• Episode and guest introduction (0:00 – 0:29)
• AI and the opportunity for businesses in Japan (0:30 – 1:37)
• Disclosures (1:38 – 2:28)

Alex Warren: Welcome to The Power of Patience. I’m Alex Warren, product specialist at Aristotle Capital. I’m speaking with Aylon Ben-Shlomo, Client Portfolio Manager at Aristotle Capital. We’re going to be changing up the format today to talk about Japan, and this episode is titled Opportunity Hidden in Plain Sight. Aylon, thank you so much for joining me today.

Aylon Ben-Shlomo: Thanks for having me, Alex, and thanks to all the listeners out there.

Alex Warren: All right, Aylon, I want to get your thoughts on AI because it’s been a hot topic lately. Can you talk about the opportunity for businesses in Japan?

Aylon Ben-Shlomo: The headlines around AI have been much more focused on the consumer-facing application, things like ChatGPT, and of course, we’ve seen the darlings of the Magnificent Seven as they’re being called, and how those stock prices have really taken off. While those are interesting, and they do seem to be unlocking certain efficiencies, some of the things that get us interested, particularly with respect to Japan, where there’s lots of industrial companies, manufacturing companies, goods producing companies, rather than software companies, is what the second and third order effects of enterprise-facing AI technologies can do.

There are companies that are using AI to unlock the next generation of manufacturing, unlock the next generation of factory automation, warehouse automation, and other types of areas that have lower margins today, but lots of opportunity for higher margins and higher cash flows in the future. Instead of looking to make bets on who will win the AI race, what we’re trying to do is understand how AI might benefit businesses in the future.

For additional disclosures please refer to www.aristotlecap.com. 

• Episode and guest introduction (0:00 – 0:22)
• What moves from the Tokyo Stock Exchange focusing on improving governance standards mean for value investors (0:23 – 2:07)
• How price-to-book valuation matters when assessing Japan’s corporate health (2:08 – 3:49)
• Disclosures (3:50 – 5:30)

Alex Warren: Welcome to the Power of Patience. I’m Alex Warren, product specialist at Aristotle Capital. I’m speaking with Aylon Ben-Shlomo Client Portfolio Manager at Aristotle Capital. We’re going to be changing up the format today to talk about Japan, and this episode is titled Opportunity Hidden in Plain Sight. Aylon, thank you so much for joining me today.

Aylon Ben-Shlomo: Thanks for having me, Alex. And thanks to all the listeners out there.

Alex Warren: Now, Aylon, I want to get your thoughts on some of the news the last year. What do the moves from the Tokyo Stock Exchange focusing on improving governance standards mean for value investors?

Aylon Ben-Shlomo: The recent announcements from the Tokyo Stock Exchange are using some rather harsh language. They’re focused on promoting measures that increase “the literacy of cost of capital and stock price”. They’re zeroing in on companies that persistently trade at a price-to-book ratio of below one, meaning they’re focused on companies that are less efficient with their capital and therefore not generating a substantial returns for their shareholders. And while these all sound like very good initiatives to us, perhaps they sound more like something that an activist investor would bring to the table rather than a stock exchange. The media is calling these initiatives, naming and shaming companies that are named by the Tokyo Stock Exchange as being on this list run the risk of being delisted. While they don’t face regulatory or legal challenges, fines and the like, they do run the risk of being delisted, which would obviously make cost of capital more expensive. And being delisted is not something any publicly traded company wants. There is clear accountability in the public spotlight that is being created by these initiatives. So what are companies doing? Cash balances are declining, dividends are increasing, buybacks are increasing. Corporate Japan has gotten the message, or at least they’re receiving the message and they’re acting on it by improving returns to shareholders, improving profitability, improving margins, and of course, there is still lots of room to go, but we’re encouraged by what we’re seeing and we’re eager to monitor the progress.

Alex Warren: Now, Aylon, you touched on this a moment ago, but I want to dive in a bit deeper. How much do you believe price-to-book valuation matters when assessing Japan’s corporate health?

Aylon Ben-Shlomo: While price-to-book is clearly something that the Tokyo Stock Exchange is focused on, and we would agree that it can be a helpful valuation metric, it is not our North Star hereat Aristotle Capital. What we’re focused on is cashflow return on economic value. It’s our way of getting at free cashflow yield or owner’s earnings. What can a business generate in terms of cash for its shareholders? That’s what ultimately drives intrinsic value in our eyes, and that’s what we’re most focused on. And so we put more emphasis on that than price-to-book. But we’re also mindful that price-to-book right now in Japan, at least in the Tokyo Stock Exchange’s eye, that’s going to be a metric that they’re going to hold companies accountable for. And so we’ll be aware of it, but it won’t drive our decisions. What will drive our decisions here at Aristotle is cashflow, cashflow, return on economic value, what we call C-F-R-O-E-V of C-F-R-O-E-V has guided us around the globe.

