Perspective

Market Summary

In Q2 2024, capital market participants continued to sift through various economic indicators looking for any signal that the Federal Reserve (the “Fed”) would begin to cut interest rates. The market’s yearning for rate cuts began in earnest in Q4 2023 and has driven outperformance in pockets of the market, where companies may benefit from a lower discount rate and borrowing costs. With the market at one point pricing in upwards of seven rate cuts this year, the Fed funds rate remains at 5.25% – 5.50% following a series of rapid increases initiated in March 2022. The persistence of higher-for-longer inflation is the primary culprit for the lack of Fed action so far this year, as they cannot risk a reacceleration of inflation should they decide to cut rates too soon. While their stated inflation target is 2%, there still may be room for rate cuts if the long-term inflation rate settles around 3%, but not as much as more speculative investment vehicles, that benefitted to a greater degree from near zero-percent interest rates during the 2010’s, are hoping for, and pricing in.

The narrow breadth and leadership of large-cap indexes continue to signal caution. As of this writing, six stocks comprise 31% of the S&P 500 and have accounted for about 65% of the index’s total return this year. There are some striking similarities to the “tech bubble” that peaked in early 2000, where the top ten stocks in the S&P 500 accounted for 27% of the index. The lack of breadth today is even more extreme. Interestingly, we note that Cisco’s 5-year annualized return of 105% from March 31, 1995, through March 31, 2000, is astonishingly like that of Nvidia’s 5-year total annualized return of 98% through June 30, 2024. As the tech bubble started to deflate late in 2000, Cisco would go on to fall (87%) over the next 30 months. This ushered in a difficult decade for growth stocks, where from 2000 to 2010, large-cap domestic growth stocks fell (33%) while other investments like bonds, small-cap stocks, and emerging markets outperformed.

While we don’t necessarily foresee a similar “crash” in technology stocks forthcoming, we question the impact that items such as the advent of passive investing and more quantitative-based trading models have had on the narrow breadth and leadership we currently see. These tools have led to higher correlations and lower dispersion in stocks with higher market capitalizations as broad-based flows move into and out of those names daily for little fundamental reason related to the specific group of stocks. Many investors who partake in this investing style may have little idea of the concentration risk they are taking, especially given that the benefits of such styles are pitched as diversification and risk mitigation tools. When combined with historical Fed intervention over the last fifteen years, we are unsure if the long-term effects and reverberations have yet to be fully realized.

The S&P 500 gained 4.3% in Q2 and 15.3% in the year’s first half, driven primarily by technology and AI narratives. While there certainly will be some long-term AI winners, for the market to be pricing in every large-cap stock that mentions AI in their press release as an emphatic AI winner seems disingenuous. When combined with a lack of breadth in the major indexes and compounding factors over time that drive runaway momentum, such as passive and quant-based investing, the result is the market we see today, where large-cap stocks are rising at an unabated rate with no concern for price discovery.

While broad mid-and small-cap stocks faced overall losses, our focused value strategy has outperformed the Russell 1000 Value index year-to-date by 222bps net. This highlights our bottom-up fundamental approach, which focuses on idiosyncratic, stock-specific catalysts backed by strong balance sheets and ample free cash flow. We continue to deploy our philosophy and process steadily across all market environments, as we have done since the 1990s.

Performance Highlights

In the second quarter of 2024, the Easterly Snow Focused Value strategy slightly underperformed its benchmark, the Russell 1000 Value Index. The portfolio’s relative performance was aided by a positive selection effect that slightly offset a negative allocation effect, resulting in a marginally better attribution than the benchmark.

The Financials sector was a notable contributor to performance, with strong stock selection leading to positive returns compared to the benchmark. The Energy and Industrials sectors also contributed positively, benefiting from effective stock picking and sector allocation. Conversely, the Information Technology sector was a significant detractor due to poor stock selection, which led to underperformance relative to the benchmark. Health Care and Utilities also negatively impacted on the portfolio, with Health Care experiencing negative returns from key holdings.

