(Bloomberg) -- Sun Life Financial Inc., Canada’s third-largest life insurer, is expanding into managing private assets including real estate and mortgages for pension funds as it seeks fee income.

Sun Life, which oversees about C$100 billion ($90.4 billion) in assets backing policyholder obligations, will offer three funds focused on fixed income, commercial mortgages and real estate assets for third-party clients, the Toronto-based company said today in a statement.

“It plays to our skill-set and it’s not capital- intensive,” Steve Peacher, Sun Life’s chief investment officer, said in a phone interview. The private assets “give you more yield” and diversification, he said.

Insurers including Manulife Financial Corp., Canada’s largest, and MetLife Inc. in the U.S. have added third-party management as they scale back from capital-intensive products such as variable annuities. Sun Life said it will focus on defined benefit pension plans and other institutional investors in Canada.

The insurer seeks to have “billions of dollars” of third- party assets under management in the three to five years, said Peacher, who heads the initiative. Sun Life currently doesn’t manage such assets, he said.

A prolonged period of low interest rates has curbed profit for insurers and pension funds, forcing them to seek returns in real estate, infrastructure and private equity. It’s caused a scarcity of the private assets in the marketplace, and pension funds are starting to rely more on external managers for expertise, Peacher said.

The new business will operate under Sun Life Investment Management and be overseen by about 200 employees now managing assets for the firm.



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