Section Hero Funds

Midcap Growth Focus Fund

Midcap Growth Focus Fund

3Q21 Commentary1

While year-to-date performance remains strong, at the end of September broad U.S. indices were largely unchanged from the previous quarter. U.S. markets showed strong performance in July and August followed by increased volatility and declines in September as heightened concerns on several fronts moved to the fore.

The long dance with COVID-19 continues around the world with the Delta variant and its increased virulence throwing a curveball in reopening plans across the globe over the quarter. While we continue to anticipate a “two steps forward, one step back” recovery, vaccination trends across both developed and developing countries continue a steady march upward and novel anti-viral medications are on the horizon. Progress in managing COVID-19 is an essential precursor to normalizing global supply chains, which have been a significant detractor to economic progress worldwide. Despite strong demand from both consumers and businesses, inventory levels and related capital expenditures are at multi-year lows and pricing pressure is building within supply chains. The economic impact on certain industries has been significant. For example, it is estimated that the automobile industry has lost over $200 billion in global new car sales this year due to shortages of semiconductors and other parts, which have led to inflated prices for both new and used cars. With close to 80 vessels essentially parked off the western coast of the U.S. waiting to be unloaded, we were heartened that President Biden recently announced a public/private partnership to accelerate the unloading of the container ships over roughly the next 90 days. While the backlog will take several months to reallocate across the distribution and production network, we anticipate that the global supply chain will over the next several quarters return to a more balanced state which will benefit enterprises and economies around the world.

Developments in China over the past several months have also contributed to heightened uncertainty. The Chinese government's goal of “common prosperity” has ushered in a series of policy changes which have led to significant fines and restrictions in certain industries. In sectors like Real Estate, the resolution of the Evergrande Group's financial woes and related enterprises hangs over regional financial markets. Recently, rolling power outages and increased tensions with Taiwan have only added to the level of concern amongst investors. We remain highly selective in our positioning in the region, investing via established, diversified, multi-national companies over locally listed companies at this juncture.

In the U.S., President Biden and a fractured Democratic party in Congress face a series of issues, not the least of which is passing a budget reconciliation bill and debt ceiling package that may define the party for the next several years. On the positive side, U.S. consumers are in a strong financial position with cash balances up 50% year over year to approximately $2.5 trillion. Similarly, company cash levels are at record levels and the normalizing economy should usher in the rebuilding of inventory levels which are at 25 year lows relative to sales, and spur a wave of various capital expenditures and trillions of dollars in annual cash distributions in the form of share repurchases and dividends over the coming years.

While there are several cross-currents across the globe as we come to a close on 2021, we are looking forward optimistically into 2022. The need for innovation to meet emerging needs across the globe is more apparent than ever. We are attempting to position your portfolio with an emphasis on growth-oriented equities which should benefit from the normalizing of trends highlighted above, while remaining committed to the further development and build-out of the internet and increasing digitization of the economy. While we expect some market volatility over the coming months, we maintain our view that a portfolio of appropriately-valued, high-quality, disruptive franchises will navigate the market effectively and drive disproportionate outperformance over the long term

In terms of market capitalization, large cap gains, while modest, were well above that of small stocks during the quarter, as the Russell 10002,3 and Russell 20002,3 indexes posted quarterly returns of +0.21% and -4.36%, respectively. A smaller gap of outperformance was present among investment styles as growth stocks were in favor. The Russell 1000 Growth2,3 and the Russell 1000 Value2,3 indexes posted quarterly returns of +1.16% and -0.78%, respectively

The Marsico Midcap Growth Focus Fund posted a return of +1.75% for the third quarter, handily outperforming its benchmark, the Russell Midcap Growth Index2,3, which returned -0.76%.

 Primary Contributors5: Stock selection in the Communication Services4 sector had the largest positive impact on performance during the quarter where the collective total return of the Fund's holdings (+7%) outperformed that of the benchmark index (-23%) by a wide margin in this sector. As the weakest-performing area of the benchmark index, the Fund's underweight posture provided an additional tailwind. Stock selection in the Health Care and Information Technology sectors contributed positively to results as well.

 Primary Detractors5: Stock selection in the Industrials and Consumer Discretionary sectors was weak during the quarter. In particular, most of the Fund's Transportation and Retailing industry group positions declined sharply.

For more information, please click here for the Marsico Midcap Growth 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 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 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.

 

Please consider the Fund's investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information about the Fund, click here or call 888-860-8686. Please read the prospectus carefully before investing.

Investments in mutual funds carry risks and investors may lose principal value. Click here for the principal risks of investing in the Funds. Please read the prospectus carefully before investing as it explains the risks associated with investing in the mutual funds.

Past performance is no guarantee of future results. Recent performance may have been negative.

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