Mfs International Value Fund: Regulated Investment Company?

The MFS International Value Fund is a conservative fund that focuses on investing in international companies believed to be undervalued compared to their intrinsic value. The fund is regulated by the Securities and Exchange Commission (SEC) and is registered under the Investment Company Act of 1940. The fund's objective is to seek capital appreciation, and it invests primarily in large- and mid-cap stocks of companies based outside the U.S., although it may also hold emerging-market stocks. The fund's performance has been strong, outpacing category peers for much of its history, and it has a low expense ratio of 1.03%.

The fund's investment objective

The Funds Investment Objective

The MFS International Value Fund's investment objective is to seek capital appreciation. The fund focuses on international companies that are believed to be undervalued compared to their intrinsic value. The fund seeks an advantage by evaluating the long-term quality, durability, improvement potential, and intrinsic value of businesses. The fund commenced on 24 October 1995 and is benchmarked to the MSCI EAFE Value Index, which tracks non-US value stocks. The fund may invest in large- and mid-cap stocks of companies based outside the US and may also hold emerging-market stocks. The fund's conservative investing approach has helped it to outperform its benchmark for much of its history, including during the worldwide financial crisis between late 2007 and early 2009. The fund has returned 13.20% over the past year, 0.03% over the past three years, 5.15% over the past five years, and 5.77% over the past decade. The fund's overall Morningstar Rating measures are based on risk-adjusted returns as of 30 September 2024.

The fund's investment strategy

The Funds' Investment Strategy

The MFS International Value Fund is designed to have a conservative investing approach relative to its parent company's other international funds. The fund's investment objective is to seek capital appreciation, with managers focusing on international firms they believe to be undervalued relative to their long-term potential. The fund focuses on investing in large-cap, high-quality, attractively valued companies and has a long-term investment time horizon. It employs a flexible valuation approach, placing a heavy emphasis on cash flow and returns-based methodologies. The fund may also hold emerging-market stocks, but those represent a very small percentage of assets.

The fund's managers use fundamental ratios such as price-to-cash flow, price-to-sales, price-to-book, and price-to-earnings to select stocks. They also look for firms with a sustainable competitive advantage. This strategy has resulted in steadier performance compared with other funds in its category and has kept volatility low.

The fund may invest in derivatives, which can be used to take both long and short positions, but these can be highly volatile and involve additional risks.

The fund is subject to various risks, including stock market risk, international risk, and intrinsic value risk.

The fund's performance

The MFS International Value Fund is designed to have a conservative investing approach relative to its parent company's other international funds. The fund's holdings tend to be well-diversified across sectors. The fund's portfolio consists primarily of large- and mid-cap stocks of companies based outside the U.S., although managers may also invest domestically. The fund may also hold emerging-market stocks, but those represent a very small percentage of assets.

The fund's management

The Funds Management

The MFS International Value Fund is designed to have a conservative investing approach relative to its parent company's other international funds. The fund was heavily tilted towards developed markets, with top country weightings including Japan and Switzerland. The fund's holdings in both of those countries are greater than its category peers.

The fund's portfolio consists primarily of large- and mid-cap stocks of companies based outside the U.S., although managers may also invest domestically. The fund may also hold emerging-market stocks, but those represent a very small percentage of assets.

The fund is benchmarked to the MSCI EAFE Value index, which tracks non-U.S. value stocks. The fund's investment objective is to seek capital appreciation, with managers focusing on international firms they believe to be undervalued relative to long-term potential.

The fund's managers use fundamental ratios such as price-to-cash flow, price-to-sales, price-to-book, and price-to-earnings to select stocks. They also look for firms with a sustainable competitive advantage. This strategy has resulted in steadier performance compared with other funds in its category.

The fund has returned 13.20% over the past year, 0.03% over the past three years, 5.15% over the past five years, and 5.77% over the past decade. The fund has an expense ratio of 1.03%.

The fund may not achieve its objective, and there is a risk of losing money on the investment. The fund's focus on international value stocks could result in additional downside risk if that asset class is underperforming.

The fund is managed by Benjamin Stone and Pablo de la Mata, who are based in MFS' London office.

Regulation

The fund is regulated by the Securities and Exchange Commission (SEC). It was filed with the SEC on April 13, 2020, under the Securities Act of 1933 and the Investment Company Act of 1940.

The fund's risks

The MFS International Value Fund is an international value fund that focuses on investing in large-cap, high-quality, attractively valued companies. While the fund has historically outperformed its benchmark, it is subject to various risks that investors should be aware of. Here are some key risks associated with investing in the MFS International Value Fund:

• Stock Market Risk: The fund invests primarily in stocks, which are subject to the volatility and risks of the stock market. Stock markets can decline significantly in response to various factors such as economic conditions, political events, regulatory changes, and company-specific news. This can lead to potential losses for investors.
• International Risk: The fund invests in foreign markets, which can involve greater risk and volatility than US investments. Adverse market, currency, economic, political, regulatory, and other conditions in foreign countries can impact the fund's performance.
• Value Company Risk: The fund focuses on investing in value companies, which are those believed to be undervalued compared to their intrinsic value. However, the stocks of value companies can continue to be undervalued for extended periods, and they may not realize their expected value.
• Derivatives Risk: The fund may use derivatives, such as options, futures, and swaps, which can be highly volatile and involve additional risks such as counterparty and liquidity risk.
• Currency Risk: The fund's investments are exposed to foreign currencies, and changes in currency exchange rates can affect the value of the fund's investments.
• Sector and Country Risk: The fund may invest a significant portion of its assets in specific sectors or countries, which can increase the impact of developments in those sectors or countries on the fund's performance.
• Liquidity Risk: The fund may hold investments that are difficult to sell, particularly during periods of market stress, which could force the fund to sell these investments at unfavourable prices.
• Large Shareholder Risk: Large redemptions or purchases of fund shares by shareholders can impact the fund's performance. Large transactions may require the fund to sell securities at disadvantageous prices or invest additional cash at unfavourable prices.
• Active and Frequent Trading Risk: The fund may engage in active and frequent trading, which can increase transaction costs and potentially capital gain distributions.
• Specific Company Risk: Changes in the financial condition or specific market, economic, industry, political, regulatory, or other conditions affecting a particular company can adversely impact the fund's performance.

Frequently asked questions