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Sun Life MFS Low Volatility Global Equity Fund

Fund commentary | Q4 2020

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Opinions and commentary provided by MFS Investment Management Canada Limited.

Performance review

The MSCI ACWI ended 2020 at an all-time high, as early Q4 concerns about surging coronavirus cases and an election-driven power struggle in the U.S. over the next round of stimulus were replaced with optimism from strong vaccine efficacy data and a the probability of a market-friendly outcome to the U.S. election.

Regional performance was generally cyclical with improving breadth. Emerging markets outperformed developed markets with notably strong performance in Latin American and Asian markets.

Sector performance was similarly broad, and cyclicals were led by the financial services sector, which benefitted from a steepening yield curve and the energy sector, which responded to stronger oil prices. Materials and industrials also outperformed as did the more growth-oriented information technology, communication services and consumer discretionary sectors. Defensive and bond proxy sectors, such as utilities and consumer staples, lagged significantly during the period.

Outlook

For the majority of the year, the market environment was dominated by a concentrated group of mega-cap growth and momentum stocks, which challenged the Fund’s investment process and the performance of the portfolio.

Improving economic and earnings data, coupled with broadly supportive fiscal and monetary policies, should support the evolving rotation towards cyclical geographies, such as emerging markets and cyclical sectors, including industrials and consumer discretionary. The strong Q4 rally has, in the portfolio manager’s opinion, left markets overvalued and overbought technically, with complacency evident in a number of sentiment indicators. The reestablishment of lockdowns in a number of geographies, vaccine distribution hiccups and political uncertainties are near-term risks that could, in the short-term, reverse the rotations noted above. Any such reversals should be transitory given the anticipated reopening of the global economy and supportive policy backdrop.

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, is designed to produce strong relative returns through most market environments. The most challenging market environment for the Fund’s approach is one in which a single factor and/or style, or a limited group of stocks dominate performance. Based on the portfolio manager’s factor performance through the economic cycle analysis, the recent narrow beta and/or value leadership is not uncommon and may be joined by earnings and price momentum factors as the economic recovery progresses.

Significant impacts on performance

Taiwan Semiconductor
Holdings of the semiconductor manufacturer supported relative returns. The company delivered quarterly earnings-per-share results that were well ahead of market expectations. The better-than-expected quarterly strength was primary driven by strong demand across all application platforms, with revenue growth in smartphones leading the way.

Amazon.com
Not owning shares of internet retailer, Amazon.com (United States), aided relative performance. Although the company delivered another relatively strong quarter, its stock price pulled back from its all-time highs.

Adobe Systems
An overweight position in software company, Adobe Systems (United States), weighed on relative results. Although the company reported strong quarterly financial results, shares traded only slightly higher during the period, underperforming the broader market after management provided 2021 earnings-per-share guidance in-line with expectations, which implied a deceleration in growth due to a higher tax rate.

Fund performance

Compound returns %1 Since inception2 3 year 1 year Q4
Sun Life Low Volatility Global Equity Fund - Series A

7.1

6.4

2.5

3.7

Sun Life Low Volatility Global Equity Fund - Series F

8.3

7.6

3.6

4.0

MSCI AC World C$

13.0

10.7

14.2

9.4

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

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.