NORTH AMERICA – Sun Life Financial has expanded into third-party asset management with its new company, Sun Life Investment Management.

Dean Connor, president and chief executive at Sun Life Financial, said: “Through this initiative, we will be offering the same types of expertise to third-party clients we have built over the decades to our insurance assets. 

“We are starting the new business in Canada and intend to expand it to other markets over time.”

Sun Life has a very large existing real estate portfolio it hopes to expand through the new business. 

Steve Peacher, CFO at Sun Life Financial and who will be heading Sun Life Investment Management, said: “We now have a total real estate portfolio at CAD6bn (€4bn), and we hope our new line of business will allow us to grow this sector of our portfolio in the future.”

Sun Life’s existing real estate portfolio has a total of 375 properties, with 275 assets in Canada and 100 in the US.

Sun Life is planning to have two different real estate products for the Investment Management affiliate that would target raising capital from pension funds in Canada. 

One commingled fund is the Sun Life Canadian Real Estate Fund; the other is the Sun Life Canadian Commercial Mortgage Fund. 

“Our expectation is that, combined, the assets under management will be billions of dollars over time,” said Peacher.

The Real Estate Fund will have an open-ended structure. 

Sun Life is planning on seeding the commingled fund with some of the existing assets from its general account. 

“Our plan is to contribute assets that we now own 100%, and we would then put them into the fund at a 50% interest,” Peacher said.

“The equity from the other 50% interest would be kept in the commingled fund. This would show the investors we have some of our capital at risk.”

The assets that would be placed into the fund are core properties that have no debt. 

These would be a mixture of office, industrial, retail and apartments located in urban markets – all in Canada.

Sun Life sees that most of its equity real estate portfolio has acquired properties at cap rates in the range of 5.5% to 6.5%. 

These returns are based on the property’s current net operating income.

The Commercial Mortgage Fund will be writing fixed-rate first mortgage loans that are secured by high-quality income-producing office, retail, industrial and apartment properties. 

The debt will have a loan-to-value ratio of around 60%.