Portfolio Attribution

Top 5 Performance Contributors

Stock	Avg Weight %	Contribution %
SUPER MICRO COMPUTER INC	2.20	3.32
CITIGROUP INC	5.38	1.23
JPMORGAN CHASE & CO	6.07	1.09
PILGRIM'S PRIDE CORP	3.98	0.92
LINCOLN NATIONAL CORP	4.39	0.86

Source: SEI Global Services

Securities shown represent the largest contributors and detractors to the portfolio’s performance for the period and do not represent all holdings within the portfolio. There is no guarantee that such holdings are currently or will remain in the portfolio. For a complete list of holdings and an explanation of the methodology employed to determine this information, please contact Easterly. This information is not to be construed as an offer to buy or sell any financial instrument nor does it constitute an offer or invitation to invest in any fund managed by Easterly and has not been prepared in connection with any such offer.

Portfolio Attribution

Top 5 Performance Contributors

Stock	Avg Weight %	Contribution % (net)
BJ’S WHOLESALE CLUB HOLDINGS I	4.78	0.7
AMGEN INC	4.87	0.53
FREEPORT-MCMORAN INC	3.39	0.25
COLUMBIA BANKING SYSTEM INC	0.14	0.21
RANGE RESOURCES CORP	1.66	0.19

BJ’s Wholesale Club Holdings (BJ)

BJ’s Wholesale Club Holdings posted a strong performance in Q2 2024 with a return of 16.11%, significantly outperforming the Consumer Staples sector’s return of 1.28%. The company achieved solid financial results, reporting EPS of $0.85 and total revenue of $4.9 billion. Strong club traffic growth of 3.0% YoY and a 21% increase in digital sales, with 90% fulfilled in-store, contributed positively to this performance. Key strategies included the expansion of higher-tier memberships (+8.6% YoY) and enhanced merchandise offerings, which are helping BJ’s shift from a traditional grocer model to a more profitable club model. Continued positive momentum in general merchandise categories and strategic expansions underpins a positive outlook for the stock.

Amgen Inc. (AMGN)

Amgen Inc. achieved a return of 10.68% in the second quarter of 2024, outperforming its healthcare sector peers. The company’s strong performance was driven by several key factors, including a positive earnings report with non-GAAP EPS of $3.96, beating estimates of $3.88. Revenue grew by 22%, bolstered by the acquisition of Horizon Therapeutics, contributing to double-digit revenue growth. Additionally, the interim analysis of Amgen’s obesity drug, MariTide, provided encouraging data, fueling investor optimism. The company also secured FDA approval for its lung cancer treatment, tarlatamab, further strengthening its oncology portfolio. With strong financial results and promising developments in its pipeline, Amgen remains well-positioned for continued growth.

Freeport-McMoRan Inc. (FCX)

Freeport-McMoRan Inc. delivered a strong 6.02% stock return in the second quarter of 2024, outperforming the Materials sector. The company exceeded earnings expectations, posting adjusted EPS of $0.32, supported by 6% higher-than-expected copper production and strong performance in its Indonesian operations. Consolidated net cash costs per pound of copper came in at $1.51, and Freeport lowered its full-year cash cost guidance, reflecting operational efficiency. The company’s focus on copper leaching initiatives in North America and South America, along with new labor agreements, contributed positively to the outlook. With the Indonesian smelter project on track and copper prices trending upward, Freeport-McMoRan is well-positioned for future growth.

While Freeport-McMoRan has positively contributed to our portfolio, we have exited the position due to concerns about ongoing operational challenges in the U.S. and the stock’s current valuation. Despite improvements in copper production and a healthy balance sheet, the company faces uncertainties related to U.S. operations and potential headwinds from future capital expenditures. Although FCX remains a stable player in favorable jurisdictions, the recent run in stock price and mixed sentiment suggest that it is prudent to lock in gains at this stage.