It’s enabled us to find companies that meet our QVC criteria, not just here in the U.S. but in Europe and in Japan. It’s exposure that we’ve had for a number of years, and it’s a quality that we see in Japan today and in the future. There are lots of cashflow generating businesses that are leaders in their industry across the globe that happen to be headquartered in Japan. Now with the tailwinds of the Tokyo Stock Exchange naming and shaming initiatives, perhaps that will give these companies the extra push and will give investors around the world the extra spotlight that they need to see the opportunities that we’ve seen in Japan for many years.

The opinions expressed herein are those of Aristotle Atlantic Partners, LLC (Aristotle Atlantic) and are subject to change without notice. Past performance is not a guarantee or indicator of future results. This material is not financial advice or an offer to purchase or sell any product. You should not assume that any of the securities transactions, sectors or holdings discussed in this report were or will be profitable, or that recommendations Aristotle Atlantic makes in the future will be profitable or equal the performance of the listed in this report. The portfolio characteristics shown relate to the Aristotle Atlantic Focus Growth strategy. Not every client’s account will have these characteristics. Aristotle Atlantic reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings. The performance attribution presented is of a representative account from Aristotle Atlantic’s Focus Growth Composite. The representative account is a discretionary client account which was chosen to most closely reflect the investment style of the strategy. The criteria used for representative account selection is based on the account’s period of time under management and its similarity of holdings in relation to the strategy. Recommendations made in the last 12 months are available upon request. Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

All investments carry a certain degree of risk, including the possible loss of principal. Investments are also subject to political, market, currency and regulatory risks or economic developments. International investments involve special risks that may in particular cause a loss in principal, including currency fluctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs. These risks typically are greater in emerging markets. Securities of small‐ and medium‐sized companies tend to have a shorter history of operations, be more volatile and less liquid. Value stocks can perform differently from the market as a whole and other types of stocks.

The material is provided for informational and/or educational purposes only and is not intended to be and should not be construed as investment, legal or tax advice and/or a legal opinion. Investors should consult their financial and tax adviser before making investments. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Information and data presented has been developed internally and/or obtained from sources believed to be reliable. Aristotle Atlantic does not guarantee the accuracy, adequacy or completeness of such information.

Aristotle Atlantic Partners, LLC is an independent registered investment adviser under the Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Aristotle Atlantic, including our investment strategies, fees and objectives, can be found in our Form ADV Part 2, which is available upon request.  AAP-2310-34

Sources: CAPS Composite Hub, Russell Investments

Composite returns for all periods ended September 30, 2023 are preliminary pending final account reconciliation.

Past performance is not indicative of future results. Performance results for periods greater than one year have been annualized. Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

The Russell 1000® Growth Index measures the performance of the large cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. This index has been selected as the benchmark and is used for comparison purposes only. The Russell 1000® Value Index measures the performance of the large cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. The S&P 500® Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices. The Russell 2000® Index measures the performance of the small cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Dow Jones Industrial Average® is a price-weighted measure of 30 U.S. blue-chip companies. The Index covers all industries except transportation and utilities. The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite includes over 3,000 companies, more than most other stock market indices. The Bloomberg U.S. Aggregate Bond Index is an unmanaged index of domestic investment grade bonds, including corporate, government and mortgage-backed securities. The WTI Crude Oil Index is a major trading classification of sweet light crude oil that serves as a major benchmark price for oil consumed in the United States. The 3-Month U.S. Treasury Bill is a short-term debt obligation backed by the U.S. Treasury Department with a maturity of three months.  The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. While stock selection is not governed by quantitative rules, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. The volatility (beta) of the Composite may be greater or less than its respective benchmarks. It is not possible to invest directly in these indices.

The opinions expressed herein are those of Aristotle Atlantic Partners, LLC (Aristotle Atlantic) and are subject to change without notice. Past performance is not a guarantee or indicator of future results. This material is not financial advice or an offer to purchase or sell any product. You should not assume that any of the securities transactions, sectors or holdings discussed in this report were or will be profitable, or that recommendations Aristotle Atlantic makes in the future will be profitable or equal the performance of the securities listed in this report. The portfolio characteristics shown relate to the Aristotle Atlantic Large Cap Growth strategy. Not every client’s account will have these characteristics. Aristotle Atlantic reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings. The performance attribution presented is of a representative account from Aristotle Atlantic’s Large Cap Growth Composite. The representative account is a discretionary client account which was chosen to most closely reflect the investment style of the strategy. The criteria used for representative account selection is based on the account’s period of time under management and its similarity of holdings in relation to the strategy. Recommendations made in the last 12 months are available upon request. Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

All investments carry a certain degree of risk, including the possible loss of principal. Investments are also subject to political, market, currency and regulatory risks or economic developments. International investments involve special risks that may in particular cause a loss in principal, including currency fluctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs. These risks typically are greater in emerging markets. Securities of small‐ and medium‐sized companies tend to have a shorter history of operations, be more volatile and less liquid. Value stocks can perform differently from the market as a whole and other types of stocks.

