Section Hero Funds

Focus Fund

Focus Fund

4Q19 Commentary1


The U.S. equity market finished 2019 with strong fourth-quarter performance, leading to its best annual gain since 2013. Stocks bounced back from their late-2018 losses in the first quarter of 2019, posted timid gains during the second and third quarters, and finished the year with a rally as trade tensions eased. The S&P 500 Index2 posted a +9.07% return for the quarter, while the Nasdaq Composite Index2 gained +12.47%.

Breaking down the quarter, stocks rose in October on the back of a “Phase One” U.S/China trade deal announcement, and a 25 basis point cut to the Federal Funds rate. During his speech, Fed Chairman Powell indicated that a pause in future rate cuts was likely. November brought new highs for stocks on the back of more progress on trade negotiations and a robust 266,000 increase in non-farm payrolls, a blowout number compared to economists' expectations. In December, the Federal Reserve paused on rates, as expected, and an official date for signing the “Phase One” trade deal was announced.

Recently, Middle East tensions have dominated the headlines following a U.S. airstrike that killed Iranian military commander Qassem Soleimani, for which Iran retaliated with missile strikes on U.S. army bases in Iraq. Following these developments, President Trump delivered a speech to the country and signaled no further U.S. military strikes are planned, and it appears that Iran›s response was also calibrated to avoid further escalation of conflict.

As referenced above, the latest news in the ongoing U.S./China trade conflict is that the Chinese delegation, led by Vice Premier Liu He, China's key negotiator throughout the negotiation process, traveled to Washington on January 15th and signed the first phase of a U.S./China trade deal in a White House ceremony. This phase includes structural reforms and other changes to China›s economic and trade regime in intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange. Investors viewed this progress on trade relations as overwhelmingly favorable for global markets.


For the quarter, Japan's Nikkei 225 Index2 rose +8.89% (in local currency). Equities in Europe were generally positive as the MSCI Euro Index2 rose +7.89%. Likewise, the MSCI China Index2 was bolstered by cooling trade war-related tensions, returning +14.71%. The MSCI Emerging Markets Index2 posted a substantial +11.84% gain during the period. Last, the price of oil rose +13% during the quarter due to well-publicized and increasingly volatile tensions in the Middle East.

The yield on the U.S. 10-year Treasury Note broke its declining trend for 2019 as it rose 25 bps during the quarter. The 10-year yield began at 1.66%, but as stock market returns rose throughout the period investors put their appetite for yield aside and instead invested incremental dollars in risk assets, further supporting strong stock momentum. Flows into U.S. equities allowed yields to rise, eventually finishing the quarter at 1.91% for the 10-year note.

On the employment front, the U.S. labor market ended the year with less momentum. U.S. nonfarm payrolls increased by 128,000, 266,000 and 145,000 in October, November and December, respectively. Job growth averaged approximately 176,000 jobs per month for calendar year 2019, compared to the 216,000 average monthly job gain for calendar year 2018.

Meanwhile, confidence among Americans surged to the highest level since October 2000 on brighter views regarding the economy and Americans' personal finances, adding to signs that consumers will continue to support an economic expansion. Bloomberg's index of consumer comfort rose 1.2 points to 65.1 in the week ended January 5th, marking the index›s seventh advance in eight weeks and demonstrating how positive Americans are feeling amid cooling U.S. trade tensions with China, record stock prices, and the lowest unemployment in a half century.

In terms of market capitalization, large cap stocks slightly lagged smaller cap stocks during the quarter, as the Russell 10002,3 and Russell 20002,3 indexes posted quarterly returns of +9.04% and +9.94%, respectively. As for investment style, there was a large gap of outperformance present between growth and value stocks as the Russell 1000 Growth2,3 and the Russell 1000 Value2,3 indexes posted quarterly returns of +10.62% and +7.41%, respectively.

The Marsico Focus Fund posted a return of +9.72% for the fourth quarter and outperformed its benchmark, the S&P 500 Index, which returned +9.07%.


Primary Contributors5: An overweight allocation to Information Technology, the strongest-performing sector4 of the benchmark index, had the largest positive impact on performance in the quarter. The Fund had zero exposure to the weak-performing sector, Consumer Staples, which aided results. Stock selection in the Communication Services sector was strong, boosting overall performance.


Primary Detractors5: Stock selection in the Industrials sector was the largest detractor from performance in the quarter. An underweight allocation to one of the strongest-performing sectors of the benchmark index, Health Care, also dampened returns.


For more information, please click here for the Marsico Focus Fund Quarterly Investment Update.

1 Performance data quoted represents past performance. Past performance is no guarantee of future results. A Fund's performance, especially for short time periods, should not be the sole factor in making an investment decision. Please keep in mind that our views on investments discussed herein are subject to change at any time and the holdings represented here do not represent all of the securities purchased, sold, or recommended by Marsico Capital Management, LLC ("MCM"). Certain less-material factors may not be presented.

2 The S&P 500 Index is a registered trademark of S&P and is an unmanaged broadly-based index of the common stock prices of 500 large U.S. companies, and includes the reinvestment of dividends. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership, and includes the reinvestment of dividends. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership, and includes the reinvestment of dividends. The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values, and includes the reinvestment of dividends. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values, and includes the reinvestment of dividends. The Nasdaq Composite Index is the market capitalization-weighted index of approximately 3,000 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. The Nikkei 225 Stock Average Index is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange, excluding ETFs, REITs, preferred equity contribution securities, and tracking stocks (on subsidiary dividend) etc. other than common stocks. Sources of foreign exchange rates may be different between a portfolio and the benchmarks.  The MSCI Euro Index captures large cap representation across the 10 Developed Markets countries in the EMU. With 115 constituents, the index covers approximately 70% of the free float-adjusted market capitalization of the EMU. The MSCI China Index captures large and mid cap representation across China H shares, B shares, Red chips, P chips and foreign listings (e.g. ADRs). With 703 constituents, the index covers about 85% of the China equity universe. The MSCI Emerging Markets (EM) Index captures large and mid-cap representation across 24 Emerging Markets (EM) countries. With 1,404 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. The indexes mentioned above are unmanaged and not available for direct investment. For comparison purposes, it should be noted that the indexes do not charge fees and have no expenses.

3Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2018. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark of the relevant LSE Group companies and is/are used by any other LSE Group company under license. “TMX®” is a trade mark of TSX, Inc. and used by the LSE Group under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company›s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

Sector and industry weightings are determined using the Global Industry Classification Standard (“GICS”). GICS was developed by and is the exclusive property and service mark of MSCI Inc. (“MSCI”) and Standard & Poor’s (“S&P”), and is licensed for use by MCM. Neither MSCI, S&P, MCM, nor any third party involved in compiling GICS makes any express or implied warranties or representations with respect to such standard or classification (or the results from use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any such standard or classification. MSCI, S&P, and MCM, and any of their affiliates or third parties involved in compiling GICS shall not have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. 

5Source: UMB Fund Services, Inc., FactSet, and Marsico Capital Management, LLC “(MCM”). Data shown such as portfolio holdings, percentages, country, and sector weightings generally applied on the date shown above, and may have changed substantially since then. References to specific securities and sectors are not recommendations to buy or sell such securities or related investments.


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