Top 5 Performance Detractors

Stock	Avg Weight %	Contribution % (net)
OPEN TEXT CORP	4.45	-1.08
INTEGRA LIFESCIENCES HOLDING	1.05	-0.84
CENTENE CORP	4.62	-0.73
KENVUE INC	3.87	-0.59
FMC CORP	4.72	-0.42

Open Text Corp (OTEX)

Open Text Corp experienced a significant decline of 21.98% in the second quarter of 2024, driven by disappointing financial results and a downgraded outlook. The stock sold off following the company’s FY3Q’24 results, where Open Text pushed its FY26 targets to FY27 and lowered guidance for adjusted EBITDA margins to 32-33%. The market responded negatively to the updated guidance, which included reduced revenue expectations for FY25, down to $5.745-$5.795 billion, and a 30% reduction in 2025 earnings estimates. Additionally, although cloud bookings grew 53% year-over-year, customers opted for longer contract durations, which delayed revenue realization. Despite a solid free cash flow of $348 million, the tempered outlook weighed heavily on the stock’s performance.

Integra LifeSciences Holdings (IART)

Integra LifeSciences Holdings underperformed significantly in the second quarter of 2024, with a stock decline of 29.25%. This was primarily driven by the setback at its Boston manufacturing facility, which remains offline due to an external audit that revealed more issues than anticipated. Management no longer expects commercial distribution to resume in 2024, further delaying the recovery of approximately $100 million in annual revenue. Additionally, first-quarter gross margin fell to 64.4%, down 290 basis points year-over-year, due to lower skin sales and international sales mix, while EBITDA margin declined by 470 basis points to 19.5%. Despite positive performance in the Codman Specialty Surgical segment, the Tissue Technologies division struggled, down 15.3% year-over-year. The acquisition of Acclarent increased debt levels, raising concerns about balance sheet stability.

We have exited our position in Integra LifeSciences Holdings due to growing concerns over the company’s ability to recover from the Boston facility’s operational setbacks. The investment thesis has broken, with delayed recovery timelines and persistent headwinds in key growth areas like Tissue Technologies, leading to a reassessment of potential returns. Additionally, the acquisition of Acclarent, while strategic, has deteriorated the balance sheet with increased debt, adding further risk to the outlook. We exited the position to limit losses and redirect capital towards more stable opportunities.

Centene Corp (CNC)

Centene Corp experienced a significant decline of 15.52% in Q2 2024. This underperformance was driven primarily by higher-than-expected claims in its Medicaid segment, attributed to the ongoing redetermination process and the need to adjust for higher patient acuity levels. Despite reporting strong first-quarter results, with $40.4 billion in revenue and $2.26 adjusted EPS (beating estimates of $36.55 billion and $2.08, respectively), the market responded negatively due to these elevated Medicaid costs. Centene’s Medicaid Health Benefits Ratio (HBR) underperformed at 90.9%, further weighing on investor sentiment. Although Centene reaffirmed its full-year guidance and raised its EPS outlook by $0.10, concerns over ongoing Medicaid challenges and redetermination issues remain prominent.

Trailing Performance

as of June 30, 2024

	QTD	YTD	1 Yr	3 Yr	5 Yr	7 Yr	10 Yr	Since Inception*
Composite (gross)	-2.23%	9.35%	21.10%	11.28%	14.31%	10.67%	7.53%	14.45%
Composite (net)	-2.46%	8.84%	19.96%	10.24%	13.24%	9.63%	6.52%	13.37%
Russell 1000 Value	-2.17%	6.62%	13.06%	5.52%	9.00%	8.60%	8.22%	11.29%

