Portfolio Insights: Alger Weatherbie Specialized Growth Strategy

TRANSCRIPT

Portfolio Insights: Alger Weatherbie Specialized Growth Strategy

Joshua D. Bennett, CFA Senior Managing Director and Director of Research Weatherbie Capital, LLC

Josh Bennett, CFA, recently provided a portfolio update for clients in the Alger Weatherbie Specialized Growth strategy. The call was hosted by Ted Doyle, senior vice president in institutional sales and service. Director of Market Strategy, Brad Neuman, CFA, shared an economic update.

outstanding client service and relationship management teams. All of our resources are at your disposal and our teams stand ready to help you in any way we can. If there's anything we can do to support you and/or your clients, please reach out to your Alger representative. For today's call, Brad Neuman will first offer a few brief observations on the capital markets as well as the latest macro events affecting the markets. Next, we will have a few questions prepared for the Weatherbie Specialized Growth PM Josh Bennett.

Please note this transcript is from a call on August 26, 2020 and it has been edited for clarity and brevity.

Ted Doyle : Good morning, everyone, and thank you for taking time out of your busy schedule to join the Alger Weatherbie Specialized Growth call. My name is Ted Doyle and I'm a senior vice president on the institutional sales and service team. I'll be your host for today's call. Today I'm joined on the call by Josh Bennett, who's our director of research and a portfolio manager at Weatherbie Capital, as well as Brad Neuman, who's the director of market strategy at Alger. Today we all face unprecedented challenges not only in the investment markets, but in all aspects of our lives. The COVID-19 virus has a profound and heartbreaking impact across the globe. Our families, friends and travel have all been disrupted. At Alger, we hope and pray that you and your loved ones stay safe and healthy through this crisis. We also want to thank you for your confidence in Alger's investment capabilities. Fortunately at Alger, we are not only great investment professionals, but we also have

After Josh answers our prepared questions, we will open it up to questions from all of you today.

Now I'll turn it over to Brad.

Brad Neuman: Thanks, Ted. So in my view, the economic recession that officially began in February likely ended in May. While U.S. GDP contracted 33 percent in the second quarter of this year, it's currently running up 26 percent in the third quarter, according to data from the Federal Reserve Bank of Atlanta. In fact, retail sales are now running at a rate that is higher than pre-COVID levels. Now, that's being helped in part by record fiscal stimulus, which has allowed personal income to actually rise through the recession as government transfer payments more than offset the large decline in wages.

TRANSCRIPT

Brad Neuman (continued): Additionally, the housing market is extremely strong as existing home sales are well above pre-COVID levels and median home prices are at record highs, up a robust 8.5 percent year over year. Further fiscal support and a vaccine would go a long way to creating a sustainable environment for growth. If this is indeed the beginning of a sustainable expansion, it may be instructive to remember that the last five economic expansions lasted eight years on average. Some of our clients who agree with this message of economic recovery are still skeptical about the stock market's rapid gains and record highs. Here I would make two points. First, Wall Street is not a mirror of Main Street. This is important because according to data from the Federal Reserve, there is record divergence within the economy between winners and losers. This is key because the stock market is overweighted to these winners. Let's take U.S. business investment in software, for example. In the second quarter of this year, which was the worst quarter for economic growth in over 70 years, it actually grew year over year and while the stock market over-indexes to software investment, it's underexposed to consumer spending, particularly traditional retail. In fact, less than 20 percent of the S&P 500 is made up of consumer discretionary and consumer staple stocks while personal consumption expenditures on Main Street make up about two thirds of GDP. Second, while P/E valuations are high in absolute terms, they're low relative to interest rates and we believe accounting issues may be obscuring some value as the price-to-free cash flow multiple of the stock market is actually relatively in line with history. Finally, I just want to say a quick word about the upcoming presidential election. Investing in a, quote- unquote, "America first portfolio," or one made up of domestically oriented largely value stocks that should have benefited from the current administration's policies, such as lower corporate taxes, would have actually underperformed the broader stock market over the past four years, as did energy and financial stocks,

which should have benefited from the administration's deregulation.

