What's New - Changes to AA RD Funds

Manulife Financial

Changes to Group Retirement Solutions' Asset Allocation and
Retirement Date Funds

In February 2011, Group Retirement Solutions (GRS) will make a number of positive changes to the Manulife Asset Allocation (AA) Funds and Manulife Retirement Date (RD) Funds on the GRS investment platform. These changes further diversify the AA and RD suites by introducing new asset classes, funds and fund managers, and include strategic adjustments to current holdings.

Making these changes demonstrates Manulife's ongoing commitment to offering competitive investment options positioned to help your plan members meet their long-term retirement goals.

You do not need to take any action as a result of these changes. This background is provided to help you understand these enhancements and answer questions you receive from plan members.

New Asset Classes
After these changes take effect, Manulife's AA and RD Funds will contain exposure to these new asset classes.
  • Global Multi-Sector Fixed Income (Manulife Asset Management Strategic Income Fund).
    Introducing this fund to the AA and RD suites will provide strong risk-adjusted returns relative to those in global fixed income markets. The exposure to a wide range of regions, sectors and currencies offered by this asset class make it a strong addition to the AA and RD suites.
  • Emerging Markets (DFA Emerging Markets Value Fund)
    Funds in this asset class have experienced stronger growth in recent years. Adding this class to Manulife's AA and RD funds introduces exposure to an element with the potential to increase earnings growth.
  • Direct Real Estate (managed jointly by Manulife Real Estate and Manulife Asset Management)
    Historically, Canadian real estate has generated attractive annual income and capital appreciation that make this component a logical addition to the funds.
Passive management being introduced to existing asset classes
Passive management (index) funds will be introduced to the AA and RD suites' Canadian Fixed Income, Canadian Equity, US Equity and International Equity asset classes. Incorporating these funds improves the AA and RD suites' overall fee structure with minimal impact on the overall risk-return profile.

Changes within existing asset classes
To accommodate the asset classes introduced to the AA and RD funds, these changes will occur within asset classes already included in those suites.
  • Reduced exposure to Canadian Small Cap Equity
    Recently, Canadian Small Cap securities have shown less favourable risk-return characteristics. As a result, exposure to this asset class will be reduced in favour of the Canadian Large Cap asset class.
  • Reduced exposure to International Equity
    The fund's International Equity holdings will be reduced to allow exposure to Emerging Market equities and a slight increase in exposure to the U.S. Equity class.
Changes to funds in existing asset classes and strategies
As a result of changes made to the GRS investment platform in January, a small number of funds will be removed from Manulife's AA and RD funds. These changes will also occur in February 2011:
  • The Manulife AllianceBernstein US Large Value Fund will be replaced by the T. Rowe Price Large Cap Value Fund.
  • The Manulife Capital Guardian Global Equity Fund will be removed, with assets in the fund re-allocated to existing investments in the AA and RD suites.
  • The Manulife U.S. Small/Mid Cap Equity Fund (GSAM) will be removed from the AA and RD funds. The funds will not have exposure to the US Small/Mid Cap Equity asset class after this change, as the class has been replaced in favour of the classes listed above.
What your plan members will see
In February 2011, GRS will add information explaining these changes to the "What's New" section of the plan member website at www.manulife.ca/GRO.

Individual pages for these funds – which members can access at www.manulife.ca/GRO - will be updated in March 2011 to reflect these changes.

Members with assets in a Manulife Asset Allocation Fund or a Manulife Retirement Date Fund will see an article in the newsletter accompanying their June 2011 account statements that explains these changes.

About Investment Management Services and the Portfolio Solutions Group
Manulife maintains specific teams of in-house investment expertise. These teams carefully select, monitor, and manage fund options to ensure GRS clients have access to competitive options that suit wide-ranging needs.

Investment Management Services (IMS) operates as an independent team. This group completes thorough analysis of fund managers and their offerings before recommending them for inclusion on Manulife's investment platform. IMS also provides continuing review of fund managers' operations, offerings and performance.

Manulife's Portfolio Solutions Group manages more than $90 billion globally, including $70 billion in Retirement Date and Asset Allocation categories. The Group consists of 20 investment professionals, of which its most senior members have an average of nearly 23 years of asset management experience.

If you have any questions about these changes, the funds, or styles being added to the Manulife Asset Allocation and Retirement Date Funds, please contact your Group Retirement Solutions representative.