Capital Markets: Winter 2019

Winter 2019

Capital Markets: Observations and Insights Capital Markets: Observations and Insights Sanguine About Slowing

Sanguine About Slowing

Sanguine: being optimistic, especially in an apparently difficult situation.

Peak growth is probably behind us. Earnings and GDP growth are unlikely to reach new heights this cycle, but does that mean the expansion is ending? No, not in our view. There have been many times in the past few decades, and even in this expansion, when economic growth has slowed materially without ending the economic cycle or equity bull market. The best example of a slowing but still growing economy may come from the mid-1990s. In 1994, the economy was growing robustly as the Federal Reserve tightened monetary policy. While U.S. economic growth slowed significantly in 1995, earnings grew and the U.S. equity market turned in a strong year. More recently, economic growth slowed materially in 2016, while stocks posted solid, albeit varied, returns. While we are positive on equities in general in this environment, our research shows that there are always areas of the economy and innovative companies that can grow irrespective of economic conditions. Those companies and industries are, and always have been, our focus.

Daniel C. Chung, CFA Chief Executive Officer Chief Investment Officer

Brad Neuman, CFA Senior Vice President Director of Market Strategy

Page 1

Key Observations

• While pessimism abounds and equities are discounting a significant economic slowdown, we believe stocks are likely to post solid long-term returns , particularly relative to other asset classes • Monetary conditions have tightened but we believe equities and the economy should be able to absorb the moderate increase in interest rates • Trade policy issues are weighing on global economic growth and while there could be more pain to come, we believe the powerful trend toward lower tariffs and more trade will ultimately prevail

Table of Contents

Sanguine About Slowing

Pages 3-8

Performance

Pages 9-14

Fundamentals

Pages 15-23

Valuation

Pages 24-28

Page 2

Prospering Through a Slowdown ​ Sanguine About Slowing

• Economic growth is likely to decelerate in 2019 but that does not necessarily mean weak equity returns ‒ In the past 35 years, there have been 15 years when U.S. GDP growth materially slowed, with the vast majority generating positive U.S. stock returns

‒ Returns were negative only when accompanied by a recession (1990, 2000/2001, 2008)

S&P 500 Returns

Years When GDP Growth Stays Stable or Improves

Years When GDP Growth Materially Slows

-40% -30% -20% -10% 0% 10% 20% 30% 40%

History suggests that slowing GDP growth is not necessarily bad for equities

Source: FactSet, Alger. Note: Material slowing of GDP is defined as 50bps or more of a negative change in the annual real GDP growth rate.

Page 3

Tailwinds Meet Headwinds ​ Sanguine About Slowing

• While the Federal Reserve’s tightening monetary policy is a headwind to economic growth

• Fiscal stimulus remains a tailwind with the cumulative benefit continuing to build…

Cumulative GDP Boost from 2017 Tax Act

Estimated GDP Impact of 100bps Increase in the Federal Funds Rate

1.0%

3%

0.9%

0.9%

0.8%

2%

0.6%

0.3%

1%

U.S. Real GDP Growth

0%

2018 2019 2020 2021 2022 2023

1 2 3 4 5 6 7 8 9

Months After Increase

Source: Tax Act impact is from CBO, based on fiscal years ending in September. Effect of 100bps increase in Fed Funds rate is based on impact shown in FRB/US Model (November 2014 VAR version).

Page 4

​ Sanguine About Slowing

Not Signaling Recession

• Recent economic statistics are materially stronger than those prior to previous recessions

• Relevant metrics indicate continued expansion

= Recessionary

= Expansionary

Data Preceding U.S. Recessions

Leading Economic Indicator YoY

Yield Curve (Min Past 18- Months)

