Sun Life MFS U.S. Growth Fund

Fund commentary | Q4 2023

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

Market Review

The Russell 1000 Index (CA$) posted strong returns in the fourth quarter (Q4), gaining 9.2% on broad-based strength supported by better-than-expected earnings and hopes the U.S. Federal Reserve (the Fed) will cut interest rates early in 2024. The narrative reversed from the Q3 declines with improving economic data, declining inflation trends and increased confidence in the potential for a soft economic landing. The late quarter, high-beta rally lifted high-risk assets. Quality, as a factor, underperformed. Price/earnings multiples expanded with the rapid decline in the 10-year U.S. Treasury yields. Most sectors gained during Q4 led by interest rate sensitive utilities and real estate. Energy was the only sector that posted a decline.

The strength in Q4 caps a remarkable year of performance for the Russell 1000 Index, and more specifically, growth-oriented stocks in the index. The Russell 1000 Index gained 23.1% for the year while growth stocks, measured by the Russell 1000 Growth Index (the Growth Index), rose 38.9% in Canadian dollar terms over the same period.


Performance Review

Sun Life MFS U.S. Growth Fund (the “Fund”) outperformed its benchmark, the Russell 1000 Index over Q4. 

Contributing to relative performance were:

  • An underweight position in energy, the weakest-performing sector in the benchmark, contributed to relative performance.
  • A combination of both stock selection and an overweight position in information technology, one of the stronger-performing sectors in the benchmark, contributed to relative performance.
  • Stock selection in consumer discretionary contributed to relative performance.
  • A combination of both stock selection and underweight positions in financials, industrials and real estate, areas of strength in the benchmark, detracted from relative performance.

Q4 can be characterized as a tale of two halves. The first part of the quarter traded on fundamentals, and the portfolio outperformed due to stock picking. During the second half, the Fed Chair Powell’s speech, coupled with softening inflation data, caused interest rates to peak and fall precipitously. The expected pivot in Fed policy catalyzed a high beta rally that was a headwind to portfolio performance.


Manager outlook

Looking ahead, our sub-advisor MFS Investment Management (MFS) expects the market to remain choppy, and they remain cautiously optimistic. In the short run, market volatility is expected to be dominated by macroeconomic events, but the earnings outlook appears to be improving in areas supported by longer-term growth trends. MFS continues to monitor trends closely. While employment data remains healthy, the economy still faces the potential headwind of the lagged impact of higher rates.

  • Exxon Mobil Corp. – Not owning shares of the integrated oil and gas company helped relative performance. Despite strong operational performance and an increased dividend returned to shareholders, the share price fell as the company reported lower-than-expected earnings.
  • Microsoft Corp. – An overweight position in the software giant supported relative performance. The stock price rose during the quarter as the company reported solid quarterly financial results.
  • Inc. – An overweight position in the internet retailer aided relative returns. The stock price appreciated following continued strong growth within the Amazon Web Services.

  • Alphabet Inc. – Overweighting shares of the technology company held back relative performance. The stock price declined early in the quarter after the company's revenues and operating income came in lighter than market expectations due to a slowdown in cloud revenue growth.
  • Verisk Analytics Inc. – The portfolio's overweight position in the analytics and risk assessment services provider weighed on relative performance. Although the company posted solid organic revenues that were above expectations, the stock lagged the market during the strong tech-driven rally.
  • Broadcom Inc. – Not owning shares of the semiconductor company detracted from relative returns. The stock price appreciated during the quarter in reaction to better-than-expected earnings results, supported by strength in AI-related server demand.

Portfolio Activity

  • In the Communication Services sector, MFS continued to build the position in Meta Platforms Inc. Instagram’s competitive positioning is improving, and user growth is accelerating. Artificial intelligence is not new to Meta, but the company has done a better job articulating how it helps improve monetization.
  • The Fund’s exposure in Financials is comprised of non-bank financials. The Fund does not own any bank stocks. Positions include payments companies Mastercard and Visa, which continue to post consistent long-term growth trends.
  • MFS continued to build positions in Industrials and Material stocks that they believe will benefit from long-duration secular trends. MFS added to the position in industrial gas company Linde plc. The company is a market leader in a highly consolidated market with high barriers to entry. They believe the company will enable the move toward cleaner energy with its hydrogen and carbon capture solutions.
  • Within Health Care, MFS remains optimistic about the growth prospects for the Glucagon-like peptide-1 (GLP-1) category supported by broad-based health benefits and product innovation. MFS added slightly to healthcare equipment providers Agilent Technologies and Thermo Fisher Scientific. The position in Becton, Dickinson and Co. was trimmed to fund these purchases.
  • In information technology, MFS added to the position in Adobe Systems as the company has clearly articulated its AI strategy and they have a higher degree of confidence in the long-term earnings outlook.

Fund Positioning

Overall positioning in information technology, the largest sector weight in the Fund, did not change much from Q3. MFS believes developments in artificial intelligence (AI) are in the early stages of a long investment cycle that should be a tailwind for long-duration growth companies. Microsoft remains a key Fund holding 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. 

MFS remains focused on their bottom-up fundamental approach, identifying companies they believe can generate a consistent, above-average rate and duration of growth. As at December 31, 2023, the portfolio is overweight information technology, communication services and materials when compared to the Russell 1000 Index. The portfolio is underweight consumer staples, energy and financials while maintaining zero exposure to the utilities sector.

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


13.0 13.0 4.2 30.1 9.5
Sun Life MFS U.S. Growth Fund - Series F


14.3 14.3 5.4 31.6 9.8
Russell 1000 Index


14.2 14.7 10.2 23.1 9.2

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