Section Hero Funds

21st Century Fund

21st Century Fund

3Q19 Commentary1

 

The third quarter of 2019 was a continuance of themes witnessed earlier in the year. Volatility was elevated in several major asset classes as markets oscillated in reaction to U.S./China trade negotiations, Federal Reserve announcements, and other headline-grabbing events.

Equity markets generally trended positively in July, as the Federal Reserve announced a 25 basis point cut of the Federal Funds rate, marking just the fifth time in the past 25 years that the central bank switched from raising to lowering rates, and the first time since the credit crisis of 2008. Notably, Chairman Powell also said the Federal Reserve will act as appropriate to sustain U.S. economic expansion as it evaluates future data. The continuing trade war with China also remained in the headlines, as a U.S. delegation engaged in goodwill talks with Chinese representatives, causing investors to feel cautiously optimistic about the path forward.

August began with a shock to the markets, as President Trump announced an additional 10% tariff on an additional $300 billion of goods and products coming into the U.S. from China, supplementing the $250 billion of goods already being tariffed at 25%. The Chinese responded by putting a halt to purchases of U.S. agricultural products and letting the Yuan tumble to its weakest level in more than a decade, prompting the U.S. to label China a “currency manipulator.” This led to a sharp drop of over 1150 points in the Dow Jones Industrials Average in the first three trading days of August, and a 3.1% weekly drop in the S&P 500 Index, the worst of the year. Investors were whipsawed for the remainder of the month, but both countries finally agreed to a high-level meeting in October, giving anxious markets some temporary pause.

September then brought Brexit-related uncertainty, a drone attack on major Saudi Aramco oil facilities, and a highly-expected 25 bps cut to the Federal Funds rate. Near the end of the month, markets were again moved by the revelation that House Democrats were launching an impeachment inquiry focused on a telephone conversation between President Trump and the Ukrainian president. In addition, reports surfaced that the Trump administration was looking into limiting U.S. investment in Chinese companies. Needless to say, September was a busy, headline-driven month for investors to digest.

For the quarter, the NASDAQ Composite Index2 gained +0.18% while Japan's Nikkei 225 Index2 rose +2.92% (in local currency). Equities in Europe were largely negative as the MSCI Euro Index2 dropped -1.99%. Likewise, the MSCI China Index2 was burdened by trade war-related fears, returning -4.73%. The MSCI Emerging Markets Index2 declined a substantial -4.25% during the period.

In terms of market capitalization, large cap stocks posted slightly positive gains relative to smaller cap stocks during the quarter, as the Russell 10002,3 and Russell 20002,3 indexes posted quarterly returns of 1.42% and -2.40%, respectively. As for investment style, a very small gap of outperformance was present between growth and value stocks as the Russell 1000 Growth2,3 and the Russell 1000 Value2,3 indexes posted quarterly returns of 1.49% and 1.36%, respectively.

The Marsico 21st Century Fund posted a return of -0.56% for the third quarter and outperformed its benchmark, the Russell Midcap Growth Index2,3, which returned -0.67%.

Primary Contributors5: Stock selection in the Information Technology sector4 was the largest contributor to performance in the quarter. The Fund also benefited from strong stock selection in the Materials sector. The Fund had no exposure to the Energy sector, the weakest-performing sector of the benchmark index, contributing to results.

 

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

 

For more information, please click here for the Marsico 21st Century 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 Russell Midcap Growth Index (the “Underlying Index”) measures the performance of the mid-capitalization growth sector of the U.S. equity market, and is composed of mid-capitalization U.S. equities that exhibit growth characteristics. It is a subset of the Russell Midcap® Index, which measures the performance of the mid-capitalization sector of the U.S. equity market. The Underlying Index measures the performance of equity securities of Russell Midcap Index issuers with higher price-to-book ratios and higher forecasted growth.  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 123 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 153 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 846 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. 

Source: 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.

Source: 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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