The material is provided for informational and/or educational purposes only and is not intended to be and should not be construed as investment, legal or tax advice and/or a legal opinion. Investors should consult their financial and tax adviser before making investments. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Information and data presented has been developed internally and/or obtained from sources believed to be reliable. Aristotle Atlantic does not guarantee the accuracy, adequacy or completeness of such information.

Aristotle Atlantic Partners, LLC is an independent registered investment adviser under the Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Aristotle Atlantic, including our investment strategies, fees and objectives, can be found in our Form ADV Part 2, which is available upon request. AAP-2310-31

Sources: CAPS Composite Hub, Russell Investments

Composite returns for all periods ended September 30, 2023 are preliminary pending final account reconciliation.

Past performance is not indicative of future results. Performance results for periods greater than one year have been annualized. Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

The Russell 1000® Growth Index measures the performance of the large cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. This index has been selected as the benchmark and is used for comparison purposes only. The Russell 1000® Value Index measures the performance of the large cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. The S&P 500® Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices. The Dow Jones Industrial Average® is a price-weighted measure of 30 U.S. blue-chip companies. The Index covers all industries except transportation and utilities. The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite includes over 3,000 companies, more than most other stock market indices. The Bloomberg U.S. Aggregate Bond Index is an unmanaged index of domestic investment grade bonds, including corporate, government and mortgage-backed securities. The WTI Crude Oil Index is a major trading classification of sweet light crude oil that serves as a major benchmark price for oil consumed in the United States. The Brent Crude Oil Index is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. The 3-Month U.S. Treasury Bill is a short-term debt obligation backed by the U.S. Treasury Department with a maturity of three months.  The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. While stock selection is not governed by quantitative rules, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. The volatility (beta) of the Composite may be greater or less than its respective benchmarks. It is not possible to invest directly in these indices.

The opinions expressed herein are those of Aristotle Atlantic Partners, LLC (Aristotle Atlantic) and are subject to change without notice. Past performance is not a guarantee or indicator of future results. This material is not financial advice or an offer to purchase or sell any product. You should not assume that any of the securities transactions, sectors or holdings discussed in this report were or will be profitable, or that recommendations Aristotle Atlantic makes in the future will be profitable or equal the performance of the securities listed in this report. The portfolio characteristics shown relate to the Aristotle Atlantic Core Equity strategy. Not every client’s account will have these characteristics. Aristotle Atlantic reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings. The performance attribution presented is of a representative account from Aristotle Atlantic’s Core Equity Composite. The representative account is a discretionary client account which was chosen to most closely reflect the investment style of the strategy. The criteria used for representative account selection is based on the account’s period of time under management and its similarity of holdings in relation to the strategy. Recommendations made in the last 12 months are available upon request.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

All investments carry a certain degree of risk, including the possible loss of principal. Investments are also subject to political, market, currency and regulatory risks or economic developments. International investments involve special risks that may in particular cause a loss in principal, including currency fluctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs. These risks typically are greater in emerging markets. Securities of small‐ and medium‐sized companies tend to have a shorter history of operations, be more volatile and less liquid. Value stocks can perform differently from the market as a whole and other types of stocks.

The material is provided for informational and/or educational purposes only and is not intended to be and should not be construed as investment, legal or tax advice and/or a legal opinion. Investors should consult their financial and tax adviser before making investments. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Information and data presented has been developed internally and/or obtained from sources believed to be reliable. Aristotle Atlantic does not guarantee the accuracy, adequacy or completeness of such information.

Aristotle Atlantic Partners, LLC is an independent registered investment adviser under the Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Aristotle Atlantic, including our investment strategies, fees and objectives, can be found in our Form ADV Part 2, which is available upon request. AAP-2310-32

Sources: CAPS Composite Hub, Russell Investments

Composite returns for all periods ended September 30, 2023 are preliminary pending final account reconciliation.

The Aristotle Core Equity Composite has an inception date of August 1, 2013 at a predecessor firm. During this time, Mr. Fitzpatrick had primary responsibility for managing the strategy. Performance starting November 1, 2016 was achieved at Aristotle Atlantic.

Past performance is not indicative of future results. Performance results for periods greater than one year have been annualized. Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

The Russell 1000® Growth Index measures the performance of the large cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. This index has been selected as the benchmark and is used for comparison purposes only. The Russell 1000® Value Index measures the performance of the large cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. The S&P 500® Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices. The Dow Jones Industrial Average® is a price-weighted measure of 30 U.S. blue-chip companies. The Index covers all industries except transportation and utilities. The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite includes over 3,000 companies, more than most other stock market indices. The Bloomberg U.S. Aggregate Bond Index is an unmanaged index of domestic investment grade bonds, including corporate, government and mortgage-backed securities. The WTI Crude Oil Index is a major trading classification of sweet light crude oil that serves as a major benchmark price for oil consumed in the United States. The Brent Crude Oil Index is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. The 3-Month U.S. Treasury Bill is a short-term debt obligation backed by the U.S. Treasury Department with a maturity of three months.  The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. While stock selection is not governed by quantitative rules, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. The volatility (beta) of the Composite may be greater or less than its respective benchmarks. It is not possible to invest directly in these indices.

