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Sun Life MFS Low Volatility Global Equity Fund

Fund commentary | Q3 2021

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Opinions and commentary provided by MFS Investment Management Canada Limited.

Market review

Strong earnings surprises propelled global equites higher in July and August despite the delta variant, inflation and peak growth concerns, as well as a regulatory crackdown in China. Late in August, the US Federal Reserve Chairman signaled that the tapering of bond purchases was likely to begin by year end, which pushed global bond yields higher and prompted an ensuing selloff in global markets. Growth stocks, which are heavily weighted in the index and are more sensitive to interest rates due to their stretched valuations, led the selloff which more than erased the gains made earlier in the quarter.

Regional performance generally reflected the macro dynamics referred to above, resulting in developed markets outperforming emerging markets. Japanese equities, which were negatively impacted by COVID-19-related issues early in the quarter, outperformed significantly with investors responding positively to the resignation of Prime Minister Suga and a robust recovery in the earnings outlook. US and European markets modestly outperformed, while Asia Pacific ex-Japan markets lagged due to the rapidly spreading delta variant and low vaccination rates in Australia and New Zealand. A strong US dollar and central bank rate hikes to contain inflation, coupled with regulatory tightening and real estate market turmoil in China, resulted in significant underperformance by emerging markets. The EEMEA region, benefitted from broad-based strength in Eastern European markets as well as strong performance by Russia and Saudi Arabia markets, which benefitted from the late quarter surge in energy prices.

The spike in energy prices, caused by supply shortages and robust demand, enabled the energy sector to significantly outperform for the period overall. The technology, health care and utilities sectors, which dominated performance early in the quarter, notably lagged in the September rotation in favor of cyclicals. The discretionary and industrials sectors, while lagging for the quarter, outperformed in September alongside peaking delta variant cases and a constructive outlook for capital spending. The materials sector significantly underperformed as concerns about peak growth weighed on most industrial commodities, while a stronger US dollar negatively impacted gold.

Performance review

Stock selection within health care was the largest contributor to returns, followed by stock selection within consumer discretionary. On the other hand, stock selection within financials subtracted from returns, followed by an underweight allocation to energy.

On a regional basis, stock selection within emerging markets was the largest contributor to returns, followed by stock selection within Europe ex-UK. Conversely, stock selection within Japan subtracted from returns.

On an individual security basis, the largest contributor to relative performance was the portfolio’s overweight position in Novo Nordisk. Additionally, overweights in Terumo, PLDT and KDDI added to performance. An underweight to Alibaba Group added to results as well.

Performance was hurt by an overweight position in Activision Blizzard. Additionally, overweights in Franco-Nevada and BOC Hong Kong subtracted from performance. Underweights to Apple and Tesla weighed on returns.


The global recovery generally remains on track; however, momentum is slowing with supply chain bottlenecks, and higher prices also impeding the outlook. Monetary support has peaked but remains broadly accommodative, and fiscal support is passing the baton to the private sector as economies reopen. Bond yields, central bank rate actions and market leadership point to leading economic indicators such as manufacturing PMIs remaining at elevated levels through the end of the year. Earnings revisions (outlook), which are highly correlated with manufacturing PMIs, have similarly moderated; however, they are likely to remain at elevated levels and continue to favor cyclicals.

Despite the constructive outlook, there are several issues that require monitoring. First, inflation continues to surprise central bankers, which has led to a notable shift in guidance by the Fed and the Bank of England as well as rate hikes by the Norges Bank and numerous EM central banks. With economic momentum decelerating, some worry about stagflation risk. Additionally, valuations, particularly in the large cap growth segment, are a significant risk to markets particularly if bond yields continue to rise as they typically do when the economy is strong, inflation is increasing, and central banks are hiking rates. Finally, the investment climate in China has notably deteriorated in recent months with a regulatory clampdown in the technology, education and real estate sectors being further exacerbated by the collapse of property giant Evergrande.

The team continues to be encouraged by the broad market and factor leadership. As communicated in the past, the most challenging market environment for the Fund’s approach is one in which a single factor/style or a limited group of stocks dominate performance. Based on the team’s analysis of factor performance through the economic cycle, the strength of earnings momentum and growth factors is expected during the midcycle/expansion phase. Value factor leadership, which is prominent and more diverse at this stage of the cycle, typically continues until earnings growth peaks. A peak in the economic cycle would, based on history, coincide with sustained outperformance of price momentum.

Significant impacts on performance


An overweight position in telecommunications company KDDI (Japan) bolstered results. The company reported operating profit results that were higher than expectations, driven by a greater-than-expected increase in other revenues within its mobile communications division.

Novo Nordisk

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

Activision Blizzard

An overweight position in American video game holding company detracted from performance. The stocks suffered with a fall in user engagement levels when compared to last year as people spent less time indoors. There was also a lawsuit that was filed against the company which did not bode well with investors, adversely impacting share price.

Tesla Inc.

Not holding shares of electric vehicle manufacturer Tesla (United States) dampened performance. While the company's second-quarter vehicle deliveries were largely in line with expectations, its second-quarter earnings came in ahead of estimates as favourable pricing of its model 3 and Y vehicles helped improve profitability.

Fund performance

Compound returns %1 Since inception2 5 year 3 year 1 year Q3
Sun Life Low Volatility Global Equity Fund - Series A






Sun Life Low Volatility Global Equity Fund - Series F






MSCI AC World C$






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 February 11, 2016 to December 31, 2016.

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 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. and MFS Investment Management Canada Limited are members of the Sun Life group of companies. All rights reserved.