Sun Life Hits Lowest Coupon As Sustainable Debt Goes Mainstream

Photographer: Brent Lewin/Bloomberg

Sun Life Financial Inc. has spent years building its SLC Management alternative-asset management arm into a C$145 billion ($116 billion) business through acquisitions.

Now the insurer is seeking to increase SLC’s size an additional 55% to C$225 billion in third-party assets under management by 2025, largely with the pieces it already has in place.

SLC Management President Steve Peacher said he’ll rely on organic growth and new products from existing teams, which span fixed income, real estate, infrastructure and alternative credit. Despite a recent uptick in inflation expectations and long-term interest rates, Peacher sees a lower-for-longer rate environment persisting, continuing to fuel alternatives demand from insurance, pension fund, endowment and foundation clients.

“Institutions are allocating more to alternatives because equity valuations are high and rates are really low, and these are asset classes have delivered,” Peacher said Thursday in an interview, following the announcement of the 2025 assets target and a morning of presentations to investors. “We’ve got the wind at our back with our existing products and then new variations of our existing capabilities.”

Read more: Sun Life Buys Majority Stake in Attanasio’s Crescent Capital

Acquisitions aren’t off the table, but they likely won’t be at the scale of those SLC undertook to put in place the building blocks of its investment platform. Peacher has called the purchase of alternative credit manager Crescent Capital, which was announced last year and closed in early January, the “final major piece of the puzzle” for SLC and stood by that assessment on Thursday. The firm paid $276 million for Crescent up front and could pay as much as $62 million more, depending on performance.

Crescent is evaluating an “incremental” acquisition that would give it a capability in another niche of alternative credit, Peacher said. Acquisitions that bring its current businesses into new market segments or geographies would be most likely, but he wouldn’t rule out deals to significantly increase the size of businesses, particularly in Asia. He declined to provide more details on Crescent’s potential acquisition.