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Sun Life Excel Emerging Markets Fund

Fund commentary | Q3 2020

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Opinions and commentary provided by Schroder Investment Management.

Emerging markets (EMs) delivered positive returns overall in Q3, with the fund outperforming its benchmark. Country allocation was negative and stock selection was positive.

In country allocation, overweight positions to Russia and Brazil, both of which underperformed, contributed negatively to relative returns. Russian equities fell amid weakness in crude oil prices and concerns over U.S. foreign policy changes after the upcoming election. Brazilian equities and currency both depreciated as concern mounted over the government’s commitment to a spending cap created in 2016, despite a need for stimulus spending to boost the economy.

An underweight to India, which outperformed, also weighed on relative returns. India posted a strong gain, despite further acceleration in new COVID-19 cases and tensions on its border with China. The government made reform progress with the passing of agricultural and labour reforms, while monsoon rains were also favourable. Cash held in a rising market was also a headwind. This was somewhat offset by underweight positions in Thailand and Indonesia, both of which underperformed. In Thailand, a lack of improvement in tourism dragged on economic recovery. In Indonesia, daily new cases of COVID-19 accelerated, leading to new lockdowns in the Greater Jakarta region.

Stock selection was positive overall. In China, an overweight to Alibaba bolstered returns as its core e-commerce business continued to perform strongly. Investors also responded positively to news of the upcoming IPO of Alibaba’s affiliate and 33%-owned, Ant Financial, on the Shanghai and Hong Kong stock exchanges. A zero weight to China Construction Bank also benefitted returns, as it underperformed along with other banks, seeing pressure to lend to support the economy.

Stock selection was also positive in Taiwan, Russia and South Korea. In Taiwan, an overweight to TSMC (Taiwan Semiconductor Manufacturing Company), benefitted returns as company rallied on market share gains and the potential for increased foundry outsourcing from Intel. In Russia, an overweight to gold mining company, Polyus, and internet-based product and service company, Yandex, also contributed to returns. Polyus benefitted from higher gold prices and investor recognition of expansion projects. Yandex came to an agreement with Sberbank to split up its shared e-commerce and payment joint ventures. Finally, in South Korea, a zero weight to Celltrion supported returns after the biopharmaceutical company’s valuation became extended. 

Fund performance

Compound returns %1 Since inception2 7 year 5 year 3 year 1 year Q3
Sun Life Excel Emerging Markets Fund - Series A 1.9 6.6 8.4 4.5 11.5 9.1
Sun Life Excel Emerging Markets Fund - Series F 3.0 7.8 9.6 5.6 12.7 9.4
MSCI Emerging Markets Index 8.1 7.7 8.9 4.7 11.5 7.4

1Returns for periods longer than one year are annualized. Data as of September 30, 2020.

2Partial calendar year. Returns are for the period from the fund’s inception date of September 1, 2011 to December 31, 2011.

Views expressed are those of Schroder Investment Management North America Inc., 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.

© SLGI Asset Management Inc., 2020. SLGI Asset Management Inc. is a member of the Sun Life group of companies.