All investments carry a certain degree of risk, including the possible loss of principal. Investments are also subject to political, market, currency and regulatory risks or economic developments. There are risks specifically associated with fixed income investments such as interest rate risk and credit risk. Bond values fluctuate in price in response to market conditions. Typically, when interest rates rise, there is a corresponding decline in bond values. This risk may be more pronounced for bonds with longer-term maturities. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. High yield securities are generally rated lower than investment grade securities and may be subject to greater market fluctuations, increased price volatility, risk of issuer default, less liquidity, or loss of income and principal compared to investment grade securities.

The material is provided for informational and/or educational purposes only and is not intended to be and should not be construed as investment, legal or tax advice and/or a legal opinion. Investors should consult their financial and tax adviser before making investments. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Information and data presented has been developed internally and/or obtained from sources believed to be reliable. Aristotle Credit does not guarantee the accuracy, adequacy or completeness of such information.

The opinions expressed herein are those of Aristotle Credit Partners, LLC (Aristotle Credit) and are subject to change without notice. Past performance is not a guarantee or indicator of future results. This material is not financial advice or an offer to buy or sell any product. You should not assume that any of the securities transactions, sectors or holdings discussed in this report are or will be profitable, or that recommendations Aristotle Credit makes in the future will be profitable or equal the performance of the securities listed in this report. The portfolio characteristics shown relate to the Aristotle Credit High Yield Bond strategy and the Aristotle Credit Investment Grade Corporate Bond strategy. Not every client’s account will have these characteristics. Aristotle Credit reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings. For a full list of all recommendations made by Aristotle Credit during the last 12 months, please contact us at (949) 681-2100. This is not a recommendation to buy or sell a particular security.

Past performance is not indicative of future results. Performance results for periods greater than one year have been annualized. Composite returns are preliminary pending final account reconciliation.

Composite and benchmark returns reflect the reinvestment of income. Composite returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

Aristotle Credit Partners, LLC is an independent registered investment adviser under the Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Aristotle Credit, including our investment strategies, fees and objectives, can be found in our Form ADV Part 2, which is available upon request. ACP-2310-23

Sources: SS&C Advent; ICE BofA

*Composite returns are preliminary pending final account reconciliation.

**2014 is a partial-year period of nine months, representing data from April 1, 2014 to December 31, 2014.

***2009 is a partial-year period of ten months, representing data from March 1, 2009 to December 31, 2009.

Past performance is not indicative of future results. Composite returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses. The Aristotle High Yield Bond strategy has an inception date of April 1, 2014; however, the strategy initially began at Douglas Lopez’s predecessor firm. A supplemental performance track record from March 1, 2009 to December 31, 2013 (Mr. Lopez’s departure from the firm) is provided. The returns are based on a separate account from the strategy while it was being managed at Doug Lopez’s predecessor firm and performance results are based on custodian data. During this time, Mr. Lopez had primary responsibility for managing the account. Please refer to disclosures at the end of this document.

Sources: SS&C Advent, Bloomberg

*Composite returns are preliminary pending final account reconciliation.

**2014 is a partial-year period of eight months, representing data from May 1, 2014 to December 31, 2014.

***2009 is a partial-year period of four months, representing data from September 1, 2009 to December 31, 2009.

Past performance is not indicative of future results. Composite returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses. The primary benchmark was retroactively changed from Bloomberg U.S. Credit Bond Index to Bloomberg U.S. Corporate Bond Index effective March 31, 2017. The Aristotle Investment Grade Corporate Bond strategy has an inception date of May 1, 2014; however, the strategy initially began at Terence Reidt’s predecessor firm. A supplemental performance track record from September 1, 2009 to December 31, 2013 (Mr. Reidt’s departure from the firm) is provided. The returns are based on a separate account from the strategy while it was being managed at Terence Reidt’s predecessor firm and performance results are based on custodian data. During this time, Mr. Reidt had primary responsibility for managing the account. Please refer to disclosures at the end of this document.

The Bloomberg U.S. Aggregate Bond Index is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. The Index is frequently used as a stand-in for measuring the performance of the U.S. bond market. In addition to investment grade corporate debt, the Index tracks government debt, mortgage-backed securities (MBS) and asset-backed securities (ABS) to simulate the universe of investable bonds that meet certain criteria. In order to be included in the Index, bonds must be of investment grade or higher, have an outstanding par value of at least $100 million and have at least one year until maturity. The Bloomberg U.S. Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers that are all U.S. dollar denominated. The Bloomberg U.S. Corporate Bond Index is a component of the Bloomberg U.S. Credit Bond Index. The Bloomberg U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Bloomberg EM country definition, are excluded. The S&P 500 Index is the Standard & Poor’s Composite Index and is a widely recognized, unmanaged index of common stock prices. It is market cap weighted and includes 500 leading companies, capturing approximately 80% coverage of available market capitalization. The ICE Bank of America (ICE BofA) BB-B U.S. Cash Pay High Yield Constrained Index measures the performance of the U.S. dollar-denominated BB-rated and B-rated corporate debt issued in the U.S. domestic market, a fixed coupon schedule and a minimum amount outstanding of $100 million, issued publicly. Allocations to an individual issuer in the Index will not exceed 2%. The Credit Suisse Leveraged Loan Index is a market-weighted index designed to track the performance of the investable universe of the U.S. dollar-denominated leveraged loan market. Consumer Price Index is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The WTI Crude Oil Index is a major trading classification of sweet light crude oil that serves as a major benchmark price for oil consumed in the United States. The U.S. Dollar Index (DXY) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the United States’ most significant trading partners. The volatility (beta) of the Composites may be greater or less than the indices. It is not possible to invest directly in these indices. Composite and index returns reflect the reinvestment of income.

