Sun Life Institutional Investments (Canada) Inc. has launched a new short-term private fixed income fund for institutional investors.
The fund, which will provide access to Sun Life’s capabilities in private fixed income and commercial mortgage investments, was created to address near-term market need for higher yield investments, says Carl Bang, president of Sun Life Institutional Investments in Toronto.
“Rates are very low in the [public] marketplace and people who are focused on the shorter end of the market, say two to three years, are finding this extremely painful,” he says.
Read: Canadian pension solvency surveys show contrasting results
“What we tend to focus on is purely investment grade, though we do sometimes have opportunities to very solid companies but just below investment grade. But these tend to be better priced deals with much better governance and protections because they’re directly negotiated between the lender, being ourselves, and the borrower.”
He also notes private markets tend to be less liquid than public ones, and investors can be rewarded for providing liquidity.
Sun Life created the fund with input from pension plans, insurance companies and other clients. Its first capital raise of $550 million for the fund resulted in an excess demand of $350 million.