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Global Growth Fund —
Driven by technology holdings, Fund outperforms
3rd Quarter, 2016
"The themes of innovation and demographics form the backbone of the Fund. However, in a time of increased uncertainty, the Fund also reflects a continued defensive positioning. "
– Marsico Capital Management, LLC

Global equity markets posted a strong advance during the third quarter of 2016, largely recovering from second quarter declines that followed Brexit. Markets generally rebounded as central banks quickly sought to ease fears of recession and talk of austerity measures was absent, both in the U.S. and abroad. Anxiety about soft economic momentum remained a global issue, and the U.S. Federal Reserve (the Fed) continued to defer interest rate increases, as continuing low inflation rates likely led committee members to leave short-term rates unchanged. The S&P 500 Index advanced 3.85%, while both developed international markets and emerging markets posted gains. The MSCI EAFE (ND) Index ended the period up 6.43%, while the MSCI Emerging Markets (ND) Index advanced 9.03%. Growth stocks and value stocks generally performed in line with each other.
The Harbor Global Growth Fund advanced 6.10% in the third quarter, outperforming its benchmark, the MSCI All Country World (ND) Index, which advanced 5.30%. Fund performance relative to the benchmark was boosted primarily by the combination of a significant overweight and stock selection in the Information Technology sector. Conversely, a significant underweight to Financials had a negative impact on relative returns. The Fund closed the quarter with no holdings in the sector, as the Manager struggled to find good top line growth or compelling returns in most banks and diversified financials companies.
During the quarter, sovereign debt yields climbed modestly, likely a function of growing confidence in the durability of global expansion and reduced angst surrounding the implications of Brexit. Commodity prices rose modestly, but oil prices ultimately moved little. Similarly, the Dollar was essentially unchanged versus a large basket of global currencies.
The U.S. jobs market remained reasonably healthy. Economic performance in the service sector firmed the quarter, evidenced by upbeat news from industry surveys and service sector job growth. In contrast, manufacturing remained in the doldrums, likely a consequence of languid growth trajectories in Europe and China. The news out of China remained cloudy, as investors globally monitored continued deflationary pulses from the Chinese economy, although other emerging markets appeared to show more signs of life.
Marsico Capital Management’s comments were made in an October, 2016 report. Highlights adapted from the report appear below. All comments relate to the quarter ended September 30, 2016, unless otherwise indicated. All references to the year-to-date are for the period January 1 through September 30, 2016.

Interview Highlights

Rewards for Portfolio Positioning
The Fund maintained no exposure to Utilities. In the first half of the year, dividend paying stocks perceived by the market to offer safety, such as those in the sector, were rewarded. However, during the third quarter, our belief that valuations for many Utilities companies are high was rewarded, and we witnessed a shift towards companies that exhibit truer growth characteristics.
An Emphasis on Millennials
Millennials, the generation born between the early 1980s and the early 2000s, exhibit spending patterns that emphasize social connections, civic engagement, healthy lifestyles and travel/experiences versus material goods; they also tend to use mobile devices extensively for media, social engagement and purchasing. We have taken advantage of opportunities to invest in companies that we believe are poised to benefit from millennials’ spending habits.
Finding a Balance Amid Uncertainty
We believe we are reaching the latter stages of monetary policy’s effectiveness in driving global GDP growth. As a result, hopes are growing for a hand-off to fiscal policy, a transition that is fraught with uncertainty in the U.S. and other developed markets. Given this uncertainty, we are sticking with the same principles that have guided our portfolios over time: we invest in high-quality, market share gainers that are less sensitive to macroeconomic and interest rate events, balanced with investments in growing, compounding assets.

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.