Calendar Year Performance

	2023	2022	2021	2020	2019	2018	2017	2016	2015	2014
Composite (gross)	19.01%	-1.11%	31.80%	2.56%	28.00%	-18.03%	17.76%	15.10%	-18.20%	15.17%
Composite (net)	17.89%	-2.04%	30.57%	1.59%	26.81%	-18.81%	16.66%	14.03%	-18.99%	14.10%
Russell 1000 Value	11.46%	-7.54%	25.16%	2.80%	26.54%	-8.27%	13.66%	17.34%	-3.83%	13.45%

Source: SEI Global Services

*Inception: 12/31/08

Performance shown is the Easterly Investment Partners LLC (“the Firm”) Snow Focused Value composite in USD. Past performance is not indicative of future results.  Gross performance results do not include advisory fees and other expenses an investor may incur, which when deducted will reduce returns. Changes in exchange rates may have adverse effects. Net performance results reflect the application of a model investment management fee which is higher than the actual average weighted management fee charged to accounts in the composite applied to gross performance results. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. The Firm claims compliance with the GIPS® standards; this information is supplemental to the GIPS® report included in this material. Returns greater than one year are annualized.

Top 10 Holdings

JPMORGAN CHASE & CO	4.79%
LINCOLN NATIONAL CORP	4.10%
SILICONE MOTION TECHNOLOGY CORP	3.75%
AMGEN INC	3.74%
COMMERCIAL METALS CO	3.43%
METLIFE INC	3.35%
OPEN TEXT CORP	3.21%
ABM INDUSTRIES INC	3.03%
CNO FINANCIAL GROUP INC	2.95%
BANK OF AMERICA CORP	2.90%
Total	35.25%

Excludes cash and cash equivalents.

References to securities, transactions or holdings should not be considered a recommendation to purchase or sell a particular security and there is no assurance that, as of the date of publication, the securities remain in the portfolio. Additionally, it is noted that the securities or transactions referenced do not represent all of the securities purchased, sold or recommended during the period referenced and there is no guarantee as to the future profitability of the securities identified and discussed herein. Top ten holdings information shown combines share listings from the same issuer, and related depositary receipts, into a singular holding to accurately present aggregate economic interest in the referenced company.

Attribution vs Russell 1000 Value

Source: Bloomberg

Holdings, sector weightings, market capitalization and portfolio characteristics are subject to change at any time and are based on a representative portfolio, and may differ, sometimes significantly, from individual client portfolios.

Outlook

As active managers, we look forward to environments like this, where correlations are elevated, and stocks trade in step. This enables us to identify price dislocations and populate our strategy with great companies whose stock price doesn’t reflect their underlying fundamental valuation. This helps us drive positive returns over full cycles, not just on a day-to-day or quarter-to-quarter cadence.

The market continues to remain focused on the timing and magnitude of interest rate cuts from the Fed, which is looking more likely in the second half of the year even as they continue to reduce their own balance sheet (which stands in contrast to their balance sheet expansion during the 2010s, artificially suppressing yields). While certain pockets of the small-cap market may outperform (stocks with negative earnings and/or high debt levels) as rate cuts are initially priced in, we question how sustainable that outperformance may remain as the market prices in a normalized Fed Funds rate that may be higher than what those more speculative pockets of the market are hoping for.

As we work through a U.S. Presidential election cycle likely to bring volatility, items we’re paying heightened attention to include the U.S. jobs market, where unemployment has increased above 4%. The jobs market has shown impressive resilience, while other cracks in the U.S. economy have emerged over the last few quarters. Consumer spending, which is 70% of GDP, is declining as credit card balances continue to rise. Retail sales are slowing and, when factoring in inflation, have, in fact, turned negative. $1T in corporate debt annually continues to roll into issuances with much higher costs. We are unsure how this will impact more leveraged corporations, especially if cash flow falters. A housing market that looks increasingly unaffordable for many, especially younger people without familial financial assistance, may reshape how that younger cohort allocates their discretionary income. We are keeping a steady eye on the US fiscal deficit, the associated debt servicing costs, and the ramifications of legislators’ inability to rein in spending.

