Sun Life Schroder Emerging Markets Fund

Emerging markets delivered a positive return in Q2 2021, with the Fund underperforming the index. Country allocation was positive and stock selection negative.

At a country level, the overweight positions in in Brazil and Russia, both of which outperformed, were the main positive contributors to relative performance. Brazil was among the best performing markets, with currency strength amplifying gains. Central bank rate hikes in response to rising inflation, accelerating vaccine rollouts, easing fiscal concerns and renewed progress in reforms, all helped lead the market higher. Meanwhile, high crude oil prices were supportive in Russia. These positive effects were partly offset by the overweight to South Africa. It underperformed on the back of a deteriorating COVID-19 outlook, which was exacerbated by weakness on index heavyweight Naspers Ltd., a south African multinational.

Stock selection was negative in Taiwan, with an underweight position in Evergreen Group, a shipping company, and an overweight in Hon Hai Precision, a contract manufacturer. Shipping stocks outperformed as global trade continued to recover following the pandemic. However, Hon Hai experienced a pullback after earlier outperformance was driven by electric vehicle partnerships it had entered into.

The Fund was also hindered by an underweight position in Korean internet company Kakao. It outperformed following the listing of two financial businesses. In China the Fund was overweight Ping An, one of the country’s largest insurance companies. And it was underweight Nio an electric vehicle manufacturer.

For its part, Ping An experienced slow sales recovery following the lifting of the COVID-19 lockdown in China. And Nio benefited from a rotation back towards growth sectors, with a strong outlook for electric vehicle sales in China. In Brazil, the Fund was underweight Petrobras, the state-owned oil multinational that rebounded on higher oil prices.

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.

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