Alger Insights that Helped Our Clients Navigate the 2020 Storm

I NS I GHTS

Alger Insights that Helped Our Clients Navigate the 2020 Storm

At Alger, we use in-depth fundamental research to seek attractive investment opportunities among companies with potential for generating earnings growth throughout economic cycles. We also seek to understand how large-scale trends, such as the disruptive nature of digital technologies and changes in market conditions, create investment opportunities. With the onslaught of the Covid-19 pandemic, heightened partisanship in Washington and periods of considerable market volatility during 2020, we strived to help our clients weather uncertainty by sharing perspectives that we gained through our research. In this piece, we feature seven insights from our top content pieces released in 2020 that we believe helped investors navigate a challenging year and illustrate our role as a thought leader.

Featured Content Alger Breaking Views , Investors are Anxious, Insiders are Buying – Released March 19, 2020 Alger On the Money , Insiders vs. Investors – Released March 25, 2020 • In these two pieces, we posited that insider buying signals opportunity. • We showed that insider buying was at its highest level since 2004 and that this could potentially alleviate investors’ anxiety about equities. • The market hit its bottom on March 23, 2020. Since then, the S&P 500 Index returned 64% through November. Featured Content Alger Breaking Views , Buy Into the Panic – Released March 2, 2020 Alger On the Money , Have No Fear – Released March 18, 2020 • In these pieces, we highlighted the historical correla- tion of market returns and the VIX, one of the best gauges of investor sentiment. At the time, the gauge had just exceeded 40, signaling a high level of fear. • The historical median one-year and three-year returns of the S&P 500 were 32% and 58% when the VIX had exceeded that level, illustrating that periods of fear could be potentially attractive for equity investing. • Since March, the VIX has fallen significantly and the S&P 500 gained over 40% as of the end of November. 0 10 20 30 40 50 60

Insider Buying in Small Caps Is Highest on Record

0 100 200 300 400 500 600 700 800 900 1000

UNIQUE INSIDER BUYERS

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: Insiderscore.com. Note: Chart reflects the number of insider buyers in Russell 2000 companies.

Can You Take Advantage of Fear?

S&P 500 Total Return from Various VIX Index Levels

58%

1 Year 3 Year

As of Mid-March, We Are Here

49%

32%

28%

23%

9%

>20

>30 VIX Index Level

>40

Source: FactSet and Alger. Note: Ensuing returns have been measured from the day the VIX hit each level.

Alger is committed to sustainability and is a signatory to the PRI.

ALGER INSIGHTS 2/4

Featured Content Alger Breaking Views , Going on the Offense with Small Caps – Released April 2, 2020 Alger On the Money , Small Caps for the Recovery – Released May 13, 2020 • In April, our analysis concluded that small cap stocks have historically led market rallies following recessions. • Though small caps had dramatically underperformed year to date as investors sought the relative safety and liquidity of large caps, we believed that their depressed valuations made them potentially attractive. • Since May, the Russell 2000 Index outperformed the S&P 500 by 10% through November. Featured Content Alger Breaking Views , Is Growth Investing Healthier than Value? – Released March 23, 2020 Alger On the Money , Why Growth Now? – Released April 1, 2020 • As pioneers of growth equity investing, Alger has long believed in the power of growth as a long-term performance driver. • In March, we argued that growth could potentially – Companies with predominantly physical assets, such as manufacturing plants, would be hurt more by economic contraction than businesses with intangible assets, such as digital technology. – Accounting issues in classification of value stocks, including the treatment of intangible assets in determining price to book ratios. – Growth companies had stronger balance sheets. • Since April, the Russell 3000 Growth Index has outperformed the Russell 3000 Value Index by 15%, through November. outperform for the following reasons: – Growth is less cyclical than value. – Declining interest rates hurt value.

Small Caps Have Outperformed in Recoveries

38%

22%

S&P 500

Russell 2000

Source: FactSet and Alger. S&P 500 vs. Russell 2000 average performance over past three recession troughs: 12 months following 10/31/90, 9/30/01, 2/28/09, respectively.

Growth vs. Value Relative to S&P 500

110

Russell 1000 Growth Russell 1000 Value

105

100

S&P 500 Index

95

90

85

80

Dec 2019

Jan 2020

Feb 2020

Mar 2020

Source: FactSet as of 3/26/20.

BANNER_TITLE_INSIDE 3/4 FLYER  2/2 ALGER INS GHTS 3/4

Featured Content Capital Markets , Casting a Vote for Fundamentals – Released January 9, 2020 Market Strategy Insights , From the Crisis Emerge Change and Investment Opportunities – Released April 15, 2020 • Another cornerstone of Alger’s investment philoso- phy is our belief that innovation and disruption can generate long-term outperformance. • Specifically, we have written that innovation has triumphed over economic volatility. • During the year, the most innovative companies, as measured by the top quintile of stocks based on R&D as % of sales, have outperformed the broad stock market as measured by the S&P 1500 by approxi- mately 10% through October.”* Featured Content Market Strategy Insights , Beware the Election – Released December 20, 2020 Video , This November, Don’t Choose – Released September 25, 2020 • January, we wrote that investing in politics is a flawed strategy; innovation is more important. • We did not believe that the election would be immensely important for the stock market’s subse- quent performance. • In the month after the election, the VIX declined 43% from 37 to 21 and the S&P 500 gained 11%.