The Easterly Snow investment team’s core competency is to invest the same stylistically through all of this market noise. We remain focused on allocating capital to companies going through short-term difficulties with great balance sheets, material free cash flow, and a path to earnings recovery resulting in asymmetric upside/downside return profiles.

Easterly Investment Partners LLC Snow Focused Value Composite GIPS® Report

Composite Inception Date: December 31, 2008
Composite Creation Date: 07/01/2021

	Composite Performance			Annualized 3-Year Standard Deviation			Total Assets (millions)
Year End	Gross	Net	Russell 1000 Value	Composite	Russell 1000 Value	Composite Dispersion	Total Firm Assets	Firm (AUM)	Firm (AUA)*	Composite	Number of Accounts
2023	19.01%	17.89%	11.46%	18.35%	16.74%	0.16%	1,730	1,090	640	17	6
2022	-1.11%	-2.04%	-7.54%	25.73%	21.55%	N/A	1,834	1,341	493	1	Five or fewer
2021	31.80%	30.57%	25.16%	24.28%	19.33%	N/A	2718	1540	1178	30	Five or fewer
2020	2.56%	1.59%	2.80%	24.63%	19.62%	0.10%		-	-	26	10
2019	28.00%	26.81%	26.54%	14.90%	11.90%	0.14%		-	-	31	9
2018	-18.03%	-18.81%	-8.27%	15.30%	10.80%	0.05%		-	-	3	8
2017	17.76%	16.66%	13.66%	16.65%	10.20%	0.06%		-	-	5	8
2016	15.10%	14.03%	17.34%	17.07%	10.77%	N/A		-	-	25	6
2015	-18.20%	-18.99%	-3.83%	15.63%	10.68%	N/A		-	-	26	7
2014	15.17%	14.10%	13.45%	13.98%	9.20%	N/A		-	-	37	Five or Fewer

*Firm-wide advisory-only assets.  Assets under Advisement (AUA) includes the assets where Easterly Investment Partners (“Easterly”) provides its advisory services in similar strategies and does not have discretionary trading authority.

Firm Definition
For purposes of complying with the GIPS® standards, the firm is defined as Easterly Investment Partners LLC (“EIP”) which is an SEC registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended, effective January 2019. The firm was redefined on 1/1/2023 to reflect that EIP is comprised of two distinct firms: the institutional asset management operations, investment strategies, performance track records, certain employees and client accounts of Levin Capital Strategies, which were acquired by EIP in March 2019, and Snow Capital Management LLC’s (“SCM”) asset management business, investment strategies, performance track records, client accounts, and certain employees, acquired by EIP in July 2021.

Firm Verification Statement
Easterly claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Easterly has been independently verified for the period April 1, 2019 through December 31, 2023. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis.

Composite Verification Statement
The Focused Value Composite has had a performance examination from composite inception date through December 31, 2023. The verification and performance examination reports are available upon request.

Composite Description
The Focused Value composite provides concentrated exposure to the mid- and large-capitalization segments of the value equity market.

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

Performance Calculation
All returns are calculated and presented in US dollars based on fully discretionary AUM, including those investors no longer with the firm. All gross composite returns are net of transaction costs and foreign withholding taxes, if any, and reflect the reinvestment of interest income and other earnings. Net performance results reflect the application of a model investment management fee which is higher than the actual average weighted management fee charged to accounts in the composite applied to gross performance results. Composite net returns are calculated by reducing daily gross returns by an amount where the monthly net return will be the monthly gross return reduced by 1/12th of the highest advisory fee rate. Monthly net returns are then geometrically linked to calculate the annual net return. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. Actual investment advisory fees incurred by clients will vary. Policies for valuing investments, calculating performance, and preparing GIPS reports are available upon request. A list of composite descriptions and a list of broad distribution pooled funds are available upon request. Past performance is not indicative of future performance. Results may be higher or lower based on IPO eligibility, and actual investor’s returns may differ, depending upon date(s) of investment(s). Additional information is available upon request. The Focused Value Composite has removes accounts from the composite for the period of significant cash of greater than or equal to 10% of the account’s market value.

