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Sun Life MFS International Value Fund

Fund commentary | Q4 2024

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

Market review

Global equity markets ended the fourth quarter of 2024 (Q4) relatively flat but still achieved strong double-digit performance for the full year. The consumer discretionary, communication services, and information technology sectors led the gains in Q4. A closer look revealed that the U.S. was the primary driver of these gains as optimism rose about potential tax cuts, deregulation and investments in the tech sector. In contrast, most other regions saw declines.

For instance, the materials sector lagged during Q4, driven by weakness in Australia and poor performance of specialty chemicals sector in Europe. The health care sector also lagged due to policy uncertainty in the U.S.

Most sectors in international developed markets represented by the MSCI EAFE Index ended Q4 lower. While financials were one of the few bright spots, the materials and health care hurt Index returns. Further, after a bounce in Q3, the rate-sensitive real estate and utilities sectors lagged the Index average as long-term interest rates moved higher.

Performance review

Sun Life MFS International Value Fund (the “Fund”) outperformed the MSCI EAFE Index (CA$) in Q4.  

  • A combination of both stock selection and underweighting health care, one of the weaker-performing sectors in the Index, contributed to relative performance.
  • A combination of both stock selection and overweighting financials, one of the stronger-performing sectors in the Index, contributed to relative performance.
  • Stock selection in materials contributed to relative performance.
  • A combination of both stock selection and underweighting consumer discretionary, one of the stronger-performing sectors in the Index, detracted from relative performance.
  • Stock selection in industrials and energy detracted from relative performance.

  • Samsung Electronics Co., Ltd. - The portfolio's position in the microchip and electronics hindered relative returns. The share price declined as it grappled with weakness in personal computer and smartphone sales, reported declines in flash memory shipments, and announced weaker-than-expected price increases in flash memory.
  • Rohto Pharmaceutical Co., Ltd. - The portfolio's position in the pharmaceutical manufacturing company hindered relative returns. The share price fell as it reported weaker-than-expected operating profit results, driven by costs related to the acquisition of Eu Yan Sang, and higher research and development expenses.
  • Capgemini SE - The portfolio's overweight position in the IT services provider weighed on relative results. The stock price declined as its management reported a small decline in Q3 organic revenue and lowered its 2024 guidance, citing weakness in its engineering, manufacturing and retail verticals segments.

  • Taiwan Semiconductor Manufacturing Co., Ltd. - The portfolio's position in the semiconductor manufacturer helped relative performance. Its stock climbed as it reported a stellar quarter owing to higher-than-expected gross margins attributable to higher utilization, productivity gains, and cost improvements.
  • NatWest Group plc - The portfolio's overweight position in the financial services company contributed to relative returns. The stock price advanced as it reported Q3 earnings above market expectations driven by better-than-expected net interest income.
  • Novo Nordisk A/S - Not owning shares of the pharmaceutical company benefited relative performance. Its share price fell sharply after disappointing trials for its weight loss drug CagriSema.

Portfolio activity

Add/Buy

  • Initiated a position in Kenvue, a consumer health company spun out of Johnson & Johnson in 2021. Our sub-advisor MFS Investment Management (MFS) sees Kenvue as a relatively defensive name with good quality brands that has underperformed since the spinoff. MFS believes the stock’s valuation is attractive.
  • Added to Smith & Nephew, a multinational medical equipment company. MFS believes management has effectively improved the firm’s medicine business through innovation and cross-selling.  
  • Started a position in Waters Corporation, an analytics and software provider for the life sciences industry. MFS is attracted to its medium-term revenue prospects.  
  • Initiated a position in consumer goods company Reckitt Benckiser after selling the name in June 2023. MFS likes the core assets that will remain after the sale of Essential Health and Mead Johnson brands.
  • Added to Tenaris, a steel pipes and services provider within the energy industry.  

Trim/Sell

  • Trimmed Cadence Design Systems where over the last few years the company has achieved double-digit sales growth, surpassing their high single-digit long-term trend. While recent results have confirmed good demand shorter term, any slowdown could pressure the currently high sales multiples.
  • Exited Adidas where valuation is already reflecting steady growth and progress toward margin goals.
  • Eliminated Sydbank and trimmed GEA Group where liquidity is less attractive.
  • Trimmed Schneider on strong relative performance and valuation multiples have re-rated.
  • Exited Bayer, where litigation and business fundamentals have been deteriorating.

 

Fund positioning

The Fund remains defensively positioned. The portfolio is overweight information technology, where it owns computer software, systems and semiconductor companies that are dominant players with competitive advantages and strong intellectual properties. The portfolio is overweight materials and industrial sectors.

The Fund is underweight consumer discretionary and has avoided auto makers and most consumer cyclical stocks. The Fund is also underweight health care on concerns about drug pricing pressures, and underweight communication services, where MFS has chosen to avoid the debt-laden balance sheets and regulatory burden of the telecom companies.

Fund performance

Compound Returns %¹ Since Inception 10 Year 5 Year 3 Year 1 Year Q4
Sun Life MFS International Value Fund - Series A

8.80

7.32

4.81

0.76

14.69

-2.35

Sun Life MFS International Value Fund - Series F

10.03

8.56

6.04

1.95

16.04

-2.07
MSCI EAFE Index

7.96

7.50

6.92

6.14

13.24

-2.18

¹Returns for periods longer than one year are annualized. Data as of December 31, 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.