Sun Life Wellington Opportunistic Fixed Income Private Pool

Fund commentary | Q1 2024

Opinions and commentary provided by sub-advisor Wellington Management Canada ULC

Market review

Global fixed income markets generated negative total returns during the first quarter (Q1) of 2024, as measured by the Bloomberg Global Aggregate Index. Stronger-than-expected economic data and persistent inflation pressures pushed out the expected timing of rate cuts from the U.S. Federal Reserve (the Fed). Resilient consumer spending and strong corporate earnings led to further spread-tightening across many fixed income sectors. Most currencies depreciated versus the U.S. dollar (US$).

Economic data was broadly mixed. While Europe’s economy experienced weakness, the U.S. economy generally exceeded expectations. Inflation continued to moderate across most regions but continued to exceed central bank targets. U.S. labour markets were strong as payrolls continued to gain and jobless claims remained low. U.K.’s economy fell into recession as high borrowing costs discouraged consumer spending. Japan averted recession as initially reported economic data in Q4, 2023 was revised upward, thanks to stronger business spending. China’s manufacturing data got a boost from higher exports but the real estate sector still faces challenges.

Performance review

As of the end of Q1, Sun Life Wellington Opportunistic Fixed Income Private Pool series F (the “Fund”) generated -1.3%. The blended benchmark for the Fund posted a three-month return of -0.1% over the same period.

Performance highlights

At the portfolio level, duration and currency drove negative total returns in Q1 as yields climbed and the US$ strengthened. Credit exposure was additive within sectors such as bank loans, structured products, convertible bonds, and global high-yield.

Strategic sector positions detracted from performance, as positive contributions from bank loans, structured credits, and convertible bonds were offset by negative contributions from nominal and inflation-linked bonds and emerging markets (EM) debt. The portfolio’s exposure to EM and high-quality sovereign bonds came under pressure as markets repriced expectations for the number of interest rate cuts from the Fed. While EM local debt was one of the best performing sectors in 2023, it has struggled so far this year, despite a generally positive risk-on tone within markets.

Relative value positions were flat in Q1. Short exposure to the US$ negatively impacted performance as it appreciated versus most major currencies. Tactical trading amidst modest spread volatility within investment grade at the beginning and end of January helped drive positive total returns within Global Credit Absolute Return during the period. The Absolute Return Mortgages and Discretionary Macro Rates strategies also contributed positively to performance. Our sub-advisor Wellington Management Canada (Wellington) continues to believe this is a fertile environment to add alpha through relative value strategies.

Tactical strategies detracted over the quarter, driven by negative contribution from U.S. agency mortgage exposure. While the rates sell-off was a headwind to performance, the security selection and active trading of the coupon stack added eight (basis points) bps to performance.

Positioning and outlook 

Wellington believes alpha will be made by identifying cyclical inflation points faster than central banks and the market. With the market fully embracing a goldilocks scenario, the sub-advisor believes we are at one of those inflection points and have positioned the portfolio accordingly. Wellington maintains an elevated level of duration in the portfolio and is positioned with the lowest level of aggregate credit risk since the Fund’s inception.

Wellington remains committed to some of the ongoing key themes, which include the following:

  • It continues to think that in an environment of slower growth and stickier inflation, inflation-linked bonds offer better relative value than nominal bonds. Wellington feels real rates are too high, and that they can go down given slowing global growth. The portfolio has roughly a 23% allocation to inflation-linked bonds through its activist government theme.
  • The sub-advisor continues to own EM local debt as part of the portfolio’s EM opportunities theme within strategic sectors. The investment thesis for this theme is that after the pandemic, a majority of EM central banks acted in a highly orthodox manner, pre-emptively raising interest rates well ahead of the Fed, effectively controlling inflation in their countries. As a result, most EM countries have currently started their easing cycles. Wellington continues to like Latin American local currency bonds, which still offer historically attractive nominal and real yields. The monetary easing cycle should allow the region’s central banks to gradually reduce policy rates, which will be a tailwind for local assets. Over the past year, EM opportunities added over 200 bps to total return in the portfolio.
  • Currently, the portfolio owns higher coupon to-be-announced (TBA) mortgage-backed securities, because of their attractive carry, relative yield advantage over investment grade corporates, and cheaper valuations.
  • Wellington maintains short exposure to investment grade corporates, EM external debt, and high-yield credit where valuations are far too tight as outlined earlier. Wellington continues to find interesting opportunities across structured credit, convertible bonds, bank loans, and capital securities.
Compound returns %1 Since inception2 5 Year 3 Year 1 Year Q1
Sun Life Wellington Opportunistic Fixed Income Private Pool - Series A






Sun Life Wellington Opportunistic Fixed Income Private Pool - Series F






Bloomberg Barclays Global Aggregate Bond Index (C$ Hedged)






¹Returns for periods longer than one year are annualized. Data as of March 31, 2024.

Inception date June 06, 2016.

Views expressed are those of, Wellington Management Canada ULC 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.

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.