Innovative Companies Have Outperformed

CUMMULATIVE EXCESS RETURN

60% 50% 40% 30% 20% 10% 0% -10% -20% -30%

Most Innovative +4% Per Year

38%

Least Innovative -2% Per Year

Source: FactSet. Most/least innovative stock excess performance is derived from highest and lowest S&P 1500 quintiles based on R&D as % of sales, normalized for market value, using one month returns for 10 years ending 12/31/18. *Baruch Lev and Suresh Radhakrishnan, “The Stock Market Valuation of R&D Leaders.”

Election Portfolios

Most Innovative Companies

15%

CUMULATIVE RELATIVE PERFORMANCE

9%

10%

5%

0%

-6%

-5%

“America First” / Domestic Focused Companies

-10%

-15%

2016

2017

2018

2019

Source: Alger. Alger using FactSet Alpha Testing. High domestic exposure is companies in highest quintile of U.S. sales as percent of total sales in S&P 500. High R&D % of sales is highest quintile in S&P 500. Both are normalized for sector exposure.

*Normalized for market value.

BANNER_TITLE_INSIDE 4/4 ALGER INS GHTS 4/4

Featured Content Alger On the Money , Digital Uprising – Released August 12, 2020 Interactive Module , A New Era Emerges: The Age of Connected Intelligence – Released February 3, 2020 • Pursuant to our key investment theme, innovation, Alger has embraced that we are at the onset of a new technological revolution. • Our investment professionals have conducted exten- sive research on innovative and disruptive companies that are surging through the economy, creating new investment opportunities. • We released content detailing our insights and per- spectives so that our clients can potentially benefit from understanding how technology will evolve over the coming years.

The Digital Transformation Marches Onward

SHARE OF U.S. BUSINESS INVESTMENT

56%

54%

52%

Physical Investment Digital Investment

50%

48%

46%

44%

2Q20 1Q20 3Q19 1Q19 3Q18 1Q18 3Q17 1Q17 3Q16 1Q16 3Q15 1Q15 Source: U.S. Bureau of Economic Analysis and Alger. Digital investment comprises nonresidential fixed investment of intellectual property products (software and R&D) and information processing equipment. Physical investment comprises nonresidential structures and equipment (ex-information processing).

The views expressed are the views of Fred Alger Management, LLC (FAM) and its affiliates as of December 2020. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities. The S&P 500® is an index of large company stocks considered to be representative of the U.S. stock market. The VIX Index is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived from real-time, mid-quote prices of S&P 500® Index (SPXSM) call and put options. The Russell 2000 Index is a small cap stock market index of the smallest 2,000 stocks in the Russell 3000 Index. The Russell 3000® Growth Index measures the performance of the broad growth segment of the US equity universe. It includes those Russell 3000® companies with higher price-to-book ratios and higher forecasted growth values. The Russell 3000® Growth Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad growth market. The index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics. The Russell 3000® Value Index measures the performance of the broad value segment of the US equity value universe. It includes those Russell 3000® companies with lower price-to- book ratios and lower forecasted growth values. The Russell 3000® Value Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad value market. The index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics. Most/least innovative stock excess performance is derived from highest and lowest S&P 1500 quintiles based on R&D as % of sales, normalized for market value, using one month returns for 10 years ending 11/30/19. The S&P Composite 1500 is an unmanaged index that covers approximately 90% of the U.S. market capitalization. America First companies is represented by companies in highest quintile of U.S. sales as percent of total sales in S&P 500. Risk Disclosure: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies earnings and may be more sensitive to their companies’ earnings and may be more sensitive to market, political, and economic developments. Technology and healthcare companies may be significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Investing in companies of small capitalizations involve the risk that such issuers may have limited product lines or financial resources, lack management depth, or have limited liquidity. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Important Information for US Investors: This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares. Fred Alger & Company, LLC serves as distributor of the Alger mutual funds. Important Information for UK and EU Investors: This material is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations). It is for information purposes only and has been prepared and is made available for the benefit investors. This material does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this material and should be satisfied in doing so that there is no breach of local legislation or regulation. Certain products may be subject to restrictions with regard to certain persons or in certain countries under national regulations applicable to such persons or countries. Alger Management, Ltd. (company house number 8634056, domiciled at 78 Brook Street, London W1K 5EF, UK) is authorised and regulated by the Financial Conduct Authority, for the distribution of regulated financial products and services. FAM and/or Weatherbie Capital, LLC, U.S. registered investment advisors, serve as sub- portfolio manager to financial products distributed by Alger Management, Ltd. Alger Group Holdings, LLC (parent company of FAM and Alger Management, Ltd.), FAM, and Fred Alger & Company, LLC are not an authorized persons for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”) and this material has not been approved by an authorized person for the purposes of Section 21(2)(b) of the FSMA. Important information for Investors in Israel: This material is provided in Israel only to investors of the type listed in the first schedule of the Securities Law, 1968 (the “Securities Law”) and the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 1995. The Fund units will not be sold to investors who are not of the type listed in the first schedule of the Securities Law.

Fred Alger Management, LLC 360 Park Avenue South, New York, NY 10010 / 800.223.3810 / www.alger.com 800.305.8547 (Retail) / 212.806.8869 (Institutional)

AL2020CONTRU 121020