Sun Life 2015 Annual Report Download - page 152

As at December 31, 2014
Type of structured entity Type of investment held
Consolidated
Statement of Financial
Position line item
Carrying
amount
Maximum
exposure to
loss(1)
Securitization entities – third-party managed Debt securities Debt securities $ 4,444 $ 4,444
Securitization entities – third-party managed Short-term securities
Cash, cash equivalents
and short-term
securities $ 788 $ 788
Investment funds – third-party managed Investment fund units Equity securities $ 4,011 $ 4,011
Investment funds – company managed(2) Investment fund units
Equity securities and
Other invested assets $ 916 $ 916
Limited partnerships – third-party managed
Limited partnership
units Other invested assets $ 788 $ 788
(1) The maximum exposure to loss is the maximum loss that we could record through comprehensive income as a result of our involvement with these entities.
(2) Includes investments in funds managed by our joint ventures with a carrying amount of $187. In 2014, we redeemed units of funds managed by our Indian joint venture for
proceeds of $22 and subsequently used these funds to seed additional funds managed by this joint venture. The redemption resulted in a gain of $11 reported in Net
investment income in our Consolidated Statements of Operations.
17.D.i Securitization Entities
Securitization entities are structured entities that are generally financed primarily through the issuance of debt securities that are
backed by a pool of assets, such as mortgages or loans.
Third-Party Managed
Our investment in third-party managed securitization entities consist of asset-backed securities, such as commercial mortgage-backed
securities, residential mortgage-backed securities, collateralized debt obligations (“CDOs”), and commercial paper. These securities
are generally large-issue debt securities designed to transform the cash flows from a specific pool of underlying assets into tranches
providing various risk exposures for investment purposes. We do not provide financial or other support to these entities other than our
original investment and therefore our maximum exposure to loss on these investments is limited to the carrying amount of our
investment. We do not have control over these investments since we do not have power to direct the relevant activities of these
entities, regardless of the level of our investment.
Company Managed
We provide collateral management services to various securitization entities, primarily CDOs, from which we earn a fee for our
services. The financial support provided to these entities is limited to the carrying amount of our investment in these entities. We
provide no guarantees or other contingent support to these entities. We have not consolidated these entities since we do not have
significant variability from our interests in these entities and we do not have any investment in these entities.
17.D.ii Investment Funds and Limited Partnerships
Investment funds and limited partnerships are investment vehicles that consist of a pool of funds collected from a group of investors for
the purpose of investing in assets such as money market instruments, debt securities, equity securities, real estate, and other similar
assets. The preceding table includes our investments in all investment funds, including mutual funds, exchange-traded funds, and
segregated funds, and our investments in certain limited partnerships. Some of these investment funds and limited partnerships are
structured entities. For all investment funds and limited partnerships, our maximum exposure to loss is equivalent to the carrying
amount of our investment in the fund or partnership. Investment funds and limited partnerships are generally financed through the
issuance of investment fund units or limited partnership units.
Third-Party Managed
We hold units in investment funds and limited partnerships managed by third-party asset managers. Our investment in fund units and
limited partnership units generally give us an undivided interest in the investment performance of a portfolio of underlying assets
managed or tracked to a specific investment mandate for investment purposes. We do not have control over investment funds or
limited partnerships that are structured entities since we do not have power to direct their relevant activities.
Company Managed
We hold units in Company managed investment funds. We generally have power over Company managed investment funds that are
structured entities since we have power to direct the relevant activities of the funds. However, we have not consolidated these funds
since we do not have significant variability from our interests in these funds. We earn management fees from the management of these
investment funds that are commensurate with the services provided and are reported in Fee income. Management fees are generally
based on the value of the assets under management. Therefore, the fees earned are impacted by the composition of the assets under
management and fluctuations in financial markets. The fee income earned is included in Fund management and other asset based
fees in Note 18. We also hold units in investment funds managed by our joint ventures. Our share of the management fees earned is
included as part of the net income (loss) reported in Note 17.B.
17.E. Consolidated Structured Entities
A significant structured entity consolidated by us is the entity that issued the senior financing that is described in more detail in Note
13.C. We also consolidate investment funds managed by SLIM Inc. that invest primarily in mortgages and loans and investment
properties. During 2014, we contributed $656 of assets to these funds in exchange for units issued by the funds.
150 Sun Life Financial Inc. Annual Report 2015 Notes to Consolidated Financial Statements