• Host introduction (0:00 – 0:19)
• Episode introduction (0:20 – 00:56)
• Introduction to the episode’s guest: Aristotle Atlantic’s Thomas Hynes (0:57 – 1:35)
• What makes Aristotle Atlantic’s investment philosophy unique (1:36 – 3:31)
• Identifying investible secular themes (3:32 – 5:01)
• Why Aristotle Atlantic believes Personalized Health is an investible secular theme (5:02 – 7:23)
• Potential investment opportunities in Personalized Health (7:24 – 8:45)
• Why Aristotle Atlantic believes Pet Spending is an investible secular theme (8:46 – 10:36)
• Potential investment opportunities in Pet Spending (10:37 – 11:48)
• The lifecycle of secular themes and retired secular themes (11:49 – 13:30)
• Conclusion (13:31 – 13:55)
• Disclosures (13:56 – 15:34)

Alex Warren: Welcome to the Power of Patience, Aristotle’s podcast where we share views on topics actively explored by our investment teams and across the organization. I’m Alex Warren, Product Specialist at Aristotle, and I’ll be your host today. Coming up on today’s episode, we’ll be speaking with Tom Hynes, Managing Director and Portfolio Manager at Aristotle Atlantic Partners. Tom serves as a Portfolio Manager on Aristotle Atlantic’s Core Equity, Large Cap Growth and Focus Growth strategies. If you enjoyed this podcast, please like and share it on LinkedIn to help spread the word.

Today on the show, we’ll discuss how Aristotle Atlantic defines and identifies secular themes, the role of secular themes in the team’s investment philosophy, examples of current themes the team invests in, and why he believes certain secular themes offer attractive investment opportunities.

Without further ado, let’s get started. Tom, thank you so much for speaking with me today. To lead off the discussion, can you introduce yourself and tell me a bit about your role at Aristotle Atlantic?

Thomas Hynes: Yes. Thanks, Alex. I’m delighted to be here. My name’s Tom Hynes and I’m a Co-Portfolio Manager and Senior Sector Analyst on the team. I cover the Healthcare and Consumer Staples sector, and I also handle a lot of direct client interactions. I’m part of a five-person team that founded Aristotle Atlantic in late 2016 after spending about a decade together at Deutsche Asset Management. We’re headquartered in Sarasota, Florida, and we focus on managing US large cap equity mandates.

Alex Warren: Wonderful. Thank you, Tom. Can you discuss Aristotle Atlantic’s investment philosophy, and what do you believe makes it unique?

Thomas Hynes: Sure, Alex. So we believe that successful investments can be categorized into three different categories. Those are secular themes, product cycles and cyclical trends. I think what makes it unique is that we source these trends and cycles from bottom-up research. Not only are we looking to find the themes and cycles, we’re also trying to find the companies that are poised to benefit from them. So, let me drill down on each of those categories a little bit.

Cyclical themes refer to sort of the traditional form of investing. That would be trying to determine where we are within the business cycle, and then positioning in names that are either pro-cyclical, when the economy’s expanding, or defensive, when we see a slowdown or we see some sort of macro conditions that are slowing the economy. For us, this tends to be the smallest part of our process.

The next category is product cycles, and here what we’re looking for is a company that’s in the midst of a new product introduction or an innovative product enhancement.

What we’re really looking for here is companies that have protectable intellectual property, we’re looking for first mover advantage and we’re looking for large and growing total addressable markets. Really, to sum up this thing, we’re looking for companies that are poised to take meaningful market share in a profitable way. For us, this tends to be about 15 to 25% of our investment allocation.

The third category is what we call secular themes. We define these as long-term shifts in spending, either by corporations, consumers, or government entities. We currently have identified 20 secular themes, and for us, this makes up about 60 to 80% of our investments. We’ve identified that 12 of those themes align with the United Nation’s sustainable development goals, so we refer to those 12 themes as sustainable secular themes.

Alex Warren: Gotcha, that makes sense. Now, Tom, how does the team identify secular themes, and what makes them investible?