However, a portfolio of the most innovative companies, irrespective of how they were viewed by policymakers, outperformed. Our takeaway is that if investing in politics didn't work over the past four years, it's unlikely to work over the next four, in our view. Investing in innovative companies with strong fundamentals is the way to go in our view.

Ted Doyle: Thanks, Brad. Let's now transition to Josh on the Weatherbie team.

Josh Bennett, our next speaker, is one of the four portfolio managers on the Weatherbie Specialized Growth strategy. Additionally, he has research responsibilities in the consumer, industrials, technology and diversified business services areas. Josh, let's dive right in and ask a few questions that I think are on the minds of investors. We just heard Brad's latest views on some macroeconomic events looming ahead and while Weatherbie Specialized Growth is a fundamental, bottom-up strategy, is the team evaluating the upcoming U.S. election and/or other macro factors and is there any positioning in the portfolio as a result? Josh Bennett: Thanks again for having me. So as you mentioned, since 1996, the Weatherbie Specialized Growth team has focused much more on individual stocks identified through fundamental, bottom-up investing rather than macro factors, but that said, we do integrate a macro perspective into discussions of both the individual companies in our portfolio as well as our overall portfolio positioning. So the election is clearly the next big macro event on the horizon and we're certainly aware of the fact that it could create some volatility in the near term. However, we'd say that should that volatility occur, it's important to realize that this team has been through these periods many times before and if we enter a period in which markets overreact to the downside, we'll do what we have always done in periods like this: we'll look for ways to further upgrade our portfolio stocks.

TRANSCRIPT

Josh Bennett (continued): We have historically added in these periods to what we believe are more stable companies that are more resilient to uncertainty. Examples of that might be FirstService Corporation, which is a stable growth real estate services company that we've owned for over 10 years or even Casella Waste, which is a waste management company focused on the northeast regional market. And we've also seen that periods of market volatility may create excellent opportunities to initiate new names in the portfolio that we've known well for months or even years and then that period of market volatility can grant us the opportunity to begin a start-up position in those new names. Now, regarding the election more specifically, in our view, it does seem that a Biden win might imply a higher corporate tax rate while a Trump win might mean stability or even a tax cut and we do think that tax cuts would generally be a tailwind for smaller cap companies given their primarily domestic revenue exposure. However, in our view, the advantage of investing in these small cap companies is that these have historically been innovative companies that are market leaders. More often than not, they're competing against smaller mom and pops and we believe that innovation serves as the real engine that should enable those companies to overcome any near-term volatility caused by the election. Ted Doyle: Thanks, Josh. Another thing that's come up in recent weeks is there has been a growing speculation of a potential value growth rotation. Specialized Growth is a diversified portfolio of 50 stocks and unique to that strategy that you invest in, quote-unquote, are "diversified business services holdings." Can you comment on the potential rotation and are there any holdings in your portfolio that you think may hold up better during this period?

growth companies exist on a spectrum anywhere from kind of pure momentum investors to GARP investors, we wouldn't say that Weatherbie Specialized Growth is on either end of that spectrum. So when investors hear about small cap growth, many automatically think of technology and health care and I do want to be clear that the Weatherbie team has a multi-decade track record of finding what we believe are great companies in those tech and health care sectors. However, to your question, in our view, what makes our team truly unique is our ability to identify companies in parts of the market that most of our growth peers do not explore. Those names are typically more off-the-beaten-path type names. They're coming from what we call the dynamic growth area called diversified business services, which you mentioned in your question and sometimes we say that these companies are jewels in mundane industries such as industrials or services, even the financials industry. Should the market rotate from growth to value, we believe that the Weatherbie portfolio should navigate that environment well as we believe these unique diversified business services companies can potentially do quite well regardless of the market orientation. Ted Doyle: Well, we just saw the conclusion of earnings season or it's coming there soon to us for the second quarter and it was a quarter that most predicted would be among the most challenging ever. You and the rest of the Weatherbie team are consistently speaking to management teams of the companies you invest in. Nearly all 50 of the Specialized Growth portfolio companies have reported so far. Can you share any insights into what you've learned from the quarter and what you're hearing from the management teams you speak to? So we don't look to predict market rotations, but instead we focus on positioning the portfolio to navigate all these scenarios.