ISM Manufacturing New Orders

Jobless Claims YoY

Real Fed Funds Rate

Capacity Utilization

-2.1%

-0.4%

48.0

3.1%

85.5%

10.2%

December 1969

-1.6%

-1.4%

65.2

4.4%

88.7%

1.4%

November 1973

-5.8%

-1.7%

47.1

6.0%

84.3%

15.9%

January 1980

-1.6%

-1.9%

47.6

10.1%

80.5%

-21.4%

July 1981

-0.9%

0.0%

46.7

3.9%

82.8%

8.0%

July 1990

-7.6%

-0.6%

41.5

3.1%

77.9%

41.8%

March 2001

-4.6%

-0.6%

46.5

2.0%

81.1%

7.8%

December 2007

-3.5%

-0.9%

48.9

4.7%

83.0%

9.1%

Average

5.2%

0.2%

51.1

0.6%

78.5%

-8.5%

Present

Source: FactSet and Alger. Recessionary thresholds are as follows: Leading Economic Indicator YoY <0.0%; Yield Curve (10 year minus 3 month) <0.0% in past 18 months; ISM Manufacturing New Orders <50; Real Federal Funds Rate >1.75%; Capacity Utilization >80%; Jobless Claims >0%.

Page 5

​ Sanguine About Slowing

A Silver Lining?

• Historically, returns have been robust after such episodes ‒ Annual returns have averaged 19% after double-digit declines in P/E

• Equity valuations declined dramatically in 2018

‒ Second largest decline in past three decades

Change in S&P 500 P/E

Double-Digit S&P 500 P/E Declines

40%

P/E Change Following Year Return

50%

30%

40%

20%

30%

10%

20%

0%

10%

-10%

0%

-20%

-10%

-21%

-30%

-20%

-30%

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

1987 1994 2000 2002 2005 2008 2018

Source: FactSet and Alger. Data is 1986-2018.

Page 6

​ Sanguine About Slowing

What Outperforms in a Slowdown?

• Growth equities typically outperform when overall EPS growth decelerates, likely because:

‒ Growth equities are less cyclical

‒ Value stocks have more operational and financial leverage

‒ Higher growth is more scarce

Equity Returns in Periods of Profit Deceleration (1982-2018)

15.8%

Growth has historically

outperformed Value when fundamentals decelerate

14.1%

Russell 1000 Growth

Russell 1000 Value

Source: Bank of America Merrill Lynch Quantitative Strategy. Median data for periods identified are Jun 1984-Dec 1985, Jun 1988-Dec 1991, Mar 1995-Sep 1998, Mar 2000-Dec 2001, Dec 2003-Jun 2005, Mar 2006-Mar 2009, Jun 2010-Sep 2012, and Dec 2013-Dec 2015.

Page 7

​ Sanguine About Slowing

Innovation Through Economic Cycles

• Innovation can flourish even if the economy languishes

‒ History shows that there are areas of innovation and growth throughout recessions, depressions and panics over the past 150 years*

Personal Computer Penetration Grew Through Early ‘90s Recession

Global Smartphone Subscribers Grew Through Global Financial Crisis

U.S. Real GDP Index U.S. PC Index Recession

Global Real GDP Index Global Smartphone Subscriber Index Recession

160

500

+335%

+43%

400

140

300

120

200

+4%

100

+9%

100

80

0

1988

1989

1990

1991

1992

2006

2007

2008

2009

2010

Source: Diego Comin and Bart Hobijn “Historical Cross Country Technology Adoption Dataset”; U.S. Department of Transportation; GSM Association; FactSet . Each graph is indexed to 100. *See Alger’s white paper “The Enduring Force of Innovation.”

Page 8

Investors Play Defense ​ Performance

• In a severe equity market correction in 4Q18, defensive and less cyclical sectors performed best, highly impacting 2018 returns

4Q18 Returns (%)

2018 Returns (%)

U.S.

World

10

U.S.

World

5

5

0

0

-5

-5

-10

-10

-15

-15

-20

-20

-25

Energy

Utilities

Energy

Utilities

Materials

Materials

Financials

Industrials

Financials

Industrials

Technology

Real Estate

Health Care

Real Estate

Technology

Health Care

Consumer Staples

Consumer Staples

Consumer Discretionary

Consumer Discretionary

Communication Services

Communication Services

Source: FactSet as of 12/31/18. U.S. represented by S&P 500 and World represented by MSCI AC World Index in USD.

