Fund in Focus: Sun Life Excel India Fund

Positive outlook but high risk

There are many reasons to like India. It is one of the world’s fastest-growing economies with GDP growth rates forecasted to be more than 7% for the next couple of years. Helping the cause has been a continued rise in domestic consumption combined with an increase in infrastructure spending.

And India investments have consistently outperformed the broader emerging markets index, with the MSCI India Index delivering a 3-year average annual compounded rate of return of 8.0% (USD) to Jan. 31, double the MSCI EM ex-China Index’s 4.0% return.

There are risks, of course, including a high current account and budget deficits, which could weigh on growth. The country is also susceptible to domestic and more global geopolitical risks. Still, relative to more developed countries, the outlook is very positive.

There are only a couple of mutual funds that invest purely in India, including the Sun Life Excel India Fund and the HSBC Indian Equity Fund. Managed by Atul Penkar of Mumbai-based Sun Life Birla Asset Management, the Sun Life fund has handily outperformed the HSBC version on both an absolute and risk-adjusted basis.

The fund is actually structured as a “fund of funds,” investing in units of an underlying fund that in turn holds securities of companies located in India. It’s actively managed, logging portfolio turnover levels averaging more than 100% over the past five years.

Performance has been strong, with 3-year average annual compounded rate of return of 9.5%. But the fund can be volatile (it lost more than a third in 2011 and gained more than 50% in 2014). Understandably, 3-year average standard deviation at 17.4 as of Jan. 31 is well above both the S&P/TSX Composite and the S&P 500.

Cost is another drawback, with an MER of 2.51% compared with 0.69% for the BMO India Equity Index ETF and 1.09% for the iShares India Index ETF. While it might be tempting to favour the ETFs for their lower cost, I tend to prefer active management when investing in emerging economies.

Because of its inherent risk, this is certainly not a fund for everyone. Most investors may be better off with a more diversified emerging markets entry. However, this would be a good fund to consider for those looking to add India-specific exposure.

Sun Life Excel India Fund
Fund company: Sun Life Global Investments
Fund type: Geographic Equity
Style: Large-Cap Growth
Risk level: High
Load status: Optional
RRSP/RRIF suitability: Fair
Manager: Atul Penkar since August 2011
MER: 2.51%
Fund code: SUNL100 (Front-end load)
Minimum investment: $250

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently, and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.