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Global Growth Fund —
Fund outperforms index as equity markets rebound
4th Quarter, 2015
"In this environment, we believe it is important to focus on companies that are innovative and poised to show revenue growth contribution from market share gains rather than a dependency on macro driven top-line. "
– Marsico Capital Management, LLC

The fourth quarter of 2015 registered a healthy equity market rebound, though some gains were given back during the month of December. The S&P 500 Index advanced 7.04% and developed international markets, as measured by the MSCI EAFE (ND) Index, rose 4.71% during the fourth quarter as stock markets around the globe recovered somewhat from weakness in the prior quarter. Share prices failed to return to peak levels, however, as most indices ended the year off of mid-year high water marks.
The Harbor Global Growth Fund outperformed the MSCI All Country World (ND) Index during the fourth quarter. The Fund posted a return of 7.17% compared to the benchmark’s return of 5.03%. Stock selection in the Information Technology sector was a leading contributor to performance. For some time, the Fund has maintained investments in companies making innovative use of technology to create better retail and advertising business models. A number of these holdings performed well during the fourth quarter.
Internet services positions Facebook and Alphabet posted gains of 16% and 22%, respectively, in the fourth quarter. During the quarter, Facebook announced results that exceeded market expectations, led by strong advertising revenue and monthly active user growth rates. In October, Google reorganized its business under a new holding company called Alphabet. During the fourth quarter, Alphabet’s shares were buoyed by strong revenue growth, particularly from continued strength in mobile search. The company also announced a share buyback of up to $5.1 billion.
The investment team’s comments were made in a January 2016 report. Highlights adapted from the report appear below. All comments relate to the quarter ended December 31, 2015, unless otherwise indicated. All references to the year-to-date are for the period January 1, 2015 through December 31, 2015.

Interview Highlights

Disparate Market Moves
Fourth quarter recoveries for equity indices counterbalanced ongoing weakness for both commodity and bond prices. The U.S. Dollar advanced as the Dollar-denominated price of oil and most other commodities fell. These disparate market moves occurred amid the first U.S. central bank interest rate increase since 2007, continued economic weakness in China, and aggressive oil production throughout the world.
Limited Exposure to Emerging Markets
Emerging market equities continued to substantially underperform. The MSCI Emerging Markets (ND) Index lost nearly all of its October rebound in November and December, was up a scant 0.66% for the quarter, following its sharp drop in third quarter 2015, and slid -14.92% for the full year of 2015. As of December 31, 2015, the Fund had approximately 9% of its net assets invested in emerging markets. The Fund continued to refrain from investments in most emerging markets, holding only a select few China-headquartered stocks that we believe to be attractive from a “bottom-up,” stock-specific basis.
Growth Scarcity Premium
We believe that, as long as global growth remains tepid, growth companies will continue to command a scarcity premium. Since the 2009 global financial crisis, global economic growth has remained stubbornly weak. This is especially surprising considering that oil and commodity prices are back to decade lows while employment is either recovering, in the case of Europe and Japan, or in expansionary mode as is the case of the U.S. In addition, central banks have been incredibly accommodative as evidenced by the combined and unprecedented balance sheet expansions at the Bank of Japan, ECB and U.S. Fed and the resulting record low interest rates that have followed.
Current Positioning
In this environment, we believe it is important to focus on companies that are innovative and poised to show revenue growth contribution from market share gains rather than a dependency on macro driven top-line. We think for the next three to five years, the market will reward companies whose revenue comes from market share driven organic volume growth. This is also why we continue to favor sectors such as Health Care, Information Technology, and Consumer Discretionary as we believe that these sectors are ripe for secular growth due to changing demographics enabled by disruptive technology. Conversely, this low growth, low inflation world lends itself to remaining underweight Energy, Materials, Industrials and cyclicals in general.

Performance data shown represents past performance, which is no guarantee of future results. Current performance may be higher or lower than the past performance data shown. Investment returns and the value of an investment will fluctuate, and an investor's shares, when sold, may be worth more or less than their original cost. You can obtain performance data current to the most recent month-end (available within seven business days after the most recent month-end) by calling 800-422-1050 or visiting

Performance figures discussed reflect that of the institutional class shares.

The views expressed herein are those of the portfolio manager at the time of the interview and may not be reflective of their current opinions or future actions.  These views are not necessarily those of the fund company and should not be construed as such.

This information should not be considered as a recommendation to purchase or sell a particular security and the holdings or sectors mentioned may change at any time and may not represent current or future investments.