(Toronto) Market gains helped Sun Life Financial reach an all-time high in assets under management in the third quarter, even as it continues to struggle with the withdrawal of investor funds, says the financial services organization that published its results for the quarter ended September 30 on Monday at the end of the day.
Updated yesterday at 5:34 p.m.
Ian Bickis
The Canadian Press
CEO Kevin Strain said the earnings, up 13% from the third quarter of last year, make it the largest asset manager in Canada with more than $1.5 trillion.
The growth came as Sun Life continues to face outflows from institutional and retail clients, after seeing investors withdraw a net $19.1 billion from the MFS Investment Management division during the quarter. . The amount adds to net outflows of 47.2 billion within MFS over the previous three quarters.
“The exit issues remain,” Mr. Strain said during an earnings conference call.
Institutional outflows are largely due to portfolio rebalancing, the firm argued. She also noted that retail outflows are occurring as investors continue to favor high-growth technology stocks, concentrated in the “Magnificent Seven,” and short-term interest products.
Clearer skies on the horizon
MFS CEO Mike Roberge said the company is seeing momentum in fixed income and expects outflow trends to moderate and improve from here on.
The outflows also come as retail investors heavily favor exchange-traded funds (ETFs), while MFS, which created the first mutual fund a century ago, does not yet offer ETFs.
In Canada, ETFs attracted $33 billion in new assets in the first six months of the year, while mutual funds, which typically come with higher management fees, saw outflows of 8 billion, according to a report from TD Securities.
Mr. Strain said the company was taking steps to address the issue by offering a diverse range of products to meet changing customer needs, including the planned launch of five actively managed ETFs in December. “We are confident in MFS’s long-term strategy and the steps it is taking to address these headwinds,” he said.
Although the company is expanding into ETFs, it does not anticipate being impacted by the fee cuts, as it expects its active ETFs and fixed income offerings to have management fees similar to those of its existing products.
Sun Life’s asset management arm is also moving more into alternative investments like private credit, but the company said it is in the early stages of that expansion.
Although the company is struggling somewhat to manage capital outflows, Sun Life reported overall third-quarter profit of $1.35 billion, up from $871 million in the same quarter last year.
Sun Life said its underlying net profit was $1.02 billion, up from $930 million a year earlier, partly due to higher fee revenue at MFS.
The company also increased its dividend by three cents to 84 cents per common share and is continuing its share repurchase program.