Page 9

Value Has Lagged ​ Performance

• In 2018, higher yielding large cap stocks generally outperformed, while more economically sensitive Value equities underperformed

4Q18 Excess Return (%)

2018 Excess Return (%)

2.2 2.0

1.3

1.4 1.1

0.9

0.4

0.3

-0.2 -0.2

-0.6

-1.0 -1.2 -1.4 -1.5 -1.5

-1.5 -1.5 -1.8

-2.3

-2.2

-5.8

Market Cap

Book / Price

EPS Growth

Debt / Equity

Market Cap

Book / Price

Price Volatility

EPS Growth

Dividend Yield

Debt / Equity

Trading Activity

Earnings / Price

Revenue / Price

Price Volatility

Dividend Yield

Relative Strength

Trading Activity

Earnings / Price

Revenue / Price

Relative Strength

Earnings Variability

Earnings Variability

Source: FactSet as of 12/31/18 using Northfield defined quantitative factors for the Northfield broad U.S. market database.

Page 10

Valuation Correction Offsets Earnings Growth ​ Performance

Total Return = Dividend Yield + EPS Growth +/- P/E Change

MSCI All Country World Index ex-USA

S&P 500

Dividend

EPS Growth*

P/E Change

Dividend

EPS Growth*

P/E Change

35%

20%

25%

15%

10%

5%

0%

-5%

Sentiment Collapse

Sentiment Collapse

-10%

-15%

-25%

-20%

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

12- Month Total Return:

12- Month Total Return:

16%

33%

14%

1%

12%

22%

-4%

17%

21%

6%

2%

7%

19%

-10%

Source: FactSet as of 12/31/18. *Based on consensus estimates of next 12-month EPS. Actual earnings per share might be materially different than shown. MSCI ACWI ex-US performance based on local currency.

Page 11

​ Performance

Structural Issues Driving Growth vs. Value

• Growth stocks have dramatically outperformed (+44%) Value stocks over the past decade

• The culprit for value investors has been the very weak performance of buying low P/B stocks, while low P/E strategies have fared much better • Book value, used heavily in index classification of Growth vs. Value, may no longer be as relevant given changing business models, e.g., R&D is not capitalized in book value

120

Style classification too dependent upon flawed book value

P/E

100

80

P/B

Russell 1000 Value / Growth

60

40

20

Total Return Index

0

2008

2010

2012

2014

2016

2018

Source: FactSet as of 12/31/18. Price-to-earnings and price-to-book returns are based on the E/P and B/P Northfield factors for the Northfield broad U.S. market database.

Page 12

​ Performance

Innovative Companies Often Outperform

• Studies have shown, and our research demonstrates, that the most innovative companies grow their sales, earnings, and stock prices faster*

Innovation Drives Excess Performance 20 Years

150%

Most Innovative +4% per year

100%

50%

0%

Cumulative Performance

Least Innovative -1% per year

-50%

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 20 years ending 10/31/18. * Baruch Lev and Suresh Radhakrishnan, “The Stock Market Valuation of R&D Leaders.”

Page 13

​ Performance

Has Active Relative Performance Troughed?

• As some of those factors reverse, active management, particularly Growth, has been doing better ‒ Interest rates no longer falling ‒ Market performance more subdued

• Powerful cyclical factors impact U.S. active relative performance: ‒ Interest rates/bond-like equities ‒ Small cap performance

‒ Overall market performance ‒ Non-U.S. stock performance

% of U.S. Active Managers Outperforming 2018

Active Relative Performance Is Cyclical

100%

Large Small

84%

80%

60%

59%

40%

32%

24%

20% % of Fund Assets Outperforming

0%

Growth

Value

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

2018

Source: Left chart: Nomura/Instinet, Joseph Mezrich and FactSet through 12/31/18. Fund performance is trailing five-year data of U.S. active equity mutual funds in existence for five years or more and part of the growth, growth & income, and income categories based on CRSP codes. Right chart: Bank of America Merrill Lynch U.S. Equity and U.S. Quant Strategy using Lipper data relative to Russell benchmarks through 12/31/18.

Page 14

The Upside of Being Slow ​ Fundamentals

• Why has the current economic expansion lasted so long and when will it end?

‒ A big part of the answer is the depth of the recession that preceded it and the rate of the recovery thus far ‒ Economic recoveries of comparable length have had far more growth than the present one, suggesting a significant runway of economic expansion now

60%

1960

50%

1990

40%

1981

30%

Long runway to catch up?

