Sun Life MFS U.S. Growth Fund

Fund commentary | Q3 2023

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

Market Review

After three consecutive quarters of gains, equity markets declined broadly in the third quarter (Q3), which started out on a strong note as corporate earnings came in generally better than expected. However, in September, several factors led to growing macro uncertainty and a weakening global outlook. Oil prices rose 30%, the 10-year U.S. Treasury yield spiked, U.S. home sales weakened and student loan payments resumed, leading to waning confidence of an economic soft landing.

The Russell 1000 Index (C$) declined 1.04% in Q3 after posting strong returns in the first half of the year. Year to date, the Index remains up 12.76%. These strong gains are coming off the 2022 decline of 13.25%. Most sectors declined in Q3. One exception was energy, which rose on higher oil prices. Communication services also gained. Income-oriented sectors, namely utilities, real estate and consumer staples posted the worst performance, reacting to higher interest rates.

Performance Review

Sun Life MFS U.S. Growth Fund (the “Fund”) outperformed its benchmark, the Russell 1000 Index (C$) in Q3.

Contributing to relative performance were:

  • A combination of both stock selection and an overweight position in communication services, a strong performing sector in the benchmark;
  • Stock selection in healthcare and information technology;
  • An underweight position in utilities, benchmark’s the weakest-performing sector.

Detracting from relative performance were:

  • An underweight position in energy, the strongest-performing sector in the benchmark;
  • Stock selection in consumer staples and materials.

The Fund outperformed its benchmark over the period. Portfolio holdings in multiple sectors posted higher-than-market gains this year, driven by earnings. 

  • Alphabet Inc. – The portfolio’s overweight position in technology company Alphabet boosted relative performance. Its stock price rose after reporting better-than-expected revenue and robust margins.
  • NVIDIA Corp. – An overweight position in computer graphics processor maker NVIDIA supported relative performance. The stock price climbed after reporting earnings per share results well above expectations, primarily driven by stronger-than-expected revenue growth within its data centre, generative artificial intelligence (AI), and networking segments.
  • MSCI Inc. – An overweight position in market data provider MSCI contributed to relative returns. The stock price advanced as it posted above-consensus broad-based earnings driven by strength in its index segment and better-than-feared results in ESG. 

  • ASML Holding N.V. – A lithography systems manufacturer for the semiconductor industry, detracted from relative returns. Although it reported solid second-quarter financial results, a slowdown in the extreme ultraviolet lithography technology market appeared to have weighed on the stock.
  • LVMH Moët Hennessy Louis Vuitton SE (LVMH) – Holdings of the luxury goods company negatively impacted relative returns. After months of strong share price growth, the stock price detracted following an operating profit miss.
  • The Estée Lauder Companies Inc. – An overweight position in the beauty products maker hindered relative returns after management lowered guidance due to a slower-than-expected demand recovery from Chinese consumers and a large reduction in travel retail inventories.

Portfolio Activity


  • In the communication services sector, our sub-advisor MFS Investment Management (MFS) continued to build the position in Meta Platforms. MFS believes Meta has become more disciplined about spending and margins are improving. Instagram’s competitive positioning is getting better and user growth is accelerating. Artificial intelligence is not new to Meta, but it has done a better job articulating how it helps improve monetization. Overall, its earnings outlook is improving and its valuation remains reasonable.
  • MFS continued to build positions in select industrials and materials stocks that it believes will benefit from long-duration secular trends. Existing positions in industrials companies Eaton Corp. and Howmet Aerospace were added to. Eaton appears poised to benefit from increased demand around electrification, automation, the energy transition and U.S, infrastructure projects. Howmet provides engineered products for the aerospace and transportation industry and is benefiting from renewed capital investment to replace aging fleets, improve fuel efficiency and initiatives to reduce carbon footprints.
  • Within healthcare, MFS added to the existing position in Eli Lilly where it is optimistic about the opportunities for diabetes drugs in the GLP-1 category because of its apparently broad-based health benefits. Eli Lilly recthe funently released data supporting the cardiovascular benefits of its drug. The drug’s weight-loss version is on track for approval and new delivery formats are in the works. MFS also added to the position in medical devices company Becton Dickinson, which is seeing strong growth in medication management systems and prefilled syringes.


  • Within healthcare, MFS exited the position in Abbott Laboratories. In addition to slower COVID-related revenue, its glucose monitoring (GLM) business was set to be the driver of future growth. The success of diabetes drugs in the GLP-1 category puts that growth into question, and the range of potential earnings outcomes has widened.

Fund Positioning

Fund positioning overall did not materially change in Q3. The Fund is overweight in the information technology sector. MFS believes AI developments are in the early stages of a long investment cycle. AI is not new, but generative AI and ChatGPT were introduced only nine months ago. The speed of adoption has been quick, but MFS does not believe AI advancements have peaked. The market is now focused on companies with real pricing models and earnings. MFS continues the approach of investing in the enablers of technology and product development. Microsoft remains the portfolio’s largest overweight within the sector. The company’s software and infrastructure business lines are positioned well to benefit from AI. Microsoft is on the cusp of a price increase related to AI tools in its software. Also, Azure workloads should benefit from the increased demand related to AI.

Other names with accelerating demand trends include Cadence Design Systems, Synopsys, ServiceNow and NVIDIA. The portfolio continues to have a modest underweight position in Apple, reflecting the view that other names in the sector offer better risk to reward ratio with stronger earnings outlooks.

MFS remains concerned about the health of the consumer given inflation pressures. The portfolio remains positioned in higher-end luxury goods companies such as LVMH, as well as companies benefiting from increased spending on travel such as Hilton Worldwide.

In conclusion, MFS remains focused on its bottom-up fundamental approach, identifying companies they believe can generate a consistent, above-average rate and duration of growth. 

Fund performance

Compound returns %1 Since inception 10 year 5 year 3 year 1 year Q3
Sun Life MFS U.S. Growth Fund - Series A


13.44 8.34 1.95 21.17 -0.93
Sun Life MFS U.S. Growth Fund - Series F


14.75 9.60 3.14 22.58 -0.65
Russell 1000 Index


14.73 10.62 9.97 19.25 -1.04

¹Returns for periods longer than one year are annualized. Data as of September 30, 2023. 

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.