Thomas Hynes: Sure. So again, when we talk about secular themes, we’re talking about defined shifts in spending either by consumers, governments or corporations. We’re looking for an expected multi-year time horizon. In our experience, a lot of the investment community tends to underestimate these themes in their infancy. What we believe makes our approach different from some of our peers is that we source these ideas from listening to the companies that we cover. Again, so I talked about sourcing these from the bottom up. We’re listening for a change in tone or a change in the way that a company is doing business.

Cloud computing, for example, when that was emerging as a secular theme, several companies in the technology space were establishing dedicated divisions to the growth in cloud computing. We knew that this spending was shifting towards this emerging modality. These trends tend to be multi-year and involve large and growing total addressable markets, just like I talked about with our product stories. So the list of secular themes is wide and ranging, but the one thing, Alex, that makes it unique is they all are underpinned by technological advancement, right?

So, I’m not trying to say that they’re all within the technology sector, but if you look at the list of the 20 secular themes that we have, you can see that technology influences many of them. Things like streaming and digital media, things like next-generation sequencing and personalized health, and practice management software and diagnostics within the pet care industry.

Alex Warren: Tom, can you discuss what personalized health is, and why do you believe it’s an investible secular theme?

Thomas Hynes: Sure. We first recognized personalized health, or as some might call it personalized medicine, as an investible theme back in 2019. However, it’s been around for quite a long time. Personalized health is the idea that we can use advanced technology to tailor customized solutions based on a patient’s specific disease characteristics. These customized solutions are called targeted therapies, and they seek to deliver better patient outcomes with fewer side effects, and also in a more cost-efficient manner.

What’s nice about targeted therapies is they also help the companies that are developing drugs, right? So if a company can identify patients that are most likely to benefit from a therapy based on the specifics of their drug, it increases the odds of success in that clinical trial, and it potentially can increase the speed to market for these innovative therapies. However, personalized medicine is not just limited to these therapeutics. We have personalized health, which involves devices and trackers, things that can create a lot of data to help consumers lead a more healthy life.

So, let’s drill down really quick, Alex, and we’ll do an example within the use of targeted therapies in oncology. We believe targeted therapies have the potential to transform the cancer treatment paradigm. In the traditional treatment of cancer, all patients were given the same therapy. It was typically something like chemotherapy, which can be somewhat crude, highly toxic medicine with unpleasant side effects and questionable efficacy. Cancer researchers realize each tumor gives off a series of biomarkers or mutational signatures that can make each patient’s tumor unique.

By identifying these proteins, biomarkers or mutations, scientists are working on better therapies that can address those idiosyncrasies at the patient level. Recently, we’ve seen a lot of FDA approvals around these targeted therapies, and advanced diagnostic techniques are used to determine the exact genetic profile of the tumor, and then, if available, they can match patients to these targeted therapies. Again, these drugs typically have a better efficacy profile, they have s cleaner side effect profile, and perhaps most importantly, they can save money for the entire system by providing those better outcomes, which is important, right? It can sort of democratize health, and proper healthcare can get to more people.

Alex Warren: That sounds promising for the future. Now, how would you invest in this theme?

Thomas Hynes: We think there are several current opportunities to invest around personalized health. The first would be in the advanced diagnostics that are needed to do the comprehensive genetic profiling of the tumor. So, traditionally, to learn more about a patient’s tumor, this was done with what’s called a tissue biopsy. Tissue biopsy is a surgical procedure where a surgeon goes in and slices off a small piece of the tumor, and then that small piece of tissue is analyzed. What we’re excited about is what’s called liquid biopsy. These are more simple tests. They’re done with easily attainable liquid samples – things like blood, saliva, or urine – and they can attain that same comprehensive genetic profile of a patient’s tumor.

Liquid biopsies are important and we think they’re a better modality. They’re less invasive, less expensive, and they can offer a faster time to result. The second opportunity is, again, within the biopharmaceutical industry that I talked about, where they can develop better clinical trials and increase their odds of successfully bringing that drug to market. And then lastly, the third opportunity we think about is in the wearables and device segment. One example of this that we are excited about is continuous glucose monitoring devices. These are used by diabetic patients to help them increase their treatment and have a better treatment paradigm overall.

Alex Warren: Gotcha. It sounds like there’s a lot of opportunities in personalized health. Now, let’s switch gears and talk about pet spending. Can you talk about this secular theme a bit more?

Thomas Hynes: Sure, yeah. We first recognized pet spending as a secular theme back in 2017. It shouldn’t come as a surprise to many, but over the past couple of decades, we’ve seen a broad global expansion in pet ownership. In fact, in 2022, it’s estimated that 70% of all US households owned a pet, and that’s up from 56% when the survey was first taken back in 1988. In addition to more pets and more pet ownership, pets are increasingly becoming thought of more as a member of the family, as there’s this growing bond between pet owners and their pets. You see this every day, or at least I do, right? More people are traveling with pets, they let the pets sleep in bed with them, they might take them to a restaurant. I just feel like we’re seeing them kind of all over the place.

Alex Warren: Absolutely.

Thomas Hynes: Another recent survey that was out of pet owners, Alex, came out and said that most people, or a majority of people would make sacrifices to their own daily living before they would deprive their pet of anything.

