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Sun Life JPMorgan International Equity Fund

Fund commentary | Q3 2021

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Opinions and commentary provided by JPMorgan Asset Management.

Market review

Global equities continued their positive run of performance in July and August driven by further reopening of economies, successful vaccine rollouts, positive economic data, rising corporate profitability and continued assurance of support from central banks. However, markets pared back some of these gains and delivered negative returns in September as concerns over rising inflation, supply disruptions and a peak in economic growth dominated investor sentiment. In the Eurozone, business activity continued its strong growth during the third quarter, though the rate of expansion softened in September, reflecting the peaking of demand in the second quarter and widespread supply chain bottlenecks. In the UK, the strong labor market report showed the economy continues to improve. the Bank of England kept the policy rates unchanged unlike the Fed that set out the path to tapering and higher interest rates. Crude oil price witnessed high volatility during the quarter as the demand boost from global recovery and the subsequent decision from oil exporting nations to hold supply steady in the face of rising shortages dominated the prices. Among equities, growth stocks outperformed value stocks while developed markets outperformed emerging markets in USD terms.

Portfolio review

The portfolio underperformed its benchmark in the quarter. At a sector level, stock selection in communication services and no exposure to energy hurt performance, while stock selection in health care and an overweight to industrials contributed to performance. At the region level, stock selection in emerging markets and an underweight to Japan detracted from performance, while stock selection in Canada and the Pacific Rim contributed to performance.

Outlook

Although global growth momentum has likely peaked in the second quarter, strong economic data, policy support and successful vaccine rollout continues to drive fundamentals. While the renewed COVID-19 surge may slow the pace of reopening, it is unlikely to be reversed and the rest of the year should still see a broader recovery across the major developed economies. JPMorgan believes that equities should do well in an environment of modestly rising inflation, as rising sales tend to offset higher input prices, which can be passed onto customers when demand is strong. Cyclically geared markets, sectors, and companies are likely to benefit, but it is crucial to differentiate cyclical from structural headwinds and tailwinds as the recovery takes shape.

Significant impacts on performance

Contributors

+ Novo Nordisk A/S

Danish pharmaceutical company, contributed to relative returns. The company delivered strong quarterly results and upgraded full-year guidance with competitive growth metrics on the back of strong, obesity-launch dynamics.

+ Keyence Corp.

The Japanese manufacturer of various automation devices, contributed to relative returns. The company continues to expand its product development and product lines, while achieving stronger, organic sales-growth-automation than its peers.

Detractors

- Bilibili, Inc.,

The Chinese video-sharing platform, detracted from relative returns. The stock experienced volatility through the quarter, largely due to heightened Chinese regulation concerns. Gaming revenue growth was also lowered for the full year, given fewer, new games have been approved this year.

- Iberdrola SA

The Spanish utility company, detracted from relative returns. Most of this underperformance was concentrated in September, after the Spanish government announced new measures to combat the impact of high electricity prices, including a new proposal to claw back the impact of high gas prices on electricity prices.

Fund performance

Compound returns %1 Since inception2 1 year Q2 Q3
Sun Life JPMorgan International Equity Fund - Series A 6.1 8.7 9.2 -1.8
Sun Life JPMorgan International Equity Fund - Series F 7.4 10.0 10.5 -1.5
MSCI ACWI ex U.S. Index 6.1 7.3 17.5 -0.8

¹Returns for periods longer than one year are annualized. Data as of September 30, 2021.

²Partial calendar year. Returns are for the period from the fund’s inception date of July 20, 2018 to December 31, 2018.

Views expressed are those of JPMorgan Asset Management (Canada) 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.

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. is a member of the Sun Life group of companies. All rights reserved.