SLC executive chair Steve Peacher at the company's office on York Street in Toronto on July 11, 2017.Galit Rodan/The Globe and Mail
After 10 years of acquiring powerhouse alternative asset managers, SLC Management is shifting focus to boosting its profits by 20 per cent over the next three to five years.
The asset management division of Canada’s second largest insurer, Sun Life Financial Inc., SLF-T has spent about $2-billion over the past decade to outbid competitors and snap up a series of well-known alternative asset names, such as real estate investors Bentall Kennedy and GreenOak, and private credit provider Crescent Capital.
Today, SLC has more than $387-billion in assets under management (AUM) for more than 1,400 institutional clients in 20 countries. And now that SLC executive chair Steve Peacher has acquired much of what he set out to buy, he says the diverse group of asset managers that SLC owns, or has majority stakes in, will start to work together under a more co-ordinated business model to help fuel growth.
Forty-one per cent of Sun Life’s underlying net income comes from wealth and asset management, a division that, along with SLC, includes U.S. asset manager MFS Investment Management and Sun Life Global Investments. Another 27 per cent of net income comes from individual insurance products, and 32 per cent from its group-benefits business.
The plan to increase SLC’s profit by 20 per cent is the largest goal for any of Sun Life’s business segments – including its other operations in Asia, the United States and Canada.
During a recent investor day, Sun Life chief executive officer Kevin Strain said the company no longer refers to itself as “just an insurance company” – but as an asset manager as well, and he believes that the investment arm will be a pivotal part of the company’s growth strategy.
“We are a top-25 asset management company by AUM around the world at $1.5-trillion in assets,” he said during his opening remarks. “That’s very unique for an insurance company.”
Part of the plan to increase profit involves building a shared team of wholesalers to help pitch SLC’s entire mix of alternative assets to institutional clients. For example, Mr. Peacher says, many of the company’s 1,400 institutional clients are still unaware that Crescent is owned by the same company as BentallGreenOak.
And scale is critical in the alternatives business, said Sonny Kalsi, co-CEO of BGO, at the investor day.
“What we are seeing is clients want to do more with fewer managers, ” Mr. Kalsi told the audience. “They are overwhelmed. They are trying to do a lot with smaller teams. So, this is a big competitive advantage for us and everyone else in the industry. So that scale is beneficial.”
The strategy also involves leveraging the entire investment platform in ways the company has not done before. Through the launch of SLC Global Insurance Group, a dedicated team can now tap into Sun Life’s bigger book of insurance clients to offer custom investment strategies.
Another part of the plan is moving SLC products into the retail market in both the U.S and Canada, a task that requires extensive investor and adviser education about how private markets work, including liquidity and time horizons.
Private market giants – such as Blackstone Inc., Apollo Global Management Inc. and Toronto-based Brookfield Asset Management Ltd. – have dominated the alternative asset markets for years, but Canada’s large financial institutions, including the big banks, have been slowly entering the space by building their own alternative investment platforms.
Previously, retail investors generally could not get access to private markets. But with regulatory rules easing for the sale of alternative investments, some private firms have spent years crafting new products or partnerships that will help them infiltrate retail markets in hopes of offering high-net-worth investors an alternative to investing in publicly traded markets.
The shifting away from public markets by retail investors is creating a runway of new opportunity for SLC. Over the next 10 years, global alternative assets held by retail investors are projected to jump to $11-trillion from $4-trillion.
SLC hopes to achieve its retail goals in Canada through a partnership with the country’s third-largest bank, Bank of Nova Scotia. In November, 2023, the two companies announced an exclusive distribution arrangement that will help SLC move its investment strategies into the hands of high-net-worth investors.
SLC Management began as a small investment platform in 2014, consisting of three institutional products that were funded entirely by $650-millon in assets from Sun Life’s balance sheet. After gaining some traction with major Canadian pension plans, SLC bought two small, fixed-income managers in the U.S., and in 2015, bought North American real estate and property management firm Bentall Kennedy.
In 2019, SLC bought a stake in global real estate investment company GreenOak Real Estate, and merged it with Bentall Kennedy. The deal gave SLC a 56-per-cent stake in the newly formed real estate investment management firm, BentallGreenOak.
Less than a year later, in 2020, SLC bought an 80-per-cent interest in London-based InfraRed Capital Partners for £300-million (then $515-million) adding infrastructure equity, real estate and renewables to the company. And in 2021, the asset manager snapped up a 51-per-cent stake in U.S.-based Crescent Capital Group, a US$28-billion loan provider the insurer had been looking for several years to add to its investment portfolio.
In early 2023, Mr. Peacher decided he needed to find ways to get product into the hands of financial advisers, and bought a 51-per-cent stake in Advisors Asset Management Inc. (AAM), an independent retail distribution firm that exclusively markets and promotes to hundreds of investment firms in the United States.
“There’s a huge trend in terms of retail investors adopting alternatives,” he added. “And you’ve got to have distribution.”
In Canada, the route to the retail market has been a bit slower. It’s been 14 months since the Scotiabank partnership was announced and the launch of an investment strategy in private credit and infrastructure for accredited retail investors is under way.
Neal Kerr, head of Scotiabank global asset management, said the strategic relationship will give the bank’s high-net-worth clients access to private asset options that add “diversification and have the potential to enhance risk-adjusted portfolio performance.”
All of the SLC alternative asset acquisitions include options for SLC to purchase remaining stakes at a future date, and the company has set aside the capital to do so. Last summer, SLC purchased the remaining 20 per cent of Infrared, and has plans do the same with the remaining stakes in Crescent Capital and BentallGreenOak in early 2026.
To foster more co-ordination among the alternative asset managers, SLC created an executive leadership team in 2024. BGO co-CEO Mr. Kalsi was appointed president of SLC, and other members include AAM president Cliff Corso, InfraRed CEO Jack Paris, Crescent Capital president Chris Wright and SLC chief investment officer Randy Brown.
In the alternative asset space, Sun Life’s global competitors are some of the most well-known brands on the street, such as Blackstone, Brookfield, and Ares Management Corp. But unlike the model run by some of these behemoth alternative asset players, SLC has not folded its acquisitions under one brand. Rather, Mr. Peacher has kept each individual company’s brand, as well as the executive teams, intact to run each entity as an independent shop.
“Our priority after making those acquisitions was don’t screw them up,” Mr. Peacher told investors at the end of 2024. “Let them run their business. Don’t lose people. Don’t lose clients.”
He has held true to his word to each company’s founders. SLC operates as five separate operations. Mr. Peacher says he has no plans to merge the companies under one name just yet. However, he does see the potential upside of having a single brand in the future when it comes to retail investors.
“It would be simpler if we had one name, especially as we enter the high-net-worth markets because BGO is not a name well known by individual investors across the market,” he added. “But it’s a very strong brand with institutional clients. So, it’s an ongoing discussion.”