Market Sector Update

• Market forces moved strongly back into positive territory in the first quarter of 2019 following the sharp correction at the end of last year. The upward move had both a risk-on complexion and a cyclical component to it. Accordingly, small and mid-cap stocks surged as the Russell 2000 Growth Index, the Fund’s benchmark, gained 17% during the period.
• Spearheading the charge was a benign Federal Reserve (Fed) whose tone turned more dovish at the beginning of the year, leading to a halt of the previous progression higher of stated interest rates. This led to a move downward in the 10-year Treasury bond and renewed enthusiasm for risk assets.
• Also supporting the move up was an indication of progress in the trade dispute between China and the U.S. Economic data continued to be strong, particularly job growth and the services sector, with housing activity also perking up. The momentum was strongest in the first two months of the quarter, before a slight correction in March.

Portfolio Strategy

• The Fund delivered a positive return for the quarter and outperformed its benchmark before the effect of sales charges.
• The Fund benefited most through gains in the information technology sector, both from strong stock selection and an overweight position in software stocks. Another contributing sector was industrials due to robust gains in aerospace and defense holdings.
• Health care detracted from performance, as stock selection within the health care technology and health care provider industries proved challenging during the period. Our material underweight in biotechnology also hurt performance, as returns in the category surged during the quarter. Energy was also a modest hindrance to performance as stock selection lagged the gains in sector.
• During the quarter, strong realized gains from information technology were reinvested back into the sector along with additions to industrials. Position reductions in health care and financials were also redeployed across the portfolio.
• The portfolio remains overweight information technology and consumer discretionary, as sustainable opportunities for growth continue to present themselves in these sectors. Health care remains an underweight position primarily due to the limited exposure to the biotechnology and pharmaceutical industries.

Outlook

• The outlook for the year has improved because of optimism building for a settlement to the China trade issue, the Fed’s decision to halt any further interest rate hikes and the subsequent move lower in the level of interest rates.
• Earnings growth in 2019 won’t have the tax benefit gained in last year, so the earnings variance among companies and industries could be more pronounced. We find the greatest growth opportunities in our overweight sectors and believe a better macro environment should benefit the more cyclically exposed parts of the portfolio.
• The portfolio remains focused on its core stock selection strategy with a finer emphasis on earnings performance in 2019.

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.

The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It is not possible to invest directly in an index.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Investing in small-cap stocks may carry more risk than investing in stocks of larger more well-established companies. 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. Not all funds or fund classes may be offered at all broker/dealers. These and other risks are more fully described in the Fund’s prospectus.