Alex Warren: Wow.

Thomas Hynes: Yeah. That’s kind of interesting, and I think in the COVID-19 pandemic, that only accelerated this thing. People were locked down, they were trapped inside their homes, so we saw another uptick in pet ownership coming out of COVID. Maybe just two quick stats before I wrap up. The one would be pet spending. Pet spending has increased to over $123 billion in 2021, and that’s up from roughly $70 billion in 2017.

Alex Warren: Wow.

Thomas Hynes: Yeah. That represents a compound annual growth rate (CAGR) of 15%, well outpacing that of typical GDP growth. And then lastly, just an interesting little quip is that the average dog owner spends about $1,500 a year annually on the dog, whereas cats come in a little cheaper at about $900 per year.

Alex Warren: People love their dogs, I get it. I’m a dog owner myself, so these numbers certainly track. Now, going one step further, how do you invest in this theme?

Thomas Hynes: Sure, yeah. We think there’s a couple of different ways. The first one would be investing in companies that are making or selling pet food, treats, accessories, or some of the things I just talked about. For example, we actually had a theme in the past around natural and organic food, and this theme initially was focused on humans, right? People were more interested in eating well, eating cleanly, that sort of thing. We identified a few opportunities in companies that were also making natural and organic food for pets. So pet owners, they’re growing more conscious of what their pets are eating as well.

The second one, and one we think is very interesting, is opportunities for companies focused on that pet diagnostic services and equipment market for the veterinary segment. Similar to you and I, if we go in for an annual physical, we might go have some blood work done. Well, that’s the increasing standard of care we’re seeing for pets as well. They’re doing diagnostics both for wellness visits, your annual visit for your dog, and also for sick visits. And it’s really taking a step up in that standard of care. And again, people are treating their pets more like a member of family, so they’re more interested in better outcomes, keeping them healthy.

Alex Warren: Absolutely. That makes sense. Now, Tom, this has been a great conversation and we have time for a couple of final questions. Have there been any secular themes in the portfolio that have run their course, and can you discuss how the team decided whether that theme was no longer investible?

Thomas Hynes: Sure. So, part of our job is to be constantly reviewing these themes and listening to these companies, again, for emerging themes or new themes. So we do, on a quarterly basis, we do a formal review where we sit down, we go through all 20 of the secular themes. We also open up to all of the team members for anyone to bring up a theme, right? So it doesn’t need to be specific to our coverage, but if we’re hearing about something, we’re reading about something, we can propose and then discuss that theme. So there’s a couple that have run their course. A quick one would be 5G, right? The move from 4G to 5G for cellular communications.

We had a theme around that spending. It’s largely played out, and we eventually took that one off. The other is around shale drilling. Shale drilling was a new, emerging technique used to extract more oil and gas from the ground. It actually led to increasing levels of supply, which brought the price of those items down. So secular shale drilling sort of ate itself, cannibalized a little bit. One more quick point before we wrap up, I would make is that some of the themes just morph over time. I mentioned that one we had around natural and organic foods, and eventually, we realized it wasn’t that people just wanted to eat more cleanly and eat better foods. They wanted to look better, they wanted to feel better.

And over time, over I’d say probably the course of two or three years, that evolved into a current theme that we have that we call healthy living and vanity. And again, that’s about people wanting to exercise more, feel better about themselves, live better and ultimately look better.

Alex Warren: That brings us to the end of this episode. Thank you so much, Tom, for joining us today. We hope you’ve enjoyed it and learned more about Aristotle. Thanks for listening to the Power of Patience. To learn more about Aristotle, please visit www.aristotlecap.com or follow the link in the show notes. If you enjoyed the show, please rate and review us on Spotify and Apple Podcasts. And on behalf of Aristotle, this is Alex Warren, and thank you for listening.

For additional disclosures please refer to www.aristotlecap.com. 

The opinions expressed herein are those of Aristotle Capital Management, LLC (Aristotle Capital) and are subject to change without notice. Past performance is not a guarantee or indicator of future results. This material is not financial advice or an offer to buy or sell any product. You should not assume that any of the securities transactions, sectors or holdings discussed in this report were or will be profitable, or that recommendations Aristotle Capital makes in the future will be profitable or equal the performance of the securities listed in this report. The portfolio characteristics shown relate to the Aristotle International Equity ADR strategy. Not every client’s account will have these characteristics. Aristotle Capital reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings. The performance attribution presented is of a representative account from Aristotle Capital’s International Equity ADR Composite. The representative account is a discretionary client account which was chosen to most closely reflect the investment style of the strategy. The criteria used for representative account selection is based on the account’s period of time under management and its similarity of holdings in relation to the strategy. Recommendations made in the last 12 months are available upon request.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

All investments carry a certain degree of risk, including the possible loss of principal. Investments are also subject to political, market, currency and regulatory risks or economic developments. International investments involve special risks that may in particular cause a loss in principal, including currency fluctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs. These risks typically are greater in emerging markets. Securities of small‐ and medium‐sized companies tend to have a shorter history of operations, be more volatile and less liquid. Value stocks can perform differently from the market as a whole and other types of stocks.