Josh Bennett: Sure. So obviously we are smaller cap growth investors and we're not going to shy away from that and the way we think about it is while smaller cap

TRANSCRIPT

Josh Bennett: The heart of the second quarter earnings season is coming to a close and nearly all the Weatherbie 50 stocks, all but one, have reported at this point and frankly, the quarter has gone better than we expected and our expectations were, for the most part, ahead of Wall Street expectations. So thinking back to the first quarter, many companies in our space reduced guidance or they limited guidance to only one quarter ahead or they even removed their guidance for the entire year given an abundance of uncertainty at that time based on the COVID era. So as expected, the second quarter was difficult, but it wasn't as bad as what had been modeled out by consensus views. expectations and we were happy to see in this quarter that we did even better than we typically do with most of our names meeting or beating expectations. The current environment, we believe, is one where our fundamental research at Weatherbie and deep knowledge of our companies really paid off. We believe we were able to realize the long-term, potential value of our companies while the Street was much more focused on the near- term quarter. In terms of specific insights from management, I'll talk about some of the sectors that I follow. It was clear at a high level that the economy bottomed in late March to early April and then recovered much more quickly than most expected. In the consumer sector, people have notably been spending much more on home improvement and on household goods than most had expected. When you look at companies in our portfolio like SiteOne, which is a landscape supply company, or Ollie's, which provides essential goods at value prices, these companies have done incredibly well through this quarter given their essential nature and feeding consumer demand. Shifting to the industrial side, we saw a dramatic slowdown in the industrial space as expected. Large segments of the industrial economy like autos slowed production, but the industrial machine is definitely The Weatherbie team has been tracking how many of our portfolio companies meet, beat or miss our

coming back on and transportation, which is sort of the wheels that move that industrial product around, are moving again. So this has benefited companies in our portfolio like XPO Logistics or CerenceTechnology, which provides voice recognition for automobiles. And then finally in the technology sector, companies' adoption of new technology was clearly accelerated by months or some would even say years. Companies essentially had no choice but to quickly embrace new platforms that enabled remote work and collaboration. This benefited a lot of companies in our portfolio, but one name that comes to mind is HubSpot, which saw very strong subscriber growth and new service adoption Ted Doyle: Thanks, Josh. Let me share a question I received via e-mail. It says here there's clearly a lot of speculation about a potential vaccine. Looking at the Weatherbie portfolio, do you own any positions directly tied to a potential vaccine or do you have any positions that will potentially benefit from the impact of such a vaccine? Josh Bennett: Thanks for the question. We really don't have positions directly tied to the COVID-19 vaccine that we can talk about today. However, we've been able to position the portfolio with several health care positions that we believe should do quite well actually if and when the vaccine is approved and rolled out broadly to the population. To be a little more specific, thinking back to the period when hospitals were stressed with COVID-19 patients, they were forced to close their doors to all non-essential patients. That had a very direct effect on several of our companies that provide important surgeries, but typically they are elective surgeries or procedures. The name that comes to mind is a company called Nevro, which provides a unique high frequency spinal cord stimulation device. That stock was punished in that period—we believe unfairly because the market focused only on reduced demand in the near term—but that created a great opportunity for our team to add to a position we really believe in over the long term and at much more attractive prices. as it has a platform for marketing and sales management and other services as well.

TRANSCRIPT

Josh Bennett (continued): The way this is playing out as the vaccine rolls out is with hospitals now reopening to elective surgeries and they will do so further as vaccines come available. This pent-up demand is going to flow through the system and our confidence that names like Nevro are going to recover and benefit has definitely paid off.

the election, but the reality is we believe our portfolio is well positioned whether it's a Biden or a Trump win.

