Market Sector Update

• The Fund's benchmark, the JP Morgan GBI-EM Global Diversified Index, gained 2.9% with January seeing a gain of 5.5% as the U.S. Federal Reserve (Fed) turned dovish. The market saw weakness the rest of the quarter as investors focused on global growth concerns.
• Argentina declined 10.5% where inflation edged higher to 51% resulting in tightening measures by the central bank. Brazil was up 2.3%, but tensions arose around pension reform in the government and unemployment remained high at 12.2%. Mexico gained 6.8% mostly from bond prices given rate cuts are being priced in and the trade surplus was larger than expected.
• South Africa gained 3.5% where despite a weak retail sales print, the government provided assistance to a stateowned electric public utility. Indonesia was up 5.5% almost all from bond prices as inflation was lower than expected and the trade balance moved to surplus. Malaysia gained 3.8% with industrial production was up 3.2% year on year. The Philippines gained 7.6% with bond prices the key driver as inflation moved lower.

Portfolio Strategy

• The Fund posted a positive return but underperformed the benchmark for the quarter. Our current strategy is to be overweight local rates, particularly where we believe real yields look attractive, where the central bank increasingly looks forward or where the yield curve seems too steep.
• A less dovish Fed is also a key factor, but we expect concerns regarding inflation expectations to keep them sidelined for some time. Conversely, markets where inflation may surprise on the upside and fundamentals on the downside may result in selective opportunities to move underweight.
• As was seen in Fund activity, we continue to look for the perceived right entry point to selectively move overweight emerging market currencies that we believe were oversold during the sell-off and/or have improving growth and fundamentals. The short-term outlook for global growth is less positive, but at a potential inflexion point and this is making us cautious yet tactical.

Outlook

• We expect global data and growth to remain weak, although we see initial signs of a bottoming out in the latest set of survey indicators. At the same time, we believe emerging market growth is holding up better than developed market growth, which is more late cycle.
• While U.S. growth is also expected to continue its decline back towards potential, a less hawkish Fed could be supportive for some emerging market local rate markets. While less optimism over growth is normally not supportive for currencies, we believe valuations look appealing particularly in the context of improving growth momentum.
• In addition, the U.S.-China trade war negotiations are looking better than expected and we believe a resolution is imminent. Taking this all into account, we still believe the market is oversold presenting some very selective opportunities, especially on a relative value basis, but timing is key.
• Emerging market inflation remains low on average and the outlook remains favorable given output gaps are not yet closed in most countries. In local rates, we see selected Asia countries, Mexico and Russia moving towards a more dovish bias offering some opportunities to move overweight, while Eastern Europe is more likely to be pivot towards tighter policy should the economic environment in Europe improve.

The opinions expressed are those of the Fund’s managers regarding Class I shares 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.

The JP Morgan GBI-EM Global Diversified is an unmanaged index that tracks the performance of emerging market debt. It is not possible to invest directly in an index.

Effective December 2018, Wee-Wing Ting, portfolio manager, left the firm to pursue other opportunities.

Risk factors: As with any fund, 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. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the fund may fall as interest rates rise, especially securities with longer maturities. Investing in below investment grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. The Fund may seek to manage exposure to various foreign currencies, which may involve additional risks. The value of securities, as measured in U.S. dollars, may be unfavorably affected by changes in foreign currency exchange rates or exchange control regulations. Investing in foreign securities involves a number of risks that may not be associated with the U.S. markets and that could affect the Fund’s performance unfavorably, such as greater price volatility; comparatively weak supervision and regulation of securities exchanges, fluctuation in foreign currency exchange rates and related conversion costs, adverse foreign tax consequences, or different and/or less stringent financial reporting standards. Sovereign debt instruments are also subject to the risk that a government or agency issuing the debt may be unable to pay interest and/or principal due to cash flow problems, insufficient foreign currency reserves or political concerns. Risks of credit-linked notes include those risks associated with the underlying reference obligation, including but not limited to market risk, interest rate risk, credit risk, default risk and foreign currency risk. The buyer of a credit-linked note assumes the risk of default by the issuer and the underlying reference asset or entity. If the underlying investment defaults, the payments and principal received by the Fund will be reduced or eliminated. Also, in the event the issuer defaults or there is a credit event that relates to the reference asset, the recovery rate generally is less than the Fund’s initial investment, and the Fund may lose money. The use of derivatives presents several risks including the risk that fluctuation in the values of the derivatives may not correlate perfectly with the overall securities markets or with the underlying asset from which the derivative’s value is derived. Moreover, some derivatives are more sensitive to interest rate changes and market fluctuations than others, and the risk of loss may be greater than if the derivative technique(s) had not been used. Derivatives also may be subject to counterparty risk, which includes the risk that a loss may be sustained by the Fund as a result of the insolvency or bankruptcy of, or other non-compliance by, another party to the transaction.These and other risks are more fully described in the Fund's prospectus.