors. The Strategic Investment Group, or SIG, is chaired by Chief Executive Officer Euan Munro. The SIG is made up of the most experienced investment professionals from across the firm and represents a wide range of disciplines. The SIG determines whether ideas are suitable for potential inclusion in the strategy. COMBINING STRATEGIES TO HELP LOWER RISK Aviva Investors believes the way the strategy is constructed is as important as coming up with good investment ideas. These ideas are incorporated in the fund through investment strategies. By combining strategies in the appropriate allocations, portfolio managers aim to diversify the sources of return with the goal of reducing overall fund risk. 6
WHY DERIVATIVES? In order to pursue its investment objectives, Sun Life Multi-Strategy Target Return Fund invests broadly in multiple asset classes and uses efficient financial tools like derivatives to help control investment outcomes. Derivatives offer portfolio managers a set of tools for implementing their investment views, often in ways that can t be matched by more traditional security types such as stocks and bonds. Derivatives are a key contributor to the fund s goal of producing positive returns even when broad markets are falling. But derivatives come with risks that investors should be familiar with. While Sun Life Multi-Strategy Target Return Fund aims to deliver long-term capital growth regardless of market conditions, there s no guarantee that it will. Investors may experience negative returns in some years. Aviva Investors places particular emphasis on monitoring the potential impact of derivatives. We believe Aviva Investors deep experience and the application of careful risk controls mean the level of derivatives risk will remain consistent with the fund s risk profile. WHAT IS A DERIVATIVE? A derivative is a type of security with a market value that s linked to or derived from an underlying asset or security. One of the more common types of derivatives is an option, which has a market value that s derived in part from the price of an underlying stock. Another type of derivative is an index futures contract, which has a market value that s derived in part from the price of an underlying index, such as the S&P 500. Derivatives can be linked to commodities, currencies, interest rates and more. Sometimes, a small price movement in the underlying asset can cause a large price movement in the derivative. It s important to keep in mind that investing in derivatives can lead to large losses as well as gains. 7
MANAGING AND MONITORING RISK Risk management is integral to the investment process and is a critical component of the fund s construction. Aviva Investors risk analysis team works closely with the portfolio managers, assessing risks from multiple angles before deciding whether to incorporate an investment idea into the fund. Strategies are assessed according to their expected risk and return, the ease with which they can be exited, and whether they could still be included if the fund were to grow substantially. The team also tests how the fund would perform in different market conditions. The risk analysis team continuously monitors risks both in terms of individual strategies and the overall fund. The team conducts regular stress tests on the fund and assesses optimal trade sizes. It analyzes risk from the level of individual strategies through to the total fund level. In addition, an independent risk team provides a second line of defence, actively monitoring all aspects of the fund s risks. MEANINGFUL OUTCOMES Growing capital over the long term to meet investors needs is never straightforward, but it s especially challenging when equity markets are volatile and interest rates are low. We believe Sun Life Multi-Strategy Target Return Fund is best suited for risk-aware investors who see the potential benefit of including a multi-strategy fund as a component of a diversified portfolio. 8
ABOUT AVIVA INVESTORS At Aviva Investors, we realize that everyone is unique. We start by listening closely to our clients and understanding their investment aspirations and concerns. Our role is not only to understand each investor s desired outcomes but also possess a deep understanding, using our extensive skills and experience, of how we aim to deliver them. We make it our business to know what is important to our clients and use this insight to develop strategies that can cater to their real needs, and help build stronger and deeper long-term relationships. Having the right resources is vital when focusing on the outcomes clients want. We manage over US$400 billion across a range of asset classes and our operations span 16 locations. As such, our clients stand to benefit not just from our significant local knowledge and experience but also from the extensive global investment resources at our disposal. Although we are a global business, we act as a single team, collaborating to bring together knowledge and capabilities. We value creativity and empower our investment teams to find and execute great ideas. In-depth research and robust risk management underpin every investment decision. In an environment where investors face a bewildering choice of ever-more-complex financial products, gaining the outcomes they require can be challenging. We have strategies that aim to meet this need, now and over the long term. This is why we are unequivocally for today s investor. 9
IMPORTANT INFORMATION AND NOTES The information contained in this brochure is intended for institutional investors for general informational use only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in this brochure by Sun Life Global Investments (Canada) Inc. and/or its affiliates (collectively, SLGI ) are subject to change without notice and are provided in good faith without legal responsibility. Please note, any future or forward looking statements contained in this brochure are speculative in nature and cannot be relied upon. There is no guarantee that these events will occur or in the manner speculated. This brochure is not intended to provide specific financial, tax, insurance, investment, legal or accounting advice and should not be relied upon in that regard and does not constitute a specific offer to buy and/or sell securities. Except where stated as otherwise, the source of all information is Aviva Investors as of March 31, 2016. 10
insight to build investments that work SUN LIFE GLOBAL INVESTMENTS Sun Life Global Investments brings together the strength of one of Canada s most trusted names in financial services, Sun Life Financial, with some of the best asset managers from around the world to offer a lineup of world-class investment solutions. With a focus on risk management, our rigorous selection and monitoring process provides access to leading asset managers who use insight and innovation to manage high quality investment solutions. Our unique insight into defined contribution plan member trends and investment behaviour helps us build solutions aimed at meeting their long-term financial goals. For more information contact: PAT LEO Director, Institutional Business Development Ontario and Western Canada 416.408.7274 pat.leo@sunlife.com ANNE MELOCHE Regional Vice-President, Institutional Business Quebec and Eastern Canada 514.866.6287 anne.meloche@sunlife.com Sun Life Multi Strategy Target Return Segregated Fund is available through Sun Life Group Retirement Services. Group Retirement Services are provided by Sun Life Assurance Company of Canada. www.sunlifeglobalinvestments.com/institutional I N S T I T U T I O N A L Sun Life Global Investments (Canada) Inc., 2016. Sun Life Global Investments (Canada) Inc. is a member of the Sun Life Financial group of companies. 810-4622-05-16