Speaker Question: Josh, I was just wondering if you could go over the sell discipline, when you guys decide why you would get out of a name, if the thesis doesn't work or what have you. Josh Bennett: Our sell discipline we've really implemented over decades now at Weatherbie Capital. We sell for a few reasons. First of all, we would think about selling a stock once it gets sustainably above kind of our max market cap range. So the Weatherbie Capital style is that we want to get into a company before it hits $2.5 billion in market cap and then we're willing to let those winners run up to $15 billion market cap. Once names get sustainably above that $15 billion market cap level, we begin to move out of those names and we will move out and sell those names. That would be number one: the market cap gets too high. Number two would be if a company gets acquired and this is one of the exciting, but challenging things in small cap growth investing is that acquisitions happen on a regular basis. So we'll see typically two companies, sometimes three or four companies from our Weatherbie 50 stocks, they'll get acquired in a given year and so that creates the opportunity to kind of feed a fresh name into the Weatherbie 50. And then finally, and this is kind of what happens most often, there are names for which we bought the name on a particular investment thesis and as time goes by, we certainly don't bat a thousand. We may do well but we don't bat a thousand and when we begin to see that thesis fraying around the edges, what you'll see is that the portfolio managers at Weatherbie Capital, of which I'm one of the portfolio managers, will begin to bring that position down in our conviction-weighted sleeve, which brings the position down for the overall portfolio.

Ted Doyle: Thanks, Josh. The line is now open.

Speaker Question: Given whatever side wins the election, how do you expect it to affect capital gains and the monetary policy? And how do you see that affecting how you're positioned in the market? Josh Bennett: Regarding the Weatherbie portfolio, I mentioned in my opening remarks that the election is something that we're monitoring very closely as it's clearly the biggest macro event in the near term, but we're not necessarily positioning our portfolio for or against a Biden or a Trump win. That's just not the way we think about it. We tend to think through these things and create a portfolio that we believe can succeed regardless of who wins. I would say that some of the clear impacts on the portfolio are on the health care side. Whether one wins or the other wins, you could see some implications on drug pricing, for example, or on how quickly drugs get approved. You typically think of a Republican win as being better for defense stocks. The reality is, looking back over history, defense stocks are much more tied to the threat level than they are to whether it's a Republican or a Democrat in the White House or dominating Congress. What you see as you dig deeper into each of these kinds of factors and the way they impact stocks in our portfolio is quite often the election is less of an important factor to the portfolio than you might think it is when you're willing to kind of look out over a longer timeframe, which is exactly what we do at Weatherbie.

We tend to have a longer time horizon, we do deep research on our companies and so there are little things around the edge that we might do if we have a hunch on

TRANSCRIPT

Josh Bennett (continued): And over time, since we have a team of analysts that are constantly looking for great, new ideas for the portfolio to get in and fighting to get into the Weatherbie 50, the name that's been challenged against our thesis will begin to fall down the ranks and these other names will begin to compete for those slots and the portfolio managers will decide to eliminate one and replace it with what we think is a name with better growth prospects. So whenever things happen, we go back to the original investment thesis, we look carefully at that thesis and does this new news or what's happening change that thesis and we're always cautious to not fall into the trap of the creeping investment thesis where you find ways to justify continuing to own a name for different reasons than you initially bought it. We're very hard on going back to the thesis. Speaker Question: Maybe a little bit of a follow-up to that question and again, I understand my data may be a little bit skewed, but are you still long EPAM Systems? Speaker Question: I look at this company and obviously it's done phenomenally well. The market cap now is approaching $18 billion and you just said that $15 billion was sort of your place to start to look out of it. Can you explain to me how you guys look at portfolio drift? Because it appears to me clearly you're violating something you just mentioned that you use and maybe you can explain a little bit further how hard that $15 billion really is and if I misunderstood you, please correct me. Josh Bennett: Let me clarify that further so that you understand that it is no violation underway. What I said is when a stock gets sustainably above $15 billion, we begin to move out of that name. We do give ourselves a period of time to move out of a name that's sustainably above the $15 billion market cap. Josh Bennett: Yes, we still own EPAM.

