Section Hero Funds

Global Fund

Global Fund

2Q20 Commentary1

Globally, equity markets experienced strong gains as economies began to re-open and economic stimulus packages were implemented. Domestically, the NASDAQ Composite Index2 rose +30.95% and led the way as investors sought exposure to companies benefiting from a substantial increase in the number of workers working from home, and the general population's spending significantly more time at home. The S&P 500 Index2, which includes exposure to airlines, cruise lines, and other economic cyclical stocks, lagged the NASDAQ but still managed to post a strong absolute return of +20.54% during the period. In local currency, European (the MSCI Euro Index2) and Chinese (MSCI China Index2) equities rose +16.84% (in local currency) and +15.29%, respectively. Treasury markets were relatively quiet, with the yield on the U.S. 10-year Treasury Note dropping a single basis point off of its historically low March level. We did witness some strength in the corporate high-yield debt market after the Fed began buying corporate bonds and bond ETFs. Energy markets also bounced back after tremendous volatility and a steep decline during the first quarter as the price of West Texas Intermediate crude oil skyrocketed +97% after briefly plunging into negative territory for the first time in history. 


The national employment situation remains a key focus for policymakers and investors alike. In the beginning of the quarter, we witnessed unprecedented levels of job losses, illustrated by several consecutive weeks in which weekly jobless claims exceeded 2 million and the unemployment rate reached nearly 15%. Financial markets seemed to predict an improvement in these figures near the end of the quarter, later confirmed by the June non-farm payrolls number released on July 2, which indicated some bounce-back in key data. Specifically, non-farm payrolls rose by 4.8 million, easily the largest single-month gain in U.S. history, which reduced the unemployment rate to 11%, a lower rate compared to the peak since the crisis began, although still significantly elevated.


As we progressed through the quarter, we witnessed more governmental stimulus as Congress passed another bill which includes $310 billion in new funds for the Paycheck Protection Program, $60 billion dedicated to small business loans, $75 billion in grants to hospitals dealing with COVID-19 patients, and $25 billion dedicated to medical testing. All in all, the various stimulus packages, including Federal Reserve actions adding market liquidity through debt purchases and other support, to-date total several trillion dollars, indicating both the severity of the shutdown and the willingness of the U.S government to do whatever it believes to be necessary to support the economy.


Investors also took note of the supportive stance communicated by relevant policymakers going forward. Chairman of the Federal Reserve Board Jerome Powell, speaking in May, said the fundamentals of the U.S. economy remain strong while acknowledging the novel coronavirus posed risks to growth. Similar to fiscal policymakers, he re-iterated that the Fed will continue to use its tools to “do whatever is necessary to support the economy.” In addition, although nothing has been formally announced, it appears another stimulus package is likely to arrive from Congress prior to the August recess.


On the health care front, Gilead Sciences' antiviral drug Remdesivir showed positive data surrounding its efficacy in treating infected COVID-19 patients. According to a report, a hospital using Remdesivir saw rapid improvement in symptoms among many of its COVID-19 patients. Shortly after the report was issued, U.S. regulators gave the drug emergency use authorization. In addition to Gilead, a host of other health care and pharmaceutical companies are racing to bring various COVID-19 treatments to market, such as Dexamethasone, or are developing a COVID-19 vaccine. We are starting to see the success of the efforts of the scientific community in response to the pandemic.


In terms of market capitalization, growth-oriented stocks strongly outperformed their value counterparts  during the quarter, as the MSCI ACWI Growth Index2 and the MSCI ACWI Value Index2 posted returns of +25.15% and +12.74%, respectively.


The Marsico Global Fund posted a return of +33.31% for the second quarter and significantly outperformed its benchmark, the MSCI All Country World Index2, which returned +19.22%. 

 

Primary Contributors4: Strong stock selection and an overweight allocation to the Information Technology sector3, the strongest-performing sector of the benchmark index, had the largest positive impact on performance in the quarter. Stock selection in the Communication Services sector was also strong, boosting results. An underweight allocation and strong stock selection in the Financials sector contributed positively to performance as well. Additionally, an overweight allocation to the stronger-performing sector, Consumer Discretionary, aided results.

Primary Detractors4: The Fund incurred a slight opportunity cost by having approximately 5% of the net assets at the beginning of the quarter in cash, while the benchmark index returned +19%. The cash position at the end of the quarter was approximately 1%. Stock selection in the Materials sector was also weak, dampening results.

 

For more information, please click here for the Marsico Global 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 MSCI All Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 23 Developed Markets countries. 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 ACWI Value Index captures large and mid cap securities exhibiting overall value style characteristics across 23 Developed Markets countries and 26 Emerging Markets countries. 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. 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 Nasdaq Composite Index is the market capitalization-weighted index of approximately 3,300 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 MSCI Euro Index captures large cap representation across the 10 Developed Markets countries in the EMU. With 112 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 711 constituents, the index covers about 85% of the China equity universe. Currently, the index also includes Large Cap A shares represented at 20% of their free float adjusted market capitalization. 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. 

3 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.

4Source: 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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