A Q&A with the CIO

The last ten years have certainly been interesting for the industry. How have Canada Life Investments fared?

We have enjoyed a decade of strong growth across the business, with assets under management doubling from £18 billion to £36 billion. Obviously there have been difficult times in the market, the 2008 financial crisis and 2011’s sovereign debt issues for example, which is why I think the growth we have enjoyed has been testament to the culture we have in place at Canada Life Investments which is focused on long-term investments and providing client solutions.

What has been behind this growth?

I believe one of the main reasons has been the performance profile we have delivered for clients. Not many people are aware that we have been writing annuity business in the UK since 1903. Annuities are by their nature, long-term financial contracts that need to deliver an income, often over the very long-term. We take this same approach to fund management. For example, within fixed income our success has been down to a strong credit underwriting process, with a focus on asymmetric risk. People forget that fixed income returns are generally capped, but the downside risk is not. This approach enabled our Corporate Bond Fund, for example, to deliver a positive return in 2008. It was one of only two products in the IA Corporate Bond sector that managed this. When we invest in longer-term bonds for example, you will potentially be holding that asset over more than one cycle, it could involve a recession or there could be significant technological change. Therefore you want to be confident that the business you are lending money to has the abilities to withstand those pressures.

However, as well as successfully navigating the financial crisis, we have also grown our fund management business by listening to what our clients want. This is important as everything we do is driven by ensuring our clients have the solutions they want available to them. For example we have extended our fixed income range in recent years, launching Global Bond, Short Duration Corporate Bond and Sterling Liquidity products following client demand. As well as OEIC products, we also manage a number of similar mandates for some of our group companies, which has also contributed to our asset growth. We were also able to leverage our existing life and pension capabilities to bring a range of risk-rated products to the market, as the Financial Conduct Authority focuses more closely on client suitability in the advisory industry.

You mentioned that you manage money for other group companies, how does this work?

To give you a bit of background, Canada Life Investments is part of Canada’s Great-West Lifeco (GWL). In total, the parent company manages in excess of £750 billion in assets, split across asset managers such as ourselves in the UK, Putnam Investments and PanAgora in the US and Setanta Asset Management in Ireland. We manage a number of mandates for GWL and in addition, this relationship also enables us to offer funds from our sister companies that ordinarily would not be available for UK investors. For example, we offer a global equity income fund managed by Setanta and a global infrastructure vehicle managed by Canada’s GLC Asset Management.

Our clients also benefit from the resource that being part of the GWL Group provides. In London, for example, we have a team of credit analysts that cover around 500 issuers. Being part of a much larger organisation gives us access to a 30-strong North American credit research team as well, so we are able to cover a significantly wider investment universe. We believe this relationship enables us to offer the size and financial strength of a large global institution, as well as the level of customer focus and service of a boutique.

How would you describe the culture at Canada Life Investments?

We have nearly 100 individuals in our Lombard Street office, all of whom ascribe to our culture, our values and the attitude of working with our clients to come up with solutions. For example, our UK business encompasses the values of ‘People, Integrity, Teamwork & Excellence.’ These are evident at Canada Life Investments and how we engage with our clients. We have no ‘star’ fund managers, for example, each asset class is managed by a team and aims to deliver a superior performance. The integrity and ability of our investment professionals is also evidenced by their tenure here. We value our staff members and are fortunate to be repaid with loyalty and long service, which ultimately benefits our clients. As an example, our Head of Credit Research has been here for 35 years, Head of Property 29 years, Head of Fixed Income Portfolio Management 19 years, Head of UK Equities 13 years and Head of International Equities 18 years. 

How do you aim to approach your client relationships?

We believe we understand the challenges our clients face, from regulatory issues to investment selection. Therefore, whatever it may be – fixed income, property or equities for example – we believe we are well-placed to help our clients navigate the market through a varied suite of products. For example, our Short Duration Corporate Bond Fund was launched to help clients protect their capital against future interest rate rises. In addition, all of our investment capabilities are on offer across our range of Managed and Portfolio Funds. Either risk-targeted for specific client suitability – or more flexible in their allocation – these funds offer investors exposure to fixed income, equities and property in easy-to-understand products.

On the regulatory side, a source of concern for many fund management houses of late has been how to pay for research, What is Canada Life Investment's view?

We are pleased to be able to state that, as of 3 January 2018, Canada Life Investments will bear the costs of all research payments currently charged to our funds. MiFID II has been a catalyst for our industry to assess a number of business practices and we have always aimed to be transparent partners to our investors. We believe this change aligns our interests with those of our clients and offers value for money with regards to our fund charges.

Does this best practice extend to other areas? Many advisers now focus significant due diligence on fund charges and the impact these have on performance for example?

The industry has changed significantly in the last decade and the reduction in cost for the customer in accessing active management expertise is a huge positive. We believe that active management can add significant value, but we also recognise that we must always maintain a commitment to best practice. For example, earlier this year we reduced the ongoing charges (OCFs) on our £260m Portfolio Fund range by 0.25% by reducing the annual management charge. In January, we also launched the CF Canlife Managed 0%-35% Fund, which seeks to provide long-term capital growth and income through a diversified portfolio of UK income-generating assets. We believe there is a gap in the market for a low volatility product that is genuinely diversified across asset classes. This Fund has 19% in property for example, which is not typical for a multi-asset fund.

Why is that?

I think it is because many investment businesses do not possess the in-house expertise. We have had a very successful property business since the 1960s and we believe the asset class is able to deliver investors a strong yield, the potential for capital growth and – critically within a multi-asset portfolio – excellent diversification benefits. The team here have won numerous awards over recent years, including Three Year Peer Group Performance Awards in the Small Balanced Funds (below £100m) category at the 2017 UK Property Investment Awards. Importantly, our multi-asset range enables a much wider base of investors to gain exposure to these capabilities.

Important Information

Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. 

The information contained in this document is provided for use by investment professionals and is not for onward distribution to, or to be relied upon by, retail investors. No guarantee, warranty or representation (express or implied) is given as to the document’s accuracy or completeness. The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice. This document is issued for information only by Canada Life Investments. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available at www.canadalifeinvestments.com. Some Canada Life Investments funds may invest in property funds that may be illiquid and subject to wide price spreads, both of which can impact the value of the fund. The value of the property is based on the opinion of a valuer and is therefore subjective.

The Canada Life Investments blog page features images licensed from Getty Images International. These images shall not be downloaded, republished, retransmitted, reproduced or otherwise used in any way. Aside from the above, and unless otherwise stated, Canada Life retains copyright in and/or has a right to use all contents of this website (including text and graphics) and such contents shall not be copied, distributed, extracted or modified without the express prior written consent of Canada Life unless for private, non-commercial use.

CLI001003 Expiry 9 November 2018

David Marchant

David Marchant

Chief Investment Officer, Canada Life Limited & Managing Director, Canada Life Asset Management Limited.

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