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Sun Life MFS US Growth Fund

Fund commentary | Q1 2021

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Opinions and commentary provided by MFS Investment Management Canada Limited.

Portfolio outlook and positioning

The U.S. market, as measured by the S&P 500 Index, moved higher in Q1, driven by continued optimism in COVID-19 vaccines and by additional fiscal and monetary stimulus. Smaller-caps outperformed mid- and large-caps, and value outperformed growth. At the sector level, energy and financials outperformed as energy prices and rates increased.

Since November, cyclical stocks have rerated as excitement surrounding positive vaccine news and economic reopening has led to elevated expectations for a significant GDP print this year. However, the portfolio manager believes this enthusiasm will eventually taper off as the effect of higher input costs, rising rates and potential tax increases could weigh on profitability expectations.

Health care and technology are two sectors in which MFS continues to hold a positive view and feels well-positioned to benefit from any future growth potential.

In health care, the portfolio manager has seen COVID-19 testing beneficiaries, such as Thermo Fisher and Danaher, lag other health care names since vaccine news was released in November and sport relatively attractive valuations today. These businesses provide much more in the way of instruments and equipment beyond COVID-19 testing. MFS believes tailwinds are building for accelerated growth in new diagnostic and therapeutic platforms to meet the expanding needs of drug development in a strong therapeutic innovation cycle, of which these companies are likely to participate.

In information technology, MFS continues to favor vertical software businesses such as Adobe, Autodesk, and Cadence Design Systems, which the portfolio manager believes have not traded at extreme price-to-sales multiples. The portfolio manager prefers vertical software businesses over horizontal software, as they tend to focus on improving and optimizing a product set for one specific industry versus trying to be all things to all people. In addition to software, the Fund continues to favor semiconductor capital equipment companies. Here, names like Lam Research, Applied Materials and ASML remain top positions. MFS believes these companies are structurally advantaged in a market demanding "more brains in more things." As an increasing number of large players commit to building out semiconductor manufacturing capacity in the coming years, the long duration growth opportunity continues to emerge.

Looking at the U.S. equity landscape from an industry perspective, MFS seeks to identify which companies are growing at above market rates and where the profit pools could go over the next decade. This exercise provides a helpful check on the outlook for growth stocks. It also helps explain why certain growth-oriented companies, despite the near-term market rotation, have continued to take market share and why, the portfolio manager believes, this trend may continue over the longer-term.

A look at autos & housing industry and thinking about where future growth potential is likely to come from, one could argue, future growth is likely to come from underpenetrated areas of the industry with large addressable markets, such as electric vehicles and the Internet of things (i.e. smart elevators, smart cars, connected homes, etc.). Even in traditionally lower-growth areas like consumer staples, niche brands and healthy eating are long-term trends which are enabled largely by the Internet and e-commerce as consumers have more choices available to them. MFS also sees this trend in more traditional value sectors such as energy and financials. In energy, profits and growth are going to solar or other alternative sources of energy while in financials, most of the growth has come from Fintech.

In health care, MFS believes growth will likely come from areas like biotech, telehealth, next generation tools and life sciences companies. In industrials, similar to autos & housing, it’s all things digital, direct to consumer, and the Internet of things. In leisure, estimated growth is expected in areas like streaming video on-demand and video games. Finally, in retailing, MFS believes it’s all about e-commerce, digital or omni-channel or more direct to consumer businesses.

It’s the portfolio manager’s belief that over time, sustainable earnings growth will come from companies that possess pricing power, the result of sustainable competitive advantages, high barriers to entry, intellectual property and differentiated products and services, many of which reside in the growth universe. 

Significant transactions over the period included:

  • Established a position in Uber Technologies. A company with global scale, improving unit economics and accelerating revenue growth in the long-term secular growth area of ride hailing and delivery, that may also benefit from increased activity over the near-term due to re-openings.
  • Established a position in Icon PLC, a contract research organization that runs pharmaceutical trials on behalf of the biopharma industry. MFS believes health care R&D budgets will expand, and Icon is positioned for industry growth while having improved their quality of business through expanded customer diversification.
  • Participated in the IPO for Bumble, a company MFS believes is well-positioned for long-term secular tailwinds in the shift from offline to online dating and anticipates the company will see increased activity over the near-term due to pent-up demand as various lockdowns are lifted.
  • Exited the Fund’s position in Teladoc Health. While MFS remains favorable on the long-term shift toward telehealth versus in-person visits, it believes that the valuation currently prices in a significant amount of optimism.
  • The Fund exited its positon in IHS Markit following the announcement that S&P Global would acquire them for $44 billion.

Significant impacts on performance


Underweighting shares of the computer and personal electronics maker benefited returns. Although the company reported solid earnings, the stock declined over the reporting period. After a strong run of performance last year, the stock price retreated from its recent highs as the global economy gathered momentum towards reopening from COVID-19 related lockdowns.

Lam Research

An overweight position in the semiconductor company benefited returns. The stock price advanced as the company posted record sales for the quarter, solid free cash flows and announced an additional buyback plan.


An overweight position in the technology company benefited performance. The stock price climbed as strong advertising sales, particularly on search and YouTube, helped drive quarterly financial results that beat consensus estimates.

Verisk Analytics

The portfolio's overweight position in the analytics and risk assessment services provider detracted from returns. The company reported mixed financial results for the quarter with subdued revenue and margin growth. Additionally, the firm's outlook came under pressure from weakness in consulting and implementation projects within its Energy division and reduced growth expectations for its Financial Services segment, which reflected contract transitions and lower project spending by banks. 

Adobe Systems

The portfolio's overweight position in the software company held back relative performance. Although the company had a strong quarter, its stock price retreated as the broader equity markets, particularly technology stocks, pulled back from their recent highs.


Overweighting shares of the software services provider hindered relative performance. Although the company reported solid quarterly earnings results, its stock price traded lower throughout the period as management announced the acquisition of water infrastructure simulation and design solution firm, Innovyze, for $1 billion in cash.

Fund performance

Compound returns %1 Since inception2 10 year 5 year 3 year 1 year Q1
Sun Life MFS U.S. Growth Fund - Series A







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







Russell 1000 Index







¹Returns for periods longer than one year are annualized. Data as of March 31, 2021.

²Partial calendar year. Returns are for the period from the fund’s inception date of September 30, 2010 to December 31, 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 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.