Market Sector Update

• Global markets rallied strongly in the final quarter of 2020 after three leading COVID-19 vaccine candidates proved highly effective in late-stage trials, which provided investors with a clearer line of sight to a return to normalcy. The prospect of full-scale vaccinations and subsequent lifting of restrictions led the market to favor economically sensitive and under-owned cyclical names over their growth and momentum counterparts. As a result, value stocks, which were beaten down during the initial selloff, outperformed growth stocks for the first time on a quarterly basis since 2018.

Portfolio Strategy

• In this environment, the Fund posted positive performance and outperformed its benchmark index. Our exposure to cyclical sectors such as financials, industrials, and materials contributed positively. Strong stock selection across the board was the key driver of performance this quarter. The major individual contributors in the quarter were A.P. Moller Maersk (Danish container shipper), John Wood Group (U.K. oil service company) and POSCO (South Korean steel manufacturer). Maersk’s earnings continued to benefit from company-specific operational improvements and strong industry pricing. John Wood Group continued to progress on its divestment plan, which further strengthened its balance sheet. As investors focus more on the impending energy transition, Wood Group’s diverse and well-positioned portfolio has gained increased attention given its ‘Green’ readiness. POSCO’s core steel business continued to benefit from improvement in volumes and profitability, as steel prices remained strong amid a tight market. POSCO shares also spiked after the company made a major discovery of lithium reserves in Argentina, which portends well for its EV battery component business.
• Hitachi Metals (Japanese specialty steelmaker) detracted modestly in the quarter after the company posted weakerthan- expected operating results due to a drop-off in demand for construction machinery during the pandemic. Hitachi Metals’ parent group officially launched a sale process of Hitachi Metals, which should crystallize the value of its underlying franchises.
• We initiated a new position in Ambev, the Brazilian beer company. Ambev’s earnings have been negatively impacted by depressed economic conditions in Brazil, which is its core market. Management has done a good job navigating a challenging environment while strengthening its core brands. We anticipate meaningful upside to earnings as mix, volumes and margins benefit from a recovery in economic activity in Brazil. We also added to our holdings in Royal Dutch Shell, Galaxy Entertainment Holdings and ArcelorMittal during the quarter.

Outlook

• Our portfolio positions remain heavily skewed towards industries which experienced significant economic pain in the pandemic but are now in the midst of an earnings recovery. We remain focused on opportunities where we see potential for significant valuation upside over the long term given the robustness of the companies’ underlying franchises and balance sheets.

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 December 31, 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.

Top 10 equity holdings as a percent of net assets as of 12/31/2020: Rexel S.A. 3.6%, A.P. Moller-Maersk A/S 3.4%, BASF Aktiengesellschaft 3.1%, Panasonic Corp. 3.1%, John Wood Group plc 3.1%, Covestro AG 2.9%, POSCO 2.9%, J Sainsbury plc 2.9%, Komatsu Ltd. 2.8% and Honda Motor Co. Ltd. 2.7%.

All information is based on Class I shares.

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. 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. 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. The value of a security believed by the Fund's manager to be undervalued may never reach what the manager believes to be its full value, or such security's value may decrease. These and other risks are more fully described in the Fund's prospectus.