Section Hero Funds

International Opportunities Fund

International Opportunities Fund

2Q21 Commentary1

As we turn to the second half of the year, the impact of COVID-19 continues to be felt. As we highlighted for you last quarter, heading into the spring there were significant enthusiasm and expectations for a U.S. and global economic recovery as vaccination rates climbed around the world and exposure-related immunity spread. At that time, 10-year Treasury yields had increased 83 basis points, and sectors that were flirting with bankruptcy in 2020 were leading market returns. However, as we transitioned through the second quarter, a distinctly different narrative began to emerge. Inflation concerns intensified for a time, led by tightness in global supply chains and the rapid rise of certain commodity prices, although it now appears they have largely peaked. While demand for certain sectors like housing remains strong, transaction volume has slowed as high prices and low supply have curbed buyer momentum.

Federal Reserve officials addressed the emerging inflation concerns over the second quarter by acknowledging certain price pressures while suggesting they appeared to be somewhat transitory in nature, and by highlighting progress towards Fed policy goals. Yet the minutes of the latest Fed meeting indicated that Fed governors were open to reducing the pace of asset purchases earlier than previously anticipated, suggesting that they were sensitive to possible inflation concerns. Although markets were initially rattled by this potential shift in Fed perspective, the combination of apparent price peaks in different commodity markets and subsequent Fed commentary emphasizing accommodation seemed to calm market and inflation fears to some extent.

Another market factor during the quarter was the more widespread emergence of COVID-19 variants, which appear to be more easily transmissible than standard COVID-19 and may potentially reduce the effectiveness of vaccines, as evidenced by recent data out of Israel and the U.K. Concerns regarding these variants may continue to be a determining factor in the uneven trajectory of the worldwide economic recovery.

On the political front, while the Biden administration highlighted a series of spending proposals earmarked at greater than $4 trillion, it appears the relative balance between the power of political parties in both the House and Senate is forcing more measured outcomes, as evidenced by a recent Senate infrastructure  compromise, which will likely result in moderated expectations for measures addressing the administration's taxation and spending priorities. While recent job trends have been supportive of a re-opening economy, a significant disconnect involves apparent limits on the supply of workers available to accept new jobs, perhaps in part because of ongoing unemployment benefit payments. According to the U.S. Bureau of Labor Statistics there were 9.2 million job openings at the end of May. It appears a more holistic approach to job formation may be necessary, including elements such as improvements in job training and rethinking some of the wage assistance programs already underway.

The transition away from an economy mainly supported by the Federal Reserve and strong fiscal stimulus to a healthier business-driven rebound should lead the economy to a more sustainable future in 2022 and 2023, although the market environment is likely to prove bumpy. A combination of these forces is perhaps most evident in the 10-year Treasury yield's decline of 75 basis points from the first quarter and the recent leadership of growth stocks. We believe this environment is likely to persist for the next several quarterse.


In terms of the underlying dynamics of equity market performance, growth equities strongly outperformed their value counterparts in the quarter, as the MSCI EAFE Growth Index2 and the MSCI EAFE Value Index2 posted returns of +7.42% and +3.01%, respectively.


The Marsico International Opportunities Fund posted a return of +6.78% for the second quarter, solidly outperforming its benchmark, the MSCI EAFE Index2, which returned +5.17%.


Primary Contributors4: The Communication Services sector3 emerged as the largest positive contributor to performance in the quarter through strong stock selection in both the Telecommunication Services and Media & Entertainment industry groups. Stock selection in the Consumer Staples sector contributed positively to performance as well. An overweight allocation to the stronger-performing Information Technology sector, and a lack of exposure to the weakest-performing sector of the benchmark index, Utilities, aided returns.

 

Primary Detractors4: Stock selection in the Consumer Discretionary sector was the largest detractor to performance during the quarter as several of the Fund's holdings produced negative returns. Stock selection in the Health Care Equipment & Services and Transportation industry groups was also weak.

 

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


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 MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Growth Index captures large and mid-cap securities exhibiting overall growth style characteristics across Developed Markets countries around the world, excluding the US and Canada. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate and long-term historical EPS growth trend and long-term historical sales per share growth trend. The MSCI EAFE Value Index captures large and mid-cap securities exhibiting overall value style characteristics across Developed Markets countries around the world, excluding the US and Canada. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield. Sources of foreign exchange rates may be different be­tween a portfolio and the benchmarks. 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.

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.

UMB Distribution Services, LLC, is the distributor of The Marsico Investment Fund. Check the background of UMB Distribution Services on FINRA's BrokerCheck.

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