Market Sector Update

• Similar to last quarter, the phrase of “You can’t make this stuff up,” continues to be very applicable. Third quarter 2020 continued the momentum from the previous period with most market averages up close to 10%. The Russell 3000 Growth Index, the Fund’s benchmark, advanced nearly 13% for the period. This marks the strongest six-month period for U.S. stocks since 2009. Strength in equities continues to be driven by a more resilient economy than expected, hopes for additional fiscal stimulus and the Federal Reserve’s statement that interest rates will remain low for years to come.
• The first shot of fiscal stimulus definitely helped the employment outlook, as additional unemployment insurance claims dropped from 17 million to 11 million during the quarter. Although progress has been made, the timing of an additional stimulus package is important as industries like travel require additional aid to remain intact until a vaccine becomes available and the general consumer fear of crowds subsides.
• While the U.S. has not contained the COVID-19 spread well relative to some parts countries, the fiscal and monetary stimulus response has been impressive. In addition, the U.S. stock market is chalk full of companies that continue to grow and prosper through the pandemic. There is no doubt that U.S. companies are broadly leading the strongest trends of e-commerce, cloud computing and digital transformation for consumers and corporations.
• This all continues to fuel the same old story where stocks are more attractive than bonds and the U.S. growth equity market continues to lead all alternatives around the world. While debates around shapes of economic recoveries continues, the stock markets have completed a strong “V” shaped recovery since the pandemic-fueled downturn earlier in the year.

Portfolio Strategy

• The Fund delivered a positive return and outperformed its benchmark for the quarter.
• The Fund’s performance was balanced between stock selection and sector allocation. Standouts were strong stock selection within the health care and industrials sectors. Our intended exposure to smaller-cap companies continues to weigh on performance from an allocation perspective but was more than offset by stock selection during the period. One such example is Kornit Digital Ltd., which continues to benefit during the pandemic due to its innovation in commercial digital printing.
• The Fund has significant exposure to companies that will benefit as economies reopen and have the strong capital positions to weather the current storm. Holdings like Caesars Entertainment, Inc., Darden Restaurants, Inc. and Live Nation Entertainment, Inc. are likely to continue to perform well if COVID-19 vaccine trials continue to demonstrate positive results in the coming months. as we anticipate.
• Conversely, the materials and consumer staples were the largest sector detractors relative to the benchmark due to the Fund not holding positions in either sector. With regard to individual holdings, Apple, Inc., Tesla, Inc. and Analog Devices, Inc. detracted from performance.
• We contnue to focus on companies with long runways for sales growth by using a durable competitive advantage to either gain market share or lead new markets. The competitive advantages we focus on are bucketed by innovation, scale and brand strength. Our focus on buying these types of leading companies is not subject to change regardless of a outside influences like apandemic or presidential election.

Outlook

• While there are many important events ahead in the months ahead, including the U.S. presidential election, multiple vaccine updates and additional fiscal stimulus, we are reluctant to think the longer-term investing backdrop will significantly change. The most important focus for us in the coming months will be developments on the vaccine front, as it will have important ramifications for the timing of “normalizing” consumer behavior.
• The Fund has significant exposure to some of these areas that should benefit as consumers re-engage in social gatherings. Near-term vaccine news will be important for these holdings. Our current expectation is mass vaccinations will start during the first half of 2021, and we expect a return to normalized entertainment levels, including full stadiums for sports and concerts, in the fall of 2021.
• While our company analysis does not include election predictions, we believe the market is prepared for a victory by former Vice President Joe Biden. Should Biden win, we think the market will focus on two key issues: a potential increase in corporate tax rate – likely viewed as a negative by the markets – and a likely more amicable relationship toward China and other countries, which is likely to be viewed as a positive for many companies. If President Donald Trump is re-elected, we anticipate a short-term bump up for equities, as the current tax regime would remain in place.
• Importantly, while exact vaccine timing and elections can always carry surprises, we expect the investing backdrop of low interest rates, low inflation and U.S.-led innovation to broadly support the current backdrop, one that is constructive for U.S. equity markets.

The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through Sept. 30, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

All information is based on Class I shares.

The Russell 3000® Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3000® Index companies with higher price-to-book ratios and higher forecasted growth values. It is not possible to invest directly in an index.

Top 10 holdings (%) as of 09/30/2020: Apple, Inc. 8.4, Amazon.com., Inc. 7.7, Microsoft Corp. 7.1, Microsoft Corp. 7.7, Mastercard, Inc. Class A 4.6, Five9, Inc. 4.0, PayPal Holdings, Inc. 2.9, Twilio, Inc. Class A 2.8, Workday, Inc. Class A 2.7, Universal Display Corp. 2.6.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. Large-capitalization companies may go in and out of favor based on market and economic conditions. Prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may be more volatile or not perform as well as value stocks or the stock market in general. The Fund typically holds a limited number of stocks (generally 30 to 50). As a result, the appreciation or depreciation of any one security held by the Fund may have a greater impact on the Fund's net asset value than it would if the Fund invested in a larger number of securities. These and other risks are more fully described in the Fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.