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Sun Life MFS Global Value Fund

Fund commentary | Q3 2024

Opinions and commentary provided by sub-advisor MFS Investment Management Canada Limited.

Performance review

For the three months ended September 30, 2024, (Q3) Sun Life MFS Global Value Fund Series F (“the Fund”) returned 6.8%. This compares with a return of 5.01% for the Fund's benchmark, the MSCI World Index CA$ over the same period.

The Fund outperformed the MSCI World index during Q3, due to stock selection in industrials, consumer staples, communication services and healthcare and an underweight to information technology. There was a sharp rotation between sectors in Q3 and information technology lagged the market and was the second worst performing sector in Q3. Defensive sectors like utilities, real estate and consumer staples rallied.

At the stock level, the biggest positive contributors to relative performance were not holding Nvidia, which fell in absolute terms, strong performance from Masco and Kenvue and the positive impact from being underweight Alphabet and Microsoft. Offsetting this was a negative contribution from holdings in Samsung, Charles Schwab, NXP Semiconductors and ConocoPhillips, which lagged during Q3.

  • Nvidia - Not owning shares of the computer graphics processor contributed to relative returns. Despite reporting solid results in Q3, the stock price declined partly due to lofty consensus expectations and a delay in its Blackwell chips.
  • Alphabet - The portfolio's underweight position in the technology company helped relative performance. Despite reporting strong results in its cloud segment, driven by artificial intelligence (AI), its share price declined as the U.S. Department of Justice announced an antitrust case alleging that the company maintains a monopolistic position in its search engine. Company management also cautioned that margin growth may struggle for the year.
  • Masco Corp - An overweight position in the home improvement and building product manufacturer supported relative performance. Its stock price climbed as the company reported better-than-expected earnings results due to strong margin performance. The stock price further benefited from falling interest rates, which is expected to boost the housing market.

  • Samsung Electronics - Holding shares of the microchip and electronics manufacturer detracted from relative returns. Despite the company reporting in-line operating profits, weak memory demand and an oversupply in a few segments weighed on investor sentiment.
  • Charles Schwab Corporation - The portfolio's overweight position in the financial services provider hindered relative returns. Despite a relative decrease in cash sorting, its share price fell as cash levels declined and customers moved money to higher-yielding cash instruments.
  • NXP Semiconductors - The portfolio's overweight position in the semiconductor solutions provider weighed on relative performance. The stock price declined as the company reported a challenging business environment.

Significant Transactions

Adds/Buys

  • Charles Schwab - financials  (add)
  • Kenvue Inc. - consumer staples (add)
  • Hess Corp. - energy (add)
  • Capgemini SE - information technology (add)
  • National Grid Plc - Utilities (add)

Trims/Sells

  • Hitachi - industrials (trim)
  • Taiwan Semiconductor - information technology (eliminated position)
  • Wolters Kluwer - industrials (eliminated position)
  • Relx Plc - industrials (eliminated position)
  • CG Inc. - information technology (eliminated position)

 

Portfolio positioning

Relative to the MSCI World index, the Fund is overweight financials, industrials, consumer staples, energy, and utilities, where the sub-advisor MFS Investment Management (MFS) finds the most compelling value opportunities. Within financials, MFS tends to favour asset-light, high-return and less regulated businesses that generate durable growth and recurring revenue, such as wealth managers, exchanges, and insurance brokers. The Fund’s holdings in the financial sector are well-capitalized, have diversified exposures and continue to be well-positioned for the long term.

The biggest sector underweights are information technology, consumer discretionary and real estate. The underweights are mostly explained by not holding Apple and Nvidia within information technology, and not holding Amazon and Tesla within consumer discretionary. The portfolio does not hold any real estate stocks.

The Fund added one new position during Q3, buying Sodexo, and sold out of five stocks, resulting in a portfolio of 96 stocks. The Fund added to several positions to take advantage of price weakness and attractive valuations and trimmed the size of several holdings to take profits and/or reflect higher relative valuations. Portfolio turnover has been 16% over the last 12-month period.

  • The Fund started a new position in Sodexo, a French contract caterer, which is now a pure food services business after spinning of Pluxee, its benefits and rewards business, earlier this year. Sodexo’s valuation is compelling especially relative to Compass, its largest competitor.
  • The Fund added to several healthcare positions, where valuations look compelling, including Sanofi, Becton Dickinson and Medtronic. It also added to energy, with additions to holdings in Hess, TotalEnergies and Exxon Mobil. The Fund increased its position in National Grid, in the utility sector.
  • The Fund also added to existing positions in Charles Schwab, Kenvue, Cap Gemini, Informa, Mitsubishi Electric, Samsung Electronics, CME and Intel.
  • The Fund exited its positions in TSMC, Wolters Kluwer, Relx, CGI and KDDI, which have all performed well and their risk/reward trade-off is viewed as no longer attractive.
  • The Fund  trimmed its positions in Hitachi, JP Morgan, T-Mobile, Eaton, Goldman Sachs, Bank of America, Schneider, Microsoft, Philip Morris International and BNP Paribas to manage position size and to reflect lower conviction and/or higher relative valuations.

From a style perspective, there was a notable shift away from growth towards value. The MSCI World Growth Index underperformed the MSCI World Value Index significantly in Q3. This helped reverse some of the prior trends but still leaves the Growth Index well ahead of the Value Index year-to-date. The quarter saw reversal in market leadership, with defensive sectors such as utilities, real estate and consumer staples leading the way, while information technology and communication services lagged the market. Cyclical sectors such as materials, financials and industries delivered double-digit returns.

Fund performance

Compound Returns %¹ Since Inception 10 Year 5 Year 3 Year 1 Year Q3

Sun Life MFS Global Value Fund - Series A

10.6

 9.3 9.0 8.3 22.2 6.5

Sun Life MFS Global Value Fund - Series F

11.9

 10.5 10.3 9.6 23.7 6.8
MSCI World NR CAD

12.8

 12.2 13.5 11.4 32.3 5.0

¹Returns for periods longer than one year are annualized. Data as of September 30, 2024. 

Inception date September 30, 2010. 

Views expressed are those of MFS Investment Management Canada Limited, 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 subject to change and 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.

MFS Investment Management Canada Limited is the sub-advisor to the Sun Life MFS Funds; SLGI Asset Management Inc. is the registered portfolio manager. MFS Investment Management Canada Limited has appointed MFS Institutional Advisors, Inc. to provide additional sub-advisory services.

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.