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Sun Life Global Tactical Yield Private Pool

Fund commentary | Q3 2020

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Opinions and commentary by Sun Life Global Investments.

Global equities continued to rally in nearly uninterrupted fashion in the third quarter, with the MCSCI World Index surpassing the pre-COVID-19 highs and setting a new record in early September. Investors then paused the buying spree over the course of September to consider the still troubled market backdrop: the pandemic was accelerating, the U.S. Congress failed to deliver additional stimulus and with the threat of a prolonged downturn, the outlook for corporate profits clouded. The MSCI World held on to an 8% total return for the quarter, despite losing 3.4% in September.

With so much economic and political uncertainty, was the stock market’s tumble just a short-lived pullback? Or was it the start of a bigger downturn? That remains to be seen. But since the start of the COVID-19-driven selloff in March, we’ve consistently downplayed the idea of a quick V-shaped recovery. Instead, given the depth of the economic carnage, there could be another down leg in what may be a W-shaped recovery. Perhaps that is the start of what we saw as Q3 came to a close.

Where the markets go from here though, clearly depends on the answer to a number of key questions. As the second wave of COVID-19 grows, can it be contained without shutting down the economy again? Will the U.S. deliver another round of stimulus? When could we see an effective vaccine? And, if we don’t get a rapid recovery, can corporate profits keep pace with expanding equity valuations.

Given the deep economic hole carved by COVID-19, we started Q3 being slightly underweight equities. However, with the initial-wave of COVID-19 partially contained and with monetary and fiscal stimulus kicking in, we saw positive signs emerge major economies began to reopen, vaccine trials were advancing and corporate profits were holding up.

Over the course of the third quarter, we continued to position the Sun Life Global Tactical Yield Private Pool for an environment of roughly balanced risks. To the downside, the resurgence of COVID-19  and expected second wave of the virus was a key concern.  To the upside, policy was still broadly accommodative, vaccine trials advanced and a truly sustained cyclical recovery in the economy had yet to be reflected in markets. The Fund entered the third quarter with a neutral setting in equities with a 50% weight, which was maintained over the quarter.

Within the bond component of the Pool, we continued to maximize our allocation to alternative fixed income - looking to take advantage of ongoing opportunities within global credit markets. Over the quarter we opportunistically reallocated cash towards core bonds at points where we felt higher yields made bonds a more attractive diversifier against the equity risk in the portfolio.

Sun Life Global Tactical Yield Private Pool Monthly snapshot:

Series A Series F

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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 SLGI Asset Management 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.

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SLGI Asset Management Inc. is the investment manager of the Sun Life Mutual Funds, Sun Life Granite Managed Solutions and Sun Life Private Investment Pools.

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