Market Sector Update

• Many of the same macroeconomic factors the market has been grappling with for much of the year remained front and center during the third quarter. Volatility surrounding U.S.-China trade negotiations appeared to be a key contributor toward global economic growth falling to uncomfortably low levels and the primary impetus for the Federal Reserve’s two interest rate cuts during the period. Growth fears certainly manifested themselves in the Treasury markets as yields on the 10-year Treasury bond nearly reached the 2016 lows.
• Despite all the negative headlines, large-cap equities were able to post modest positive returns for the period, remaining near all-time highs. However, small- and mid-cap companies were not as fortunate and posted losses for the quarter.
• A review of the composition of quarterly returns indicates a dramatic rotation, primarily in the month of September, which had a powerful impact on performance for the period. There was an exodus from momentum, growth and quality, with value and cyclicals being the key beneficiaries. For example, style rotation within small caps was the largest since September 2008, with value indices trouncing growth.

Portfolio Strategy

• The Fund delivered a negative return and underperformed its benchmark for the quarter.
• Stock selection was the primary cause of the Fund's underperformance
• Stock selection was weakest in consumer discretionary, information technology and health care. The Fund’s materials and real estate holdings were a bright spot, but were not significant enough to offset other areas of weakness.
• Fashion retailer Farfetch’s outlook was impaired by a combination of weak quarterly results and its large acquisition, neither of which were contemplated in our original investment thesis; thus, our decision to eliminate the position. Aerie Pharmaceuticals recently launched two glaucoma drugs that contain the first new mechanism of action in 20 years. Initial revenues have been disappointing despite positive feedback from practitioners on the drug’s efficacy. It appears that reimbursement from insurance carriers hasn’t been sufficient, but we believe this factor should resolve itself in the coming months. Elanco – the animal health spin-off from Eli Lilly– underperformed for the quarter. However, the company’s acquisition of Bayer’s animal health division was viewed negatively. This acquisition, while frustrating for near-term stock performance, appears to enhance the long-term health of the business, which is why we added to our position.
• Top individual performers include Insulet Corp, Sherwin-Williams Co. and Fiserv, Inc. The common attributes among these three holdings were stronger-than-expected quarterly results and improved outlooks.

Outlook

• The investment landscape is always dynamic and that’s certainly the case at this time. Policymakers around the world are expected to continue to react to the weak economic data with further monetary stimulus, which should be helpful.
• However, the perpetual uncertainty surrounding the U.S.-China trade situation remains a major headwind. We are hopeful the upcoming trade negotiations in Washington offer the opportunity for more certainty to emerge.
• In addition, the sustainability of September’s rotation out of growth, quality and momentum, and the implications it has for the broader market, remains front and center in the minds of investors, as does the impeachment inquiry currently underway in the House of Representatives.
• As fundamentals-based investors, our focus remains on researching businesses and their prospects. At a high level, it would not be surprising for the third quarter earnings season to be volatile as companies adjust expectations based on the recent bout of economic weakness.
• If downside volatility does emerge, our objective will be to add to our highest conviction holdings, as well as, upgrade the quality of the portfolio as new opportunities presents themselves.

The opinions expressed are those of the Fund’s managers 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, 2019, 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.

Effective Feb. 21, 2019, the Fund's benchmark changed from the S&P 500 Index to the Russell 3000 Growth Index.

The S&P 500 Index is a float-adjusted market capitalization weighted index that measures the large-capitalization U.S. equity market. The Russell 3000 Growth Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. It is not possible to invest directly in an index.

Top 10 Equity Holdings as a percent of net assets as of 09/30/2019: Microsoft Corp. 7.0, Boeing Co. 4.2, Fiserv, Inc. 3.9, Amazon.com, Inc. 3.5, Walt Disney Co. 3.4, Mastercard, Inc. – Class A 3.2, Five9, Inc. 3.1, Take- Two Interactive 3.0, Danaher Corp. 2.9, Elanco Animal Health, Inc. 2.9.

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.