Fund commentary | Q1 2020

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Opinions and commentary provided by Amundi Asset Management.


The first quarter of 2020 was a period of extreme volatility for markets around the globe as the COVID-19 pandemic created new hotspots and sparked lockdowns around the world. The emerging markets (EM) fixed income space was no exception to the volatility, as emerging market spreads widened in March to levels not seen since the 2008 Financial Crisis as investors exited from risk assets and moved toward lower risk assets. EM currencies also saw a sharp selloff against the U.S. dollar as the risk-off sentiment grew.

The Fund underperformed its benchmark during the quarter, primarily due to its position in hard currency EM bonds, as well as its exposure to certain EM currencies. The Fund’s overweight allocations in Brazil, Russia and Indonesia were key reasons for underperformance. Russia and Brazil both underperformed after the sharp drop in energy prices that caused a sharp selloff in their respective currencies. However, the portfolio manager continues to maintain overweight positions in Brazil and Russia, as they believe these currencies have been oversold and could see a comeback.

During the quarter, the Fund increased its position in A, AA and BBB-rated securities, thereby increasing the portfolio’s quality and liquidity of the holdings. To offset this increase, the Fund reduced its positions in EM high yield securities. The Fund’s position in Mexican bonds was reduced, as Mexico experienced a credit downgrade and continues to struggle through the energy steep decline in energy prices. The portfolio manager also reduced the Fund’s position in Turkish bonds, as they believe Turkey does not yet have the spread of the COVID-19 virus under control, and has limited fiscal and monetary room to provide adequate stimulus, thereby making the recovery slower. The portfolio manager also moved to a neutral position in EM currencies with a slight positive bias, as they believe the worst move for the currencies may be behind us.

The portfolio manager believes EM Debt assets may now offer meaningful value and could possibly trade at higher levels over time. In the short-term, however, there is widespread uncertainty surrounding the extent of the virus’ spread throughout emerging markets, and the potential for poor market liquidity amidst outflows could cause further declines in asset prices. Furthermore, the portfolio manager believes the market has shifted from pricing in a slowdown in global growth due to the coronavirus, to reflecting deeper concerns around market liquidity and fund outflows. The market is observing some forced selling of assets to fund outflows from EM debt funds, which has resulted in extreme dislocation in some asset prices. The portfolio manager also believes valuations have become attractive in EM Debt, however, it may take some weeks or months for the outflows to clear the market.

Fund performance

Compound returns %1 Since inception2 7 year 5 year 3 year 1 year Q1
Sun Life Excel High Income Fund - Series A 4.2 2.9 0.8 -1.9 -5.6 -9.1
Sun Life Excel High Income Fund - Series F 5.3 4.0 1.9 -0.8 -4.6 -8.9
Benchmark* 5.8 5.2 4.0 2.1 -0.5 -5.9

1Returns for periods longer than one year are annualized. Data as of March 31, 2020.

2Partial calendar year. Returns are for the period from the fund’s inception date of Series A: October 22, 2010 to December 31, 2010 and Series F: November 4, 2010 to December 31, 2010.

*Benchmark: 50% JP Morgan GBI-EM Global Diversified Composite Unhedged Index; 50% JP Morgan EMBI Global Diversified Composite Index.


Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any mutual funds managed by Sun Life Global Investments (Canada) Inc. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. This commentary is provided for information purposes only and is not intended to provide specific individual financial, investment, tax or legal advice. Information contained in this commentary has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy.

This commentary may contain forward-looking statements about the economy and markets, their future performance, strategies or prospects or events and are subject to uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Forward-looking statements are not guarantees of future performance and are speculative in nature and cannot be relied upon.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Investors should read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual compounded total returns including changes in security value and reinvestment of all distributions and do not take into account sales, redemption, distribution or other optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

While Series A and Series F securities have the same reference portfolio, any difference in performance between these series is due primarily to differences in management fees and operating fees. The management fee for Series A securities also includes the trailing commission, while Series F securities does not. Series A securities of the fund are available for purchase to all investors, while Series F securities are only available to investors in an eligible fee-based or wrap program with their registered dealer. Investors in Series F securities may pay a separate fee-based account fee that is negotiated with and payable to their registered dealer.

© Sun Life Global Investments (Canada) Inc., 2020. Sun Life Global Investments (Canada) Inc. is a member of the Sun Life group of companies.