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Sun Life MFS Low Volatility Global Equity Fund

Fund commentary | Q1 2021

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Opinions and commentary provided by MFS Investment Management Canada Limited.

Performance review

The global equity rally that began a little over a year ago continued in the first quarter, buoyed by improving vaccination trends, strong economic data and a robust earnings outlook. Monetary and fiscal policy remained broadly supportive with the European Central Bank committing to increased bond purchases and the U.S. Congress passing the first of two planned, massive spending packages. Bond yields, which typically rise as the economy strengthens, notably increased, causing U.S. investment grade bonds to suffer their worst quarterly selloff since 1980. The rise in bond yields had significant implications for sector performance, as those with positive sensitivities, such as financials and industrials benefitted, while those with negative sensitivities, such as high multiple growth stocks in technology, were punished. Widening yield differentials coupled with bearish year-end sentiment triggered a rally in the U.S. dollar, which unsurprisingly weighed on emerging market performance in the back half of the quarter.

Sector performance was broadly cyclical in the first quarter, with the energy sector tracking a rally in crude oil and financials benefitting from steeping yield curves and robust capital markets. Economically sensitive industrials and materials also outperformed during the period. As previously mentioned, higher-multiple growth stocks, which are significant weights in the technology and discretionary sectors, were negatively impacted by the significant and quick back-up in interest rates. Defensive sectors such as healthcare broadly lagged for the period; however, utilities and consumer staples outperformed in March. 

Outlook

The synchronized global recovery remains on-track despite vaccination distribution challenges and renewed lockdowns in a number of regions. Policy remains broadly accommodative and leading economic indicators, such as the manufacturing PMI's, are broadly strong with 82% of countries reaching above expansion levels. While services PMI's have understandably lagged, mobility data continues to improve and should accelerate as more economies open as the year progresses. Earnings revisions, which are highly correlated with leading economic indicators, are supportive of continued outperformance of cyclical-value sectors, non-U.S. regions and smaller-cap companies.

MFS continues to be encouraged by the broadening market leadership and factor rotation. The Fund’s investment approach, which consists of a diversified combination of fundamental factors and research inputs, coupled with a risk-managed portfolio construction process, seeks to produce strong relative returns through most market environments. 

Significant impacts on performance

Apple

Not owning shares of the computer and personal electronics maker benefited returns. Although the company reported solid earnings results, the stock declined over the reporting period. After a strong run of performance last year, the stock price retreated from its recent highs as the global economy gathered momentum towards reopening from COVID-19 related lockdowns.

Amazon

Not owning shares of the internet retailer helped returns. Despite posting another strong quarter, the stock price retreated as the broader equity markets, particularly technology stocks, pulled back from recent highs. The company also announced that Jeff Bezos will transition to the role of Executive Chair after 25 years of leadership in the CEO role.

Electronic Arts

The portfolio's overweight position in the video game maker hindered returns. Although the company reported quarterly financial results that exceeded expectations, its share price suffered after it announced that it would acquire GLU Mobile. While GLU provides EA with expertise in mobile gaming, investors may have questioned the timing of the deal.

Adobe Systems

The portfolio's overweight position in the software company held back performance. Although the company had a strong quarter, its stock price retreated as the broader equity markets, particularly technology stocks, pulled back from their recent highs.

Fund performance

Compound returns %1 Since inception2 5 year 3 year 1 year Q1
Sun Life Low Volatility Global Equity Fund - Series A

6.8

6.6

6.5

14.5

0.8

Sun Life Low Volatility Global Equity Fund - Series F

7.9

7.8

7.7

15.8

1.1

MSCI AC World C$

13.0

12.6

11.1

36.5

3.2

¹Returns for periods longer than one year are annualized. Data as of March 31, 2021.

²Partial calendar year. Returns are for the period from the fund’s inception date of February 11, 2016 to December 31, 2016.

Views expressed are those of MFS Investment Management Canada Limited, 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.

Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada and Sun Life Financial Trust Inc.

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.

© SLGI Asset Management Inc. and its licensors, 2021. SLGI Asset Management Inc. and MFS Investment Management Canada Limited are members of the Sun Life group of companies. All rights reserved.