Market Sector Update

• Small-cap growth stocks continued to rally in the third quarter 2020 after a solid rebound the previous quarter. The Russell 2000 Growth Index, the Fund’s benchmark, advanced 7.2% for the period, but lagged its large- and mid-cap counterparts. Within the benchmark, the consumer discretionary sector led for the quarter despite the expiration of government stimulus in July and the inability to renew that benefit.
• The U.S. employment picture continued to improve during the quarter. Nearly half of the jobs lost during the pandemic have been regained. In addition, two key consumer economic industries – auto and home sales – also experienced healthy recoveries and likely could see continued near-term gains.
• The market rally was intact through August before experiencing the usual choppiness in September, with the benchmark declining 2.1% for the month. Sentiment swings between the growth and value categories were frequent during the quarter, but growth outperformed despite sub-par gains in the information technology and health care sectors.

Portfolio Strategy

• The Fund delivered a positive return and outperformed the benchmark for the quarter.
• The Fund’s performance was driven in part by stock selection in the information technology and health care sectors, which comprise more than half of the portfolio’s composition. While these sectors were laggards for the benchmark, the Fund advanced on the performance from health care companies such as iRhythm Technologies, Inc., Veracyte, Inc. and Livongo Health, Inc., as well as Five9, Inc., Globant SA, and Enphase Energy, Inc. in the information technology space.
• Consumer discretionary was the best performing sector for both the Fund and benchmark. Within the group, leaders included Lithia Motors, Inc. and two housing-related companies, Installed Building Products, Inc. and TopBuild Corp.
• Conversely, industrials and financial services were sector laggards for the Fund during the period. A number of solar stocks had a massive run, which propelled the benchmark’s performance in industrials. While the Fund has some exposure to solar power via Enphase Energy, our overall underweight position to industrials during the quarter led to the shortfall. Financial services performance was impacted by disappointing results from eHealth, Inc., which led us to exit the Fund’s position in the company during the quarter.

Outlook

• The Federal Reserve’s “low for longer” mantra creates a scenario that opens the door for periodic speculative runs in certain stocks and industry groups, which can present a challenge for the Fund to navigate. In the midst of these runs remains uncertainty over the economic outlook, the upcoming elections and swings in new COVID-19 cases.
• The Fund is positioned slightly more conservatively with additions of growth companies in the consumer discretionary and industrials sectors to reflect the prospect for further economic improvement in 2021. We continue to hold an overweight position to the information technology overall and the software industry within the sector. We also maintain a slightly underweight position in health care reflecting the large biotechnology component of the benchmark.

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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.

All information is based on Class I shares.

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.

Top 10 holdings as a % of net assets as of 09/30/2020: Biotech Swap 7/1/21 3.8, Five9, Inc. 3.5, Wingstop, Inc. 2.7, Varonis Systems, Inc. 2.5, Installed Building Products, Inc. 2.4. Mercury Systems, Inc. 2.2, Monolithic Power Systems, Inc. 2.2, , CareDx, Inc. 2.2, Globant SA 2.1, iRhythm Technologies, Inc. 2.1.

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. Investing in small-cap stocks may carry more risk than investing in stocks of larger more well-established companies. The Fund may invest in Initial Public Offerings (IPOs), which can have a significant positive impact on the Fund’s performance that may not be replicated in the future. 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.