That's what you should see and if you pull up the stock chart, you can see that it's been kind of a straight up and to the right stock. So you can assume that if that stock stays above $15 billion, we will be moving out. We do abide by what we say and when a name is sustainably above $15 billion, we're going to move out, but just to clarify your question, it doesn't mean that it's a light switch and the moment it touches $15.2 billion or $16 billion or $17 billion that like a light switch we exit the name. That wouldn't be good for our clients. We move out of that name and replace it with a better name. Speaker Question: And is there a period where you normally or historically have seen that happen? Is it a quarter or two or is there again some rule that says it's got to be 30 to 40 days? Speaker Question: In the previous economic crisis we went through, we did this massive QE that was super speculative and there's since been a lot of debate around how effective it was because trillions of dollars of liquidity entered the economy and then a lot of people say it never really circulated through the economy; it debatably just sat on balance sheets. This time, just in my opinion, the really genius aspects of what the Fed did is that instead they put these trillions of dollars right into the hands of consumers and businesses that will ultimately spend this money and so it will circulate throughout the economy and increase the money supply and so there are some complaints or concern that, hey, it hasn't circulated yet and savings rates that pre-crisis were as high as 8.5 percent have jumped up to 33 percent now. So I have this kind of speculative theory that at some point as things open up, there are 33 percent savings rates that are sitting on the balance sheets of consumers, but then also similar occurrences in businesses. Joshua Bennett: We typically sell out of a position within 90 days of the position reaching a sustained market cap of $15 billion or more.

You can look at a name like EPAM as is it sustainably above $15 billion? If it is, then you're likely to see us move out of that position by the end of the next quarter.

TRANSCRIPT

Speaker Question (continued): Then when things open up and people feel they're able to invest and spend again, these trillions of dollars or at least hundreds of billions will immediately be circulated throughout the economy and it can be like jet fuel on a fire where we see–and we just did see 40 percent year- over-year growth in I think it was M2 in the money supply if I remember right, which has never happened in history.

in quite a strong way and stronger than most had expected.

Speaker Question: The whole first half of 2020 was surprising to all of us. It was full of twists and turns and I was curious what's the one long lasting trend that you think evolved during this. Also, what is an industry or sector that got a boost as well as something that is irreparably hurt and never coming back? Josh Bennett: The first thing that comes to mind in terms of a more permanent change is the United States has proven that work from home, remote work can be incredibly effective. Our team had to very quickly adapt to working from home and we've done it swimmingly, I would say. We have the technology in our home offices that enable us to truly work from home as effectively as ever before. That's been a positive surprise. I think many of our companies had talked about the potential to someday move to a model where a portion of their employees would work from home, but there's always this concern that if somebody's at home, maybe they are building that backyard patio I mentioned instead of sitting at their desk and making the phone calls that they need to make or doing whatever their job requires of them. I think we've entered a period when, due largely to technology and some of the shifts that I talked about, work from home is more possible than it has ever been before and our country has proven that that can be effective, not in all industries, but if you're a knowledge worker and you're in a knowledge worker industry, you're likely to see a permanent change take effect. Now, the benefit of that is that companies can now hire much more broadly than they used to. They don't have to hire somebody who's willing to commute into Boston or into New York or into Chicago every day. They can hire the best talent wherever they are and be confident that that person can do work effectively from anywhere So that's a truly permanent change and I think it's a welcomed change. I think more than ever we have proven that we can do this and I think you're going to get better workers..

Is this one of the things that's driving the market? Is there still a lot of potential ahead both for the economy really taking off as well as potential inflation concerns?

Josh Bennett: We have talked quite a bit about that, that without a doubt we had an incredibly difficult market correction as people had no idea what would be in store and you did see massive action taken on a fiscal policy– from a fiscal policy standpoint, from a monetary policy standpoint. I agree with you that I think that a lot of this has yet to flow through. I do want to be clear that we are already seeing some of the early signs of this kind of money flowing through and one area we're seeing it is on the consumer side. They are spending without a doubt. As they're able to get back out and move around, they're spending on things like restaurants. So you're seeing some incredible comps at some of the restaurant chains that had been closed and are now opening up. You're seeing strong retail comps at concepts like Ollie's, which were open through the downturn and you're seeing people invest in their home and there are countless names that have benefited. I mentioned the SiteOne landscape supply, which is really pushing into new territory in terms of its ability to supply landscape suppliers with the materials that you and I need to build a backyard patio or to make sure that our grass is taken care of. I agree that it could be jet fuel on the fire. There could be more growth to come and we're certainly hopeful that we'll see that. I would say that we are beginning to see that already, that it's no longer speculation because in the second quarter, we saw the consumer coming back

TRANSCRIPT

Josh Bennett (continued): The companies that adopt that mentality and adopt that flexible thinking I think are going to be the companies that succeed.

