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Global Leaders Fund —
Fund outperforms as developed and emerging market divergence continues
3rd Quarter, 2018
"While the Fund benefited from a supportive macro backdrop during the quarter, we believe its strong absolute and relative investment results were driven primarily by the solid earnings and progress updates of the businesses within the portfolio. "
– Sands Capital Management, LLC

Global equity markets (as measured by the MSCI All Country World (ND) Index) rose in the third quarter of 2018. U.S. equities were attributable for nearly all of the index’s rise during the period, overwhelming continued emerging market weakness. Strong economic data and corporate earnings—U.S. companies reported the eighth consecutive quarter of earnings growth across all S&P 500 sectors—propelled broad U.S. equity indexes to multiple all-time highs.
At the same time, emerging markets officially entered a bear market, as the MSCI Emerging Markets (ND) Index, which returned -1.09% for the quarter, was down more than 20 percent from its January peak. Sentiment weighed heavily on emerging markets with concerns ranging from slowing regional growth to trade pressures and a stronger U.S. Dollar. Emerging Asia was the largest regional detractor from global equity returns, dragged down primarily by China.
The Harbor Global Leaders Fund advanced in the third quarter, returning 6.47%. The Fund outperformed its benchmark, the MSCI All Country World (ND) Index, which advanced 4.28%. The majority of sectors contributed to relative results, led by Industrials, along with substantial contributions from Consumer Staples and Information Technology, all driven largely by favorable stock selection. Conversely, stock choices in Health Care and Financials weighed on relative performance. An underweight to Health Care, the best performing sector in the benchmark for the quarter, also held back relative returns. From an individual market perspective, security selection made Japan and the United States the largest contributors, followed closely by France. In contrast, India, Hong Kong and Spain were notable detractors, primarily due to stock selection. The Fund’s sector and country allocations, however, are purely a residual outcome of the bottom-up stock selection process.
Sands Capital Management’s comments were presented in an October, 2018 report. Highlights adapted from the report appear below. All comments relate to the quarter ended September 30, 2018, unless otherwise indicated. All references to the year-to-date are for the period January 1 through September 30, 2018.

Interview Highlights

Strength in U.S. Outweighs Emerging Market Issues
The positive environment in the U.S. and other developed countries, where more than 85% of our positions are domiciled, provided a favorable backdrop for the Fund. The environment in the U.S. was particularly positive as strong profit growth, accelerating economic growth, increasing business confidence and record low unemployment combined to propel equities higher. The quarter marked an unprecedented eighth consecutive quarter of year-over-year Gross Domestic Product (GDP) acceleration. Initial jobless claims in the U.S. reached their lowest level since the 1960s, while consumer confidence data hit an 18-year high. Manufacturing and services growth was also strong.
Focus Is on Long-Term, and Fundamentals
While the Fund benefited from a supportive macro backdrop during the quarter, we believe its strong absolute and relative investment results were driven primarily by solid earnings and progress updates of the businesses within the portfolio. Macro events may influence share prices in the short-term, but we believe business fundamentals will remain the most important driver of investment results over the long-term.
Confident in Growth Potential
Given the long-term and business-focused nature of our investment approach, we typically avoid making calls on the direction of the market. Rather, we remain focused on the fundamental strengths and long-term growth prospects of our portfolio businesses, which are typically independent of macro events and/or conditions. We are optimistic about the growth prospects for our businesses. We believe they are well positioned to deliver strong business results and earnings growth over our five-year investment horizon.

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.