1973

20%

1969

2001

Current

10%

0%

Real Cumulative GDP Growth

-10%

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

32

34

36

38

40

42

Number of Quarters from Peak

Source: U.S. Bureau of Economic Analysis and Alger as of December 2018. Dates indicate beginning of measurement periods.

Page 15

Monetary Policy Is Not Restrictive ​ Fundamentals

• Over the past half century, every U.S. recession has been preceded by a significantly positive real Fed Funds rate of 2% or higher

• In contrast, today we have a real Fed Funds rate of close to 0%

Real Federal Funds Rate

15%

10%

Today real short-term interest rates are far

5%

lower than what induced previous recessions

0%

-5%

-10%

1960

1962

1965

1967

1970

1972

1975

1977

1980

1982

1985

1987

1990

1992

1995

1997

2000

2002

2005

2007

2010

2012

2015

2017

Source: FactSet, through December 2018. Real Federal Funds rate is equal to the Federal Funds rate less the year-over-year change in the PCE Price Index ex-food and energy. Shaded regions denote U.S. recessions.

Page 16

​ Fundamentals

Leading Indicators Suggest Continued Expansion

• The LEI historically leads S&P 500 EPS by 6-18 months • The increase in the LEI suggests EPS should continue growing

• Typically, changes in the Leading Economic Index (LEI) have preceded changes in economic growth • The rate of change of the LEI implies solid, albeit slowing, economic growth

15%

8%

$190

10%

6%

110

$170

5%

4%

Real GDP Growth YoY

100

$150

0%

2%

S&P 500 EPS

18 Month Lead

$130

-5%

0%

90

$110

-10%

-2%

$90

-15%

-4%

80

Leading Economic Index

-20%

-6%

$70

Leading Economic Index YoY

-25%

-8%

70

$50

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: FactSet, Conference Board. EPS estimates based on next 12-months consensus.

Page 17

Fundamentals

U.S. Debt Service Is Historically Low

• Despite higher levels of debt as a % of GDP, the U.S. non-financial private sector debt service ratio is much lower than in the past two recessions ‒ Because more than 80% of U.S. consumer and business debt is fixed, higher interest rates should not have a dramatic impact on service costs

U.S. Debt Service Ratio

20%

18%

Debt service ratio indicates households and corporations are not burdened by debt payments

16%

14%

12%

10%

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: Bank for International Settlements, December 2018. Debt Service Ratio is the share of income used for interest payments and amortizations in the non-financial private sector. Shaded regions indicate recessions.

Page 18

Better to Be Behind? ​ Fundamentals

• The output gap measures economic output relative to potential, with a lower output gap indicating more growth left in the cycle • While most major regions are at or near potential output, some, such as Japan and Europe, are further behind the U.S.

U.S. Output Gap

Source: FactSet and Oxford Economics. Shaded regions indicate U.S. recessions.

Page 19

​ Fundamentals

China Is Stimulating

• Chinese growth has been a key driver in volatility of global equities

• A trade deal would go a long way to help the decelerating Chinese economy but monetary policy may pick up some of the burden until then

Will easing work again?

5.5%

30%

Lower rates helped equities bottom

20%

4.5%

S&P 500 YoY

10%

0%

3.5%

China Interest Rate

-10%

2.5%

-20%

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19

Source: FactSet. China interest rate is SHIBOR one year rate.

Page 20

A Powerful Trend ​ Fundamentals

• There have been various periods in history marked by fears of “trade wars” but ultimately countries have acted rationally and reduced trade barriers • While there may be more pain to come, we believe the powerful trend toward lower tariffs and more trade will prevail

• In the meantime, opportunities will likely arise for active management

U.S. Tariff Rates

U.S. Gross International Trade % of GDP

8%

35%

30%

Japanese auto quotas imposed

6%

25%

20%

4%

Bush steel tariffs

15%

10%

2%

Chicken Tax / European trade dispute

5%

Time magazine cover on “Trade Wars”

0%

0%

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

Source: U.S. International Trade Commission, U.S. Bureau of Economic Analysis, and Alger. Tariffs are calculated as duties collected divided by total imports.

