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Perspective

Q1 2022 Large Cap Value Commentary

Portfolio Update

During the first quarter, the Russell 1000 Value Index posted a return of -0.74%. The return of the Easterly Investment Partners Snow Large Cap Value Composite outpaced the Russell 1000 Value Index. The period’s results were due to solid stock selection and sector emphasis.

The majority of the major indices posted negative results for the first quarter as the winds of war weighed on market participants. It is too soon to know just how effects of the war in Ukraine and ensuing sanctions against Russia will ripple through the global economy. The prices of commodities from wheat to corn to aluminum have hit multi-year highs and oil has surged to over $100 a barrel. Meanwhile, the labor market recovery has been particularly notable with the unemployment rate declining to 3.6%, the lowest level since February 2020. Dynamics have also swung in favor of workers over their employers, which has led to higher wages. Over the last year, the Consumer Price Index (CPI) increased to 7.9%, the largest increase since 1982.

The Federal Reserve lifted its policy interest rate for the first time since 2018 and penciled in six more rate increases this year as it tries to combat inflation. Looking ahead, the key variables for investors in 2022 will be the conflict in eastern Europe, the path of inflation and central banks’ response to acute increases in prices, which is turning out to be stronger and more long-lived than anticipated.

Our sector weightings, which are solely a consequence of our stock selection, had a positive effect on our relative return for the quarter. Our overweight in Energy coupled with an underweight allocation to Real Estate added to relative performance. Conversely, our overweight to the Consumer Discretionary sector hindered sector allocation effects.

During the period, stock selection was strong largely due to holdings in the Health Care, Industrials and Materials sectors. Among the top performers in the Health Care sector were shares in Abbvie, Cardinal Health and Amgen. Within Industrials, shares in Lockheed Martin, JetBlue Airways and Southwest Airlines were the top performers. The Materials sector was led higher by shares in Rio Tino PLC, Freeport-McMoran and B2Gold Corp. Stock selection was challenged in the Energy sector.

PeriodComposite GrossComposite NetRussell 1000 Value Index
QTD2.25%2.12%-0.74%
1 Year12.47%11.90%11.67%
3 Year17.46%16.87%13.01%
5 Year11.14%10.48%10.28%
7 Year8.67%7.98%9.72%
10 Year11.33%10.59%11.69%
Inception
(7/1/2005)
7.67%6.90%8.26%

Source: SEI Global Services

We believe the road ahead remains positive for our Large Cap Value strategy. These companies have strong balance sheets, proven management teams, recurring cash flow streams and the flexibility to adapt to the new world post Covid-19. We believe these stocks will compound earnings over an extended period through both rising and declining markets. All told, we remain dedicated to delivering strong long-term performance and transparent communications to our investors. Thank you for your commitment and loyalty to Easterly Investment Partners.

Disclosures

The information provided in this report should not be considered a recommendation or solicitation to purchase or sell any particular security or investment strategy. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed do not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions or holdings discussed was or will prove to be profitable, or that the investment recommendations or decisions the subadvisor makes in the future will be profitable or will equal the investment performance of the securities discussed herein. As a reminder investment return and principal value will fluctuate.

All information in this presentation has been obtained from sources believed to be reliable but cannot be guaranteed. There can be no assurance that the investment objective for this fund can be achieved and past performance is no guarantee of future results. The Russell 1000 Value Index® is a benchmark of unmanaged securities, and the index is not a security that can be purchased or sold.

Easterly Investment Partners LLC is an investment adviser registered with the SEC. Registration does not imply a certain level of skill or training.

This communication also contains forward-looking statements, which reflect the views of Easterly Investment Partners LLC. These forward-looking statements can be identified by reference to words such as “believe”, “expect”, “potential”, “continue”, “may”, “will”, “should”, “seek”, “approximately”, “predict”, “intend”, “plan”, “estimate”, “anticipate” or other comparable words. These forward-looking statements are subject to various risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Should any assumptions underlying the forward-looking statements contained herein prove to be incorrect, the actual outcome or results may differ materially from outcomes or results projected in these statements. Easterly Investment Partners LLC and its affiliates do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law or regulation.

Russell 1000® Value Index
The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. Indexes are unmanaged. It is not possible to invest directly in an index.

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