CEO Update and Outlook


On the business side, I've been very pleased to see clients who know us well – and I hope many of you are online; thank you. Our inflows have actually been quite a bit stronger than we had expected, including the month of March. Even with all the volatility, we are seeing clients very engaged, recognizing the opportunity. We have had year-to-date net outflows, in particular in large cap, but we've had net inflows in most of the small cap strategies, as well as the long/short strategy. Overall the business is holding up very well and we are seeing, I think, good engagement by a lot of our client investors. Brad Neuman : I guess that business environment is translating, so far, into strong performance. This past quarter was obviously very difficult. I think you noted earlier that the S&P 500 was down 20% amidst this global pandemic. Yet, as I noted earlier, Alger’s strategies had strong relative performance. What do you attribute this performance to? Dan Chung : We have a very consistent process. What I mean by that is the investment process of Alger of course includes our philosophy of looking for Positive Dynamic Change. We are constantly looking for opportunity in every sector, but very importantly, especially in this market crisis, is that we also do a lot of risk/reward modeling. For every company that we follow, and of course every one that we own, we have built bear, base and bull case scenarios – fundamental model of these different scenarios, as well as what valuations we think they imply for each company. The key part is this risk/reward modeling is not something we just devised or do during crises. It's what we do every day, every year, for more than 20 years that I've been at Alger. That means we believe we're well prepared when crisis happens to hopefully recognize where value is being created – where extraordinary value is being created – and also to recognize, on the other end, which stocks in our risk/reward modeling were perhaps closer to peaking or showing more downside than we'd like to take. Part of it is consistency, but it's also being prepared to handle the crisis before the crisis occurs.

A key attribute for why we are performing, I think, is the experience of our investment team. And there's an extraordinary amount of experience at Alger. Mine going back to the mid-nineties and all the crises since then, but Patrick Kelly joined the firm in the 1990s with me, and he helped me lead this company out of 9/11, as well as the internet bubble. Ankur Crawford has been at the firm since 2004, so she saw the great financial crisis and other crises. Teresa McRoberts, who heads our healthcare strategy, was an analyst with me way back in the 1990s. So we have a tremendous amount of experience and it's that experience coupled with the consistent process and the risk/reward modeling that we do. We do look at how this change will impact long-term fundamentals. It's not just about the short term, it's also about the long term and what businesses will change, what industries will change going forward. And of course many – many will be hurt going forward by what's happening. Others perhaps will actually benefit from it. The Alger process and philosophy is well tuned to taking advantage of that in my opinion, and looking – looking both short term and long term for performance. I'm very pleased with the team, and I'm also very confident that we have both the experience and the process to manage through this. Brad Neuman : In light of those changes that we're seeing in how people and businesses conduct themselves and the operational environment, have you directed the investment team during this period differently? Or maybe you can comment on your direction as CIO to the investment team – how that's changed and – or what you're telling them to look for and research and analyze.

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