Effective November 27, 2021, the deferred sales charge and low load sales charge purchase options will no longer be available for purchase on Sun Life Global Investments mutual funds. Switches between funds of the same sales charge purchase option will be permitted.

Sun Life Schroder Emerging Markets Fund

Fund commentary | Q3 2021

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Opinions and commentary provided by Schroder Investment Management.

Emerging markets (EM) delivered negative returns in Q3 2021, with the fund outperforming the index. Country allocation was negative and stock selection positive. 

At a country level, an underweight to India and zero weight to Saudi Arabia, both of which outperformed, as well as an overweight to Brazil, which underperformed, detracted from relative performance.

Net energy exporters, including Saudi Arabia, outperformed as supply constraints drove energy prices higher. India delivered strong gains with sentiment boosted in part by the recent stream of initial public offerings. India’s economy continued to recover and, although question marks remain over efficacy, vaccination rates have picked up markedly, with the country on track to provide a first dose of vaccine to 70% of the adult population by November. 

Brazil was the weakest index market as above-target inflation continued to rise, meanwhile Q3 GDP growth disappointed. Developments in China weighed on industrial metals prices, and political rhetoric picked up ahead of next year's presidential election. These effects were somewhat offset by an underweight to China, which underperformed, and an overweight to Russia, which outperformed. 

In China, regulatory actions triggered initial market weakness which was compounded by the re-imposition of some Covid-19 restrictions. As well, supply chain disruptions in August; worries about possible systemic financial system risks stemming from the potential collapse of real estate developer Evergrande and power shortages, weighed on the market. Meanwhile, Russia conversely saw strong gains on surging energy prices. 

Stock selection was positive in China, with overweight positions in Great Wall Motors Company and China Mengniu Diary Company. Great Wall Motors saw stronger than expected Q3 results coupled with ambitious targets for car sales and increasing disclosures around the company's new-models pipeline and technology plans. China Mengniu Dairy performed well on first half results and it reaffirmed the outlook for continued margin improvement,

In South Africa the fund was overweight FirstRand Ltd. a financial services company and underweight Naspers, a multinational holding company. FirstRand share price gained over the quarter having reported a faster than expected recovery in earnings, with ROE returning to target levels, Meanwhile Naspers, with a large stake in China’s Tencent, struggled owing to a period of weak performance from Tencent, with regulatory concerns in China manifested in a potential anti-monopoly fine for the subsidiary. 

In South Korea we were underweight Kakao, an internet company and overweight Korea Zinc. Kakao faces uncertainty as regulatory concerns rise for fintech and other online businesses in South Korea. However, Korea Zinc performed well thanks to the launch of new electric vehicle battery projects.

Compound returns %1 Since inception2 10 year 7 year 5 year 3 year 1 year Q3
Sun Life Schroder Emerging Markets Fund - Series A 2.8 3.8 6.9 7.5 7.5 11.0 -6.7
Sun Life Schroder Emerging Markets Fund - Series F 3.9 4.9 8.1 9.4 8.7 12.2 -6.5
MSCI Emerging Markets Index 7.1 8.2 7.5 8.4 7.9 12.1 -6.0

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 September 1, 2011 to December 31, 2011.

Sun Life Schroder Emerging Markets Fund - Series F Effective July 14, 2021 Sun Life Excel Emerging Markets Fund was renamed Sun Life Schroder Emerging Markets Fund

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. 

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