Investment Management Fee Schedule
The current standard management fee schedule for a segregated account managed to the composite strategy is as follows: 0.95% on assets.

Composite Dispersion
The annual composite dispersion, if shown, is an asset-weighted standard deviation calculated using gross returns for the accounts in the composite the entire year. The internal dispersion measure is not applicable if there are five or fewer portfolios in the composite for the entire year if that is the reason this is N/A.

Standard Deviation
The annualized 3-year standard deviation represents the annualized standard deviation of actual gross composite and benchmark returns, using the rolling 36 months ended each year end. Standard deviation is a measurement of historical volatility of investment returns.

Trademark
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

Important Disclosures

© 2024. Easterly Asset Management. All rights reserved.

Easterly Asset Management’s advisory affiliates (collectively, “EAM” or “the Firm”), including Easterly Investment Partners LLC, Easterly Funds LLC, and Easterly EAB Risk Solutions LLC (“Easterly EAB”) are registered with the SEC as investment advisers under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its investment strategies and objectives, can be found in each affiliate’s Form ADV Part 2 which is available on the www.sec.gov website. This information has been prepared solely for the use of the intended recipients; it may not be reproduced or disseminated, in whole or in part, without the prior written consent of EAM.

No funds or investment services described herein are offered or will be sold in any jurisdiction in which such an offer or sale would be unlawful under the laws of such jurisdiction. No such fund or service is offered or will be sold in any jurisdiction in which registration, licensing, qualification, filing or notification would be required unless such registration, license, qualification, filing, or notification has been affected.

The material contains information regarding the investment approach described herein and is not a complete description of the investment objectives, risks, policies, guidelines or portfolio management and research that supports this investment approach. Any decision to engage the Firm should be based upon a review of the terms of the prospectus, offering documents or investment management agreement, as applicable, and the specific investment objectives, policies and guidelines that apply under the terms of such agreement. There is no guarantee investment objectives will be met. The investment process may change over time. The characteristics set forth are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. Client portfolios are managed according to mutually agreed upon investment guidelines. No investment strategy or risk management techniques can guarantee returns or eliminate risk in any market environment. All information in this communication has been obtained from sources believed to be reliable but cannot be guaranteed. Investment products are not FDIC insured and may lose value.

Investments are subject to market risk, including the loss of principal. Nothing in this material constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate. The information contained herein does not consider any investor’s investment objectives, particular needs, or financial situation and the investment strategies described may not be suitable for all investors. Individual investment decisions should be discussed with a personal financial advisor.

Any opinions, projections and estimates constitute the judgment of the portfolio managers as of the date of this material, may not align with the Firm’s opinion or trading strategies, and may differ from other research analysts’ opinions and investment outlook. The information herein is subject to change without notice and may be superseded by subsequent market events or for other reasons. EAM assumes no obligation to update the information herein.

References to securities, transactions or holdings should not be considered a recommendation to purchase or sell a particular security and there is no assurance that, as of the date of publication, the securities remain in the portfolio. Additionally, it is noted that the securities or transactions referenced do not represent all of the securities purchased, sold or recommended during the period referenced and there is no guarantee as to the future profitability of the securities identified and discussed herein. As a reminder, investment return and principal value will fluctuate.

The indices cited are, generally, widely accepted benchmarks for investment performance within their relevant regions, sectors or asset classes, and represent non managed investment portfolio.  It is not possible to invest directly in an index.

This communication may contain forward-looking statements, which reflect the views of EAM and/or its affiliates. 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 or other predications or assumptions 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. EAM does 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.

Past performance is no guarantee of future results.

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