Global equities generated positive returns for the first quarter of 2013, overcoming headwinds including the Italian electorate's vote against austerity, a Cypriot banking crisis, and political discord in Washington. The MSCI All Country World Index, a measure of global equities including the U.S., rose 6.48% in the quarter, led by strength in U.S. and Japanese equities.

The Harbor Global Growth Fund outperformed the index with a 9.00% return for the quarter. The Fund is managed by Marsico Capital Management, LLC. Portfolio Managers are Thomas F. Marsico, Chief Executive Officer and Chief Investment Officer of Marsico Capital Management, and James G. Gendelman, Portfolio Manager and Senior Analyst.

Health Care was the strongest performing area of the MSCI ACWI Index and the Fund benefited from having an overweighted allocation to the sector, the portfolio managers report. Stock selection within the sector also contributed as pharmaceutical positions Biogen, Gilead Sciences, Roche, and Bristol-Myers Squibb all registered double-digit gains. Stock selection in the Industrials, Information Technology, and Materials sectors also helped, while selection among Consumer Discretionary and Financials names detracted from performance relative to the benchmark, the Marsico team reports.

Traditionally defensive sectors Health Care and Consumer Staples were the best performers in the index in the first quarter, while cyclical areas such as Energy and Materials lagged, the portfolio managers note. Given an uncertain outlook, they have diversified portfolio holdings across a variety of major economic sectors and industry groups.

The Marsico team's comments were made in an April 17, 2013, report. Highlights adapted from the report appear below. All comments relate to the quarter ended March 31, 2013, unless otherwise indicated. All references to year-to-date are for the period January 1 through March 31, 2013.

The portfolio has a significantly overweighted allocation in the Consumer Discretionary sector as compared to the MSCI All Country World Index. Our consumer-related holdings span a number of different industries, including retailing, services, durables/apparel, automobiles, and media. We believe that many of our Consumer Discretionary holdings are poised to benefit from wealth creation, higher levels of consumer discretionary spending, and increased travel.

Advances in energy exploration and development are creating jobs, lowering energy costs for consumers and businesses, and benefiting a wide range of industries – including trucking, construction machinery, mining equipment, rails, homebuilders, cement, and steel – as well as suppliers to these groups. We think it is quite possible that the energy boom will prove to be a catalyst for badly needed infrastructure improvement and the construction of new manufacturing equipment and facilities.

In a subdued global growth environment, we favor investments in companies that we believe are positioned to grow in a variety of macroeconomic conditions. These span a variety of industries but share the common characteristic of being able to compound revenues at faster than global growth rates regardless of the macro environment. We are favoring companies with strong balance sheets, strong cash flows, high returns on capital, market leading positions, and a willingness to reward shareholders with dividends and buybacks.

Emerging markets economic data have been mixed. On the plus side, China and India have implemented reforms to help encourage consumer spending. With inflation remaining relatively calm and bank lending looking more constrained, it appears that China can avoid a “hard landing” scenario and has room for policy stimulus if deemed necessary. Not all data has been positive from China, however, as its industrial production showed signs of slowing during the first quarter. Brazil, meanwhile, has been challenged by rising inflation and increased levels of consumer debt.

While we don't own any U.S. homebuilders directly, we believe several of the Fund's positions are poised to benefit from a healthier U.S. housing market, including Wells Fargo, which is a significant mortgage originator, and Home Depot. Industrials holding Pentair is a manufacturer of water and sewage systems, including residential filtration products; approximately a third of its core business is tied to the residential housing market.