Effective November 27, 2021, the deferred sales charge and low load sales charge purchase options will no longer be available for purchase on Sun Life Global Investments mutual funds. Switches between funds of the same sales charge purchase option will be permitted.

Sun Life Global Dividend Private Pool

Fund commentary | Q1 2021

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Opinions and commentary by KBI Global Investments.

Q1 2021 was a strong one for equity markets. The growth to value rotation, which began in late 2020 as investors began to consider the cyclical implications of the vaccine rollout as well as the anticipated fiscal stimulus following the US presidential election, continued to gain momentum.  This was a supportive backdrop for the Fund’s strategy which delivered excess returns versus the benchmark. The quarter was defined by very positive macro news, rising bond yields, and a very traditional (sector- based) cyclical narrative.

A number of elements came into play during the quarter to indicate that a long anticipated economic recovery has finally begun and that the deflationary spiral that has dominated market behaviour since the Great Financial Crisis is starting to unwind. This was a consequence of the scale and speed of the global vaccination roll out, highly accommodative policy mix and rising longer term bond yields.

The Fund outperformed the benchmark during the quarter which validates the orientation towards high quality, dividend paying, capital efficient businesses that are attractively valued across all industry groups. The definite style rotation which is gaining traction is a welcome tailwind for the Fund’s approach. However, unlike traditional value strategies that benefit predominantly from structural overweight in sectors like Energy and Financials, the Fund’s alpha was driven by broad based security selection. 

The Fund selects stocks with fundamentals that deserve to be trading on higher share prices regardless of the industry group that they belong to. While technology was the worst performing industry group in the benchmark, it was the best performer in the portfolio.  The Fund’s best stock selection was in the weakest industry groups, demonstrating the diversity of return that is on offer even in the same industry. KBI’s approach is to find stocks with strong fundamentals that are being underpriced by the market regardless of the industry group they belong to.

Market Outlook

As economies recover, bond yields pick up and deflation concerns subside. Investors will be less willing to pay an excessive premium for growth stocks. The trends in the first quarter show preferences starting to shift to the more immediate return from value stocks with sound fundamentals, many of which pay dividends. As the cycle evolves and investors become more selective, KBI expects there will be more emphasis on quality which is an important feature in the KBI portfolio.

Given the backdrop of unwinding of deflationary expectations and return of rising yields, even to a moderate extent, the portfolio manager sees potential for a sea change in market dynamics in the coming years. This is a reversal of the decade long trend where equity markets have been mainly driven by multiple expansion, which aligns with KBI’s approach to investing.

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Views expressed are those of KBI Global Investors, sub-advisor to select Sun Life mutual funds for which SLGI Asset Management Inc. acts as portfolio manager. 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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