Page 21

Smaller Capitalization Stocks Poised to Outperform ​ Fundamentals

• Compelling valuation : Small cap P/E multiple premium is the lowest in a decade

• Stronger fundamentals : Estimated small cap EPS growth for ‘19 & ‘20 is double that of large cap

• More levered to domestic economy : U.S. small caps have less exposure to international economies

• Rising interest rates : Small caps have historically outperformed large caps in rising rate environments

Price-to-Earnings Russell 2000 / Russell 1000

Earnings Per Share

0% 10% 20% 30% 40% 50% 60% 70% 80%

R2000 R1000

160

Small caps growing faster

140

120

Median

EPS Indexed to 100

100

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2018

2019

2020

Source: FactSet as of December 2018 . EPS for 2019-2020 are consensus estimates and actual earnings per share might be materially different than shown.

Page 22

​ Fundamentals

The Growth Advantage

• Three variables drive P/E multiples: growth, return on capital, and risk

• As compared to the Russell 1000 Value Index, the Russell 1000 Growth Index has higher expected EPS growth, higher return on equity, and lower risk in the form of better balance sheets

Stronger Growth

Higher Returns

Lower Risk

R1000G R1000V

R1000G R1000V

R1000G R1000V

2.6x

16.4%

28.6%

9.5%

13.0%

1.0x

Long-Term EPS Growth

Return on Equity

Net Debt / EBITDA

Source: FactSet as of 12/31/18. Growth represents consensus long-term analyst estimates and actual future EPS growth rates might be materially different than the forecasts shown.

Page 23

Stocks Are Cheap Relative to Bonds ​ Valuation

• Historically, the “earnings yield” of equities (inverse of the P/E) has been just modestly above 10-year Treasury yields • Since the Global Financial Crisis, however, that spread has widened out and has yet to normalize, making equities attractive relative to bonds

S&P 500 EPS Yield

Treasury Bond Yield

16%

14%

12%

10%

8%

Spread of >400bps indicates stocks are attractive relative to bonds

6%

4%

2%

0%

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

Source: FactSet, Federal Reserve, and S&P, as of 12/31/18.

Page 24

Bargains Abound ​ Valuation

• Sector valuation varies with most trading at discounts to their historical median

P/E Relative to 20-Year Median

12%

6%

0%

0%

-1%

-3%

-5%

-9%

-10% -11%

-15% -16%

Energy

Utilities

S&P 500

Materials

Financials

Industrials

Health Care

Real Estate

Consumer Staples

Information Technology

Consumer Discretionary

Communication Services

Source: FactSet and UBS, based on S&P 500 Index as of 12/31/18. The Communication Services, Consumer Discretionary, and Technology sectors’ historical data have been restated to reflect September 2018 changes to the GICS sector classifications. Note that Consumer Discretionary ex-Internet Retail is an 11% discount to its 20-year median.

Page 25

Growth and Value Near Equilibrium ​ Valuation

• Despite their outperformance over the past several years, Growth stocks are not very expensive compared to their Value equity counterparts relative to expected growth rates or history

Russell 1000 Growth vs. Russell 1000 Value PEG Ratio (P/E Divided by Long-Term Growth Rate)

Russell 1000 Growth Relative to Russell 1000 Value P/E

1.3x

Current premium is in-line relative to history

Growth stocks are cheaper relative to long-term growth

43%

1.1x

Median

Russell 1000 Value

Russell 1000 Growth

Source: FactSet, Bank of America as of 12/31/18.

Page 26

Global Equity Multiples Inexpensive ​ Valuation

• Price-to-earnings multiples around the world are below their historical average, despite very low global interest rates

= current

Price-to-Earnings Multiple +/- 2 Standard Deviations from 15-Year Average

= +2 std dev

20x

= average

= -2 std dev

15x

EM is least expensive in

10x

absolute terms while EAFE is cheapest relative to history

5x

S&P 500 MSCI AC World MSCI EAFE MSCI EM

Z-Score (Standard Deviations Above/Below Mean)

(0.1)

(0.4)

(0.8)

(0.4)

Source: FactSet. Monthly estimates over past 15 years ending 12/31/18. MSCI AC World represents developed and emerging markets globally. MSCI EAFE represents developed countries in Europe, Australasia and the Far East. MSCI EM represents emerging markets globally. A Z-Score is the number of standard deviations a data point is from the mean. A z-score equal to zero, it is on the mean. If a z-score is equal to +1, it is 1 standard deviation above the mean. Standard deviation measures how much the data has deviated from its average. If data has a high standard deviation, there is large deviation from its mean, and vice versa. Standard deviation is generally used to compare the relative volatility of data sets.

