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Managed by the team of Ben Stone and Pablo de la Mata, Sun Life MFS International Value Fund has outperformed in the largely growth-dominated market of the past few years and continues to do so through the pandemic year of 2020. The fund’s 3-year average annual compounded rate of return to Sept. 30 was 9.7%, leaving most of its value peers in the dust. Its consistent outperformance has earned in the FundGrade A+ Award every year since 2015.
I believe a key reason for this stronger performance is that in reality, the fund is more of a quality-growth or growth-at-a-reasonable-price strategy. While traditional value managers may focus more on near-term valuation levels, this team takes a long-term focus and determines what they believe a company will be worth in the future. This results in a more “growth-tilted” portfolio with valuation levels well above the broader market.
From a sector perspective, this also does not look like a typical value fund, with an overweight in consumer staples, information technology, and industrials. The portfolio has a high active share, meaning that its holdings are much different than the MSCI EAFE Index.
Top holdings at Aug. 31 included Nestlé SA, Givaudan SA, Taiwan Semiconductor Manufacturing Co. Ltd., Cadence Design Systems Inc., Schneider Electric SE.
Geographically, the fund has some modest exposure to the U.S. through a couple of multi-national names but is more focused in Europe and Asia. Europe, including the U.K., makes up about 55% of asset allocation, while Asia is a little more than a quarter.
Performance has been very strong, with the fund boasting above-average returns over the past three- and five-year periods. Volatility has been roughly in line with both the index and the category.
But where this fund really shines is in its downside protection. For the past three and five years, the fund has participated in between 66% of the downside, while participating in nearly all of the market upside.
While this fund, and a substantially similar version in the U.S., have a long history of strong returns, I don’t think that the historic level of outperformance can be repeated. But I believe the management bench strength and disciplined investment process will still help the fund deliver strong relative returns.
If you’re comfortable with a potentially higher level of risk, this may be a fund look at in more detail.
Sun Life MFS International Value Fund
Fund company: Sun Life Global Investments Inc.
Fund type: International Equity
FundGrade: A (September)
FundGrade A+ Awards: 2015-2019
Style: Bottom-up growth
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Good
Manager: Benjamin Stone since Oct. 2010; Pablo de la Mata since Sep. 2014
MER: 2.45%
Fund Code: SUN104 (Front-end load)
Minimum investment: $500
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
© 2020 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.
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. Dave Paterson is employed as an advising representative (portfolio manager) by Empire Life Investments Inc. (ELII), a subsidiary of Empire Life Insurance Company. ELII is the investment fund manager and portfolio manager of the Empire Life Mutual Funds and the portfolio manager of the Empire Life Segregated Funds (collectively, the Empire Funds). As such, his employment and his compensation may be connected to the success of ELII and the Empire Funds. From time to time, the Empire Funds may buy, sell, hold, or otherwise have an interest in securities that may be discussed in this report.
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