Market Sector Update

• Broad international markets were up approximately 10% in U.S. dollars, reversing the majority of last quarter’s losses. The U.S. dollar appreciated about 1% relative to a basket of other currencies. More accommodative central bank policy, an improving geopolitical backdrop and signs of bottoming in some international markets, particularly China, helped ease looming fears of a recession. For much of the quarter, earnings revisions were negative but leveled out at quarter end.
• With regards to monetary policy, the U.S. Federal Reserve’s (Fed) 180 degree turn in policy stance was notable, signaling rate hikes are to be placed on hold, while balance sheet reduction will end sooner than anticipated. The European Central Bank (ECB) also extended the duration of its accommodative policy, announcing plans to launch a new round of long-term loans to eurozone banks and extending a pledge to hold off on any rate increases before year end. China has implemented a mix of monetary and fiscal policies in an effort to drive growth.
• Targeted steps by China to stimulate its economy showed signs of success as the economy improved from a very low level over the quarter. Europe, Japan and the U.S. generally delivered disappointing economic data, but largely appear to be bottoming. On the geopolitical side, both China and the U.S. sent positive signals on the likelihood of a trade resolution, which benefitted markets. Meanwhile, the ongoing Brexit negotiations delivered very little progress towards reaching a resolution. The rebound in the markets is a signal that expectations for better economic growth are on the rise. While we see the merits to this view, we would feel a lot better about this prospect if the U.S. dollar was weaker.
• Brent crude rebounded approximately 24% on the quarter, though the price remained $17 below its early October high. Both global demand expectations and OPEC production cuts contributed to the price rebound.

Portfolio Strategy

• The Fund posted positive performance and performed in line with the benchmark for the period. Strong stock selection was a positive contributor, while currency and sector allocation were negative contributors to performance for the quarter. Stock selection was notably strong in the consumer staples and industrials sectors, while selection lagged in financials and communication services.
• Consumer staples holding Wuliangye Yibin Co. Ltd., a Chinese liquor company, was a standout performer as was industrials holding Airbus Se. Financials holding Swedbank was a noteworthy detractor to performance, as allegations of potential involvement in money laundering surfaced. Allocations to poor-performing telecommunication services companies also detracted, driving the underperformance in the communication services sector.
• Geographically, the Fund’s holdings in developing markets, particularly China, drove relative gains. Additionally, our underweight in Japan helped as the market performed poorly, while stock selection was weak in the U.K.
• In an effort to provide support in down markets, we maintained our forward currency contract to the Japanese yen, neutralizing our stock underweight allocation on a currency basis. Additionally, we hedged our direct exposure to the Chinese yuan.

Outlook

• There are many factors we are carefully monitoring in the current economic environment. Shift in central bank policy, the rise of nationalism, the Brexit saga and trade negotiations – particularly between the U.S. and China – are standout issues. Going forward, we believe geopolitics will be as important to asset performance as monetary policy. The think U.S.-China trade tensions will persist, we expect some positive agreements in 2019, in line with market expectations.
• In much of the world, global monetary policy remains at the extremes of easy and we do not see that changing materially unless inflation accelerates at a higher-than-expected rate. Virtually all countries are struggling with high levels of debt. As a result, we believe central banks will attempt to keep rates below nominal gross domestic product growth to monetize debt and continue to stimulate their economies. As such, we believe there is a long-term cap on how high rates can go as long as central banks maintain control. Our base case is slow, deliberate exiting of quantitative easing and narrowing of negative interest rate policy globally.
• We believe relative valuation remains supportive for international equities. We see relative value opportunities in emerging markets (especially China), energy, internet-related companies and in many cyclicals that we view as more stable than average.

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 March 31, 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.

Top 10 equity holdings as a percent of net assets as of 03/31/2019: Nestle S.A., Registered Shares 2.7%, SAP AG 2.7%, Roche Holdings AG, Genusscheine 2.6%, Total S.A. 2.6%, Airbus SE 2.4%, Danone S.A. 1.9%, Orange S.A. 1.8%, Wuliangye Yibin Co. Ltd., A Shares 1.8%, AIA Group Ltd. 1.7% and Subaru Corp. 1.7%.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. 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.