Transamerica closes several segregated fundsBy Alain Thériault | November 23 2012 08:33PM
Transamerica Life Canada has pruned its segregated fund line, with six funds cut in October. Assets in these Guaranteed Investment Funds (GIF) will be transferred into six new Transamerica Investment Portfolios (TIP).
Global Growth GIF, Can-Asian Index GIF, and Can-Europe GIF will be reallocated to the Transamerica Global Growth TIP. The Canadian Large Cap Index GIF is transferred to a similarly named TIP. Can-U.S. 21st Century Index and Can-US Large Cap Index have been moved to the Transamerica US index GIF.
Another fund was also combined with an existing fund: Transamerica CI Max Growth TIP is melding with Transamerica CI Growth TIP.
Transamerica is closing the funds largely due to lack of investor interest, channeling their assets into existing funds, says Solange Blais, regional vice president, Eastern Canada for Transamerica. “There were few assets in these funds, but we had to keep paying maintenance costs, audit them, produce reports and issue client statements,” she explains, adding that the process had become very time-consuming.
For example, the Canadian Large Cap Index GIF, founded in October 2009, had assets of $928,176 at Dec. 31, 2010, the most recent reporting date available on the company website. Worse yet, Global (Growth) Equity GIF, created at the same time, had assets under management of a meager $47,729 at the same date.
Other criteria Transamerica used to select which funds to dissolve include the number of policyholders, investment objectives and long term return.
Changes in November
Other changes followed those announced in October. Effective Nov. 2, Transamerica planned to make changes to several TIP funds, explained a company FAQ document.
Several funds were closed, including the following TIP funds: Transamerica Mackenzie Ivy Growth & Income GIF; FPG Conservative Asset Allocation GIF; Balanced Asset Allocation GIF and Growth Asset Allocation GIF. The assets of these funds will be transferred to the Transamerica Canadian Balanced GIF – TIP.
Similarly, the TIP assets of the Can-U.S. Large Cap Index and the Can U.S. 21 Century Index funds will be moved to the Transamerica U.S. Equity Index – TIP.
The net result: four out of seven families (contracts) affected will have a leaner fund portfolio. The total number of funds plunged from 209 to 132, down by 77. This number is multiplied by the fact that the imaxx and TIP GIF families differentiate funds by principal protection at maturity and death guarantees (75%-75 %; 75%-100% and 100%-100%).
The FPG Transamerica contract falls from 50 to 22 funds, Five to Life shrinks from 23 to 13 funds, imaxx GIF from 52 to 48 funds, and TOP is almost halved, from 81 to 46 funds. The three other plans, representing one fund each, remain intact.
What's more, Transamerica has changed managers for the segregated funds transferred. AGF, Dynamic Funds, Invesco, Mackenzie and AIC are giving way to AEGON Capital management, Fidelity Investments, TD Asset Management, Franklin Templeton Investments and CI Investments.
Withdrawal fees axed
Most of the closed funds include free right of exit. Clients can thus avoid a declining redemption fee of 6% to 1% over six years if they hold segregated funds that undergo what Transamerica describes as “fundamental changes.”
A fundamental change occurs if the resulting transfer increases the management expense ratios. A switch from the Transamerica Global equity Index GIF to the new Global growth GIF would fall into this category. The MER rises from 3.32% to 3.38%. “The increase is related to a slightly higher insurance fee,” the insurer explains.
Fund name change and investment objective change, decrease in the frequency with which units of a fund are valued and an increase in the insurance fee of a fund in excess of the maximum are also considered fundamental changes.
Several families are affected by these sweeping changes: Transamerica and imaxx GIF, Five for Life™ (5FL) guaranteed withdrawal contracts TOP, Agent’s Plan, Balanced Investment Growth (BIG) and Seg 1(72).
Fundamental changes apply to Transamerica and imaxx GIF, Five for Life™ contracts, TOP and Seg 1 but not Agent’s Plan or Balanced Investment Growth.