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Sun Life MFS U.S. Growth Fund

Fund commentary | Q4 2024

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

Market review

Stocks advanced during the quarter ending December 31, 2024 (Q4) amid high volatility. The Russell 1000 Index (CA$) gained 9.4% and our sub-advisor MFS Investment Management (MFS) believes this was fueled by investor optimism over the U.S. election results in late 2024. Stocks soared after Donald Trump won the election and markets shifted their focus to the new administration’s policies on deregulation, support for mergers and acquisitions, and lower taxes.

The strength in Q4 caps another remarkable year of stock price performance. In 2024 the Russell 1000 Index (CA$) gained 35.8% amid broad-based strength. All sectors in the Index posted strong gains. The U.S. economy was more resilient than expected, and this drove stronger than expected earnings growth across multiple sectors.  

Sun Life MFS U.S. Growth Fund Series F (the “Fund”) posted a return of 11.5% and outperformed its benchmark, the Russell 1000 Index (CA$) during Q4.

  • A combination of both stock selection and an overweight position in consumer discretionary, an area of strength in the benchmark, contributed to relative performance.
  • An overweight position in communication services, an area of strength in the benchmark, contributed to relative performance.
  • An underweight position in health care, an area of weakness in the benchmark, contributed to relative performance.
  • Stock selection in information technology detracted from relative performance.
  • An underweight in the outperforming financials sector detracted from relative performance.

Manager outlook

The past two years of very strong equity returns has been supported by better-than-expected earnings growth. Most forecasts for economic growth and earnings in the past two years have been incorrect as market strategists predicted a recession. However, demand and capital investment has been strong and has been supported by multiple global trends such as growth in artificial intelligence (AI), de-risking supply chains, energy efficiency, electrification, infrastructure spending and investments in data centres.

Looking ahead, MFS believes deregulation, lower taxes and a focus on government efficiency should be positive for corporate earnings. MFS believes overall growth in the U.S. will outpace the rest of the world due to a higher concentration of innovative companies. Our sub-advisor believes these U.S. companies can continue to grow despite macro uncertainties.

  • Amazon.com, Inc. - An overweight position in the internet retailer benefited relative performance. It delivered a strong quarter of revenue growth driven by online stores and subscription services revenues. Cloud service revenues also came in above expectations.
  • ServiceNow, Inc. - An overweight position in the enterprise cloud computing solutions provider boosted relative performance. It benefited from strong subscription revenue guidance, modernization of AI platforms, and continued momentum from large deals.
  • Spotify Technology SA - The portfolio's overweight position in the digital music services provider benefited relative results. The stock price rose as management reported better-than-expected operating income and monthly active users (MAUs). It also raised its operating income and MAUs estimates for the quarter ahead.

  • Broadcom Inc. - The timing of the portfolio's ownership in shares of broadband communications and networking services company held back relative returns.
  • ASML Holding N.V. - The portfolio's position in the semiconductor equipment manufacturer detracted from relative performance. The stock price declined as the management reported a significant decline in orders and revised 2025 revenue guidance below consensus expectations.
  • KLA Corp. - An overweight position in the semiconductor industry services provider detracted from relative returns. The stock price came under pressure as the company reduced its forward guidance.  

Fund Positioning

Our sub-advisor’s portfolio positioning is driven by bottom-up stock selection. It focuses on companies that can generate durable revenues and earnings. The Fund has increased its weight in the consumer discretionary sector and added a position in Tesla Inc. after evaluating the impact of regulatory changes on the company’s earnings growth.

The Fund’s financials exposure is comprised of non-bank financial services companies. MFS initiated a new position in Fiserv given the firm’s ability to consistently generate above average growth. The Fund also has exposure to alternative asset managers such as KKR & Co. Inc., Ares Management Corp. and Apollo Global Management Inc. The Fund’s industrials exposure continues to be supported by long-duration secular trends such as derisking of supply chains, electrification, data centres, infrastructure, aerospace and energy efficiency. MFS added a new position in Vertiv and other top holdings include Eaton Corp., Howmet Aerospace and Transunion.

The portfolio’s exposure to communication services increased during Q4 as MFS built its position in Netflix. Other holdings in the sector include Meta Platforms and Spotify Technologies.

Within information technology, MFS believes AI growth to continue. The sub-advisor expects increased AI adoption by software companies and has added to the Fund’s existing positions in Autodesk, Salesforce Inc. and Manhattan Associates.  

The portfolio weight in health care declined during Q4. Looking toward 2025, MFS is more concerned about the uncertainty of regulatory changes and health care budget pressures on the industry. The Fund sold its position in Agilent. MFS also exited its position in Regeneron due to generic competition from Amgen. As of Q4, the portfolio was overweight information technology, communication services and consumer discretionary in comparison to the Russell 1000 Index and was underweight consumer staples, health care, energy and financials.

Fund performance

Compound returns %1 Since inception 10 year 5 year 3 year 1 year Q4
Sun Life MFS U.S. Growth Fund - Series A

16.0

15.3

15.2

10.2

41.9

11.2
Sun Life MFS U.S. Growth Fund - Series F

17.3

16.7

16.6

11.5

43.6

11.5
Russell 1000 Index

16.9

15.3

16.7

13.2

35.8

9.4

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.