Market Sector Update

• International markets continued their upward trajectory for most of the quarter, accompanied by significant volatility, as continuing low interest rates fueled share prices. This led to a continuation of growth stock outperformance, with spreads between growth and value equities widening further. Every sector but energy and financials gained this quarter, led by materials, industrials and consumer discretionary.

Portfolio Strategy

• The Fund posted positive performance and outperformed its benchmark index for the quarter. The top individual contributors were Rexel SA (French electrical distributor), A.P. Moller-Maersk (Danish container shipper), and Amundi SA (French asset manager). Rexel, the top contributor, reported earnings reflecting good business momentum pre- COVID-19, and took aggressive action to cope with the shutdown-related revenue shock. Given its strong operational and financial base, we believe Rexel is well positioned to recover as economies reopen. Maersk reported better-thanexpected earnings, benefiting from company-specific operational improvement and industry pricing discipline. The first quarter’s year-on-year earnings improvement was notable given industry challenges ranging from pandemic related disruption to marine fuel regulation changes. Amundi’s earnings reflected resilient fund flows, particularly in the retail channel. The strong second quarter global market rebound directly benefits Amundi, the leading asset manager in Europe.
• The Fund’s largest contributions came from industrials and materials holdings, while names within the financials, communication services and health care sectors detracted most. Container shipping leader Maersk was the portfolio’s largest gainer, as strong shipping rates led to increased investor confidence. Within materials, chemicals company Covestro increased significantly from an oversold position, as did Hitachi Metals, which benefitted from rumors of a sale by a major stakeholder. Financials holdings HSBC and Standard Chartered were among the largest detractors, casualties of negative sentiment around Hong Kong and lower interest rates. Telecom giant Vodafone was down as well, along with the out-of-favor sector, on fears that the company’s earnings have yet to trough. In addition, Japanese energy company Inpex detracted, as the company missed earnings guidance and lowered its outlook for the year.
• During the quarter, we added to underperformers Sainsbury’s and TechnipFMC and continued to build our position in ArcelorMittal. U.K.-based Sainsbury’s weakened on more Brexit worries, as well as fears around general merchandise and the shift to online grocery shopping. These fears have overshot the risks, in our view. TechnipFMC, a leading energy services player, has seen its shares languish due to pain in the energy sector, yet the company has demonstrated resilience and flexibility. ArcelorMittal’s shares have suffered along with those of the steel industry, resulting in an extremely compelling valuation coupled with a newly strengthened balance sheet. To execute those buys we trimmed relative outperformers Fujitsu, Ericsson and Covestro.

Outlook

• Given today’s valuation spread environment, the portfolio contains many industry leaders near all time-low valuations. That said, we continue to go where there is pain; hence, financials, industrials, and consumer discretionary are our largest sector positions, and we have no exposure to real estate.

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 September 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.

Top 10 equity holdings as a percent of net assets as of 09/30/2020: A.P. Moller-Maersk A/S 4.1%, Rexel S.A. 3.4%, Hitachi Metals Ltd. 3.0%, J Sainsbury plc 2.9%, Roche Holdings AG, Genusscheine 2.9%, BASF Aktiengesellschaft 2.8%, Covestro AG 2.8%, Komatsu Ltd. 2.7%, Compagnie Generale des Etablissements Michelin, Class B 2.7% and John Wood Group plc 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. 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. 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