Page 27

​ Valuation Framework for Forecasting Returns

• There is a strong relationship between starting valuations and ensuing 10-year returns

• Current valuations suggest equities may post strong returns over the coming decade, beating other asset classes such as fixed income

S&P 500 P/E vs. 10-Year Returns

Russell 1000 Growth P/E vs. 10-Year Returns

= month

= current

tech bubble

25%

25%

R² = 0.79 (0.85 ex-tech bubble)

R² = 0.84

20%

20%

15%

15%

10%

10%

5%

5%

0%

0%

-5%

-5%

-10%

-10%

5

10

15

20

25

30

5

10

15

20

25

S&P 500 10-Year Annualized Return

Russell 1000G 10-Year Annualized Return

Russell 1000 Growth Price/Earnings

S&P 500 Price/Earnings

Source: FactSet. Each dot represents the P/E during that month and the returns generated over the subsequent 10 years. The starting P/E ratio is the price divided by the next 12-month earnings per share estimate at the start of each 10-year period measured. Monthly data through December 2018 and beginning in January 1986 (S&P 500) and December 1978 (Russell 1000 Growth). The tech bubble, represented by the 10-year returns beginning in April 1987-March 1990 and ending in April 1997-March 2000, skewed the regression by resulting in higher returns for given valuations than the historical relationship would imply.

Page 28

Disclosure ​The views expressed are the views of Fred Alger Management, Inc. as of January 2019. Alger has used sources of information which it believes to be reliable; however, this publication is not intended to be and does not constitute investment advice. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security, or any funds managed by Fred Alger Management, Inc. These views should not be considered a recommendation to purchase or sell securities. Individual securities or industries/sectors mentioned, if any, should be considered in the context of an overall portfolio and therefore reference to them should not be construed as a recommendation or offer to purchase or sell securities. References to or implications regarding the performance of an individual security or group of securities are not intended as an indication of the characteristics or performance of any specific sector, industry, security, group of securities, or a portfolio and are for illustrative purposes only.

​ Risk Disclosures : Investing in the stock market involves gains and losses and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks as the prices of growth stocks tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political and economic developments.

​The S&P 500 Index is an unmanaged index generally representative of the U.S. stock market without regard to company size. The S&P Composite 1500 is an unmanaged index that covers approximately 90% of the U.S. market capitalization. The Russell 1000® Growth Index is an unmanaged index designed to measure the performance of the largest 1000 companies in the Russell 3000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Growth Index is an unmanaged index generally representative of common stocks designed to track performance of small-capitalization companies with greater than average growth orientation. The Russell 2000 Value Index is an unmanaged index generally representative of the small-cap value segment of the U.S. equity universe and measures the performance of Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 3000® Growth Index is an unmanaged index designed to measure the performance of those Russell 3000® Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 3000 Value Index is an unmanaged index generally representative of stocks from the Russell 3000 Index with lower price-to-book ratios and lower expected growth rates. The MSCI ACWI Index (gross) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI consists of 45 country indices comprising 24 developed and 21 emerging market country indices. The MSCI ACWI ex USA Index (gross) captures large and mid cap representation across 23 of 24 Developed Markets (DM) countries excluding the US) and 23 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the US. The indices presented are provided for illustrative purposes, reflect the reinvestment of dividends and do not assess fees and expenses that would have the effect of reducing returns. Investors cannot invest directly in any index. The index performance does not represent the returns of any portfolio advised by Fred Alger Management, Inc. and actual client results might differ materially than the indices shown. Note that past performance is no guarantee of future results. Comparison to a different index might have materially different results than those shown. ​Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell ® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. ​ ALCAPPRESSPR-0119 Fred Alger Management, Inc. • 360 Park Avenue South, New York, NY 10010 • 800.992.3863 • www.alger.com Page 29

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