We've always said that growth investing is primarily about getting the fundamentals right, but that said, valuation does matter and we do apply rigorous valuation discipline to understand every one of our companies, both on the upside and downside and expected value based on weighted outcomes. Why Weatherbie? We've been investing in smaller cap equities for 25 years and much of our approach remains unchanged, our investment philosophy and process, the specific growth stock criteria we use. We consistently and methodically refined and improved our process and our team over time. That gives me confidence that when you look at our team-managed approach, it adds real value and we continue to believe in our ability to identify innovative, smaller cap companies.

And what has permanently been hampered? I have real questions about the impact of a move like this on office real estate, particularly in large cities. So if you think about it, it's hard to imagine that as contracts come up and leases expire, that all these kinds of office REITs and companies along those lines are going to be as well positioned. Either they're going to keep their footprints and have to charge less for it or you may see a lot of companies that are shrinking their city footprint. Those are the first things that come to mind. I think you're likely to see other changes over time, but on the positive side, I think work from home has completely changed the job of a knowledge worker and I think on the flip side of that, I think we're likely to see continued challenges for companies that depend on office real estate. Ted Doyle: Here’s a question that came over e-mail. Could you briefly address why the small cap asset class is an attractive place to be now and if you do believe in small cap growth as an attractive asset class, why would you think that Weatherbie Specialized Growth is a good place to be? Joshua Bennett: All we do at Weatherbie Capital is smaller cap growth. We do believe that smaller cap companies are truly the most innovative companies that you can invest in today and they tend to control their own destiny instead of riding the markets. We think that they're well positioned against their competition because oftentimes that competition is smaller and less resourced mom and pop companies. We fully understand that some people are going to be concerned that small cap valuations are a bit elevated today, but we only own 50 companies and we own 50 of what we believe are the best companies in our smaller cap universe.. We believe that these companies are true quality growth stocks positioned to do well in this environment and we believe that those valuations are justified by their strong outlook.

These companies tend to be less covered and they've proven to be resilient regardless of the macroeconomic backdrop.

Ted Doyle: On behalf of all my colleagues at Alger/Weatherbie, I want to thank you for not only your time today, but your continued belief in our organization.

DISCLOSURE

The S&P 500 is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.

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 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. Before investing, carefully consider the Fund’s investment objective, risks, charges, and expenses. For a prospectus and summary prospectus containing this and other information or for the Fund’s most recent month-end performance data, visit www.alger.com, call (800) 992-3863 or consult your financial advisor. Read the prospectus and summary prospectus carefully before investing. Distributor: Fred Alger & Company, LLC. Member NYSE Euronext, SIPC. NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE.

The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of August 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. Holdings and sector allocations are subject to change. Risk Disclosures: 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 market, political, and economic developments. A significant portion of assets will be invested in technology and healthcare companies, which 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 and medium capitalizations involve the risk that such issuers may have limited product lines or financial resources, lack management depth, or have limited liquidity. Assets may be focused in a small number of holdings, making them susceptible to risks associated with a single economic, political or regulatory event than a more diversified portfolio. Foreign securities and Emerging Markets involve special risks including currency fluctuations, inefficient trading, political and economic instability, and increased volatility. Please visit www.alger.com for additional risk disclosures. 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. The following positions represented the noted percentages of assets as of 5/31/20: Alger Weatherbie Specialized Growth Strategy: Firstservice Corp., 5.54%; Nevro Corp. 5.34%; EPAM Systems, Inc. 4.74%; Casella Waste Systems, Inc. 4.06%; Ollie's Bargain Outlet Holdings, Inc. 3.70%; SiteOne Landscape Supply, Inc. 3.14%; Hubspot, Inc. 2.08%; XPO Logistics, Inc. 1.85%; and Cerence, Inc. 0.82%.

For standard performance and important disclosures, please refer to the factsheet.

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.

Fred Alger & Company, LLC 360 Park Avenue South, New York, NY 10010 / www.alger.com