The material is provided for informational and/or educational purposes only and is not intended to be and should not be construed as investment, legal or tax advice and/or a legal opinion. Investors should consult their financial and tax adviser before making investments. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Information and data presented has been developed internally and/or obtained from sources believed to be reliable. Aristotle Capital does not guarantee the accuracy, adequacy or completeness of such information.

Aristotle Cpital Management, LLC is an independent registered investment adviser under the Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Aristotle Capital, including our investment strategies, fees and objectives, can be found in our Form ADV Part 2, which is available upon request. ACM-2401-149

Sources: CAPS CompositeHub^TM, MSCI

Composite returns for all periods ended December 31, 2023 are preliminary pending final account reconciliation.

Past performance is not indicative of future results. The information provided should not be considered financial advice or a recommendation to purchase or sell any particular security or product.  Performance results for periods greater than one year have been annualized.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada. The MSCI EAFE Index consists of the following 21 developed market country indexes: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The MSCI ACWI captures large and mid-cap representation across 23 developed market countries and 24 emerging markets countries. With approximately 3,000 constituents, the Index covers approximately 85% of the global investable equity opportunity set. The MSCI ACWI Growth Index captures large and mid-cap securities exhibiting overall growth style characteristics across 23 developed markets countries and 24 emerging markets countries. The MSCI ACWI Value Index captures large and mid-cap securities exhibiting overall value style characteristics across 23 developed markets countries and 24 emerging markets countries. The MSCI ACWI ex USA Index captures large and mid-cap representation across 22 of 23 developed markets countries (excluding the United States) and 24 emerging markets countries. With approximately 2,300 constituents, the Index covers approximately 85% of the global equity opportunity set outside the United States. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 24 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. The S&P 500® Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices. The Brent Crude Oil Index is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. The MSCI Japan Index is designed to measure the performance of the large and mid-cap segments of the Japanese market. With approximately 250 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in Japan. The Bloomberg Global Aggregate Bond Index is a flagship measure of global investment grade debt from 28 local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. The MSCI United Kingdom Index is designed to measure the performance of the large and mid-cap segments of the U.K. market. With nearly 100 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in the United Kingdom. The MSCI Europe Index captures large and mid-cap representation across 15 developed markets countries in Europe. With approximately 430 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization across the European developed markets equity universe. These indexes have been selected as the benchmarks and are used for comparison purposes only. The volatility (beta) of the Composite may be greater or less than the respective benchmarks. It is not possible to invest directly in these indexes.

The opinions expressed herein are those of Aristotle Capital Management, LLC (Aristotle Capital) and are subject to change without notice. Past performance is not a guarantee or indicator of future results. This material is not financial advice or an offer to buy or sell any product. You should not assume that any of the securities transactions, sectors or holdings discussed in this report were or will be profitable, or that recommendations Aristotle Capital makes in the future will be profitable or equal the performance of the securities listed in this report. The portfolio characteristics shown relate to the Aristotle International Equity ADR strategy. Not every client’s account will have these characteristics. Aristotle Capital reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings. The performance attribution presented is of a representative account from Aristotle Capital’s International Equity ADR Composite. The representative account is a discretionary client account which was chosen to most closely reflect the investment style of the strategy. The criteria used for representative account selection is based on the account’s period of time under management and its similarity of holdings in relation to the strategy. Recommendations made in the last 12 months are available upon request.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

All investments carry a certain degree of risk, including the possible loss of principal. Investments are also subject to political, market, currency and regulatory risks or economic developments. International investments involve special risks that may in particular cause a loss in principal, including currency fluctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs. These risks typically are greater in emerging markets. Securities of small‐ and medium‐sized companies tend to have a shorter history of operations, be more volatile and less liquid. Value stocks can perform differently from the market as a whole and other types of stocks.

The material is provided for informational and/or educational purposes only and is not intended to be and should not be construed as investment, legal or tax advice and/or a legal opinion. Investors should consult their financial and tax adviser before making investments. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Information and data presented has been developed internally and/or obtained from sources believed to be reliable. Aristotle Capital does not guarantee the accuracy, adequacy or completeness of such information.

Aristotle Capital Management, LLC is an independent registered investment adviser under the Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Aristotle Capital, including our investment strategies, fees and objectives, can be found in our Form ADV Part 2, which is available upon request. ACM-2310-114

Sources: CAPS CompositeHub^TM, MSCI

Composite returns for all periods ended September 30, 2023 are preliminary pending final account reconciliation.

Past performance is not indicative of future results. The information provided should not be considered financial advice or a recommendation to purchase or sell any particular security or product.  Performance results for periods greater than one year have been annualized.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada. The MSCI EAFE Index consists of the following 21 developed market country indexes: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The MSCI ACWI captures large and mid-cap representation across 23 developed market countries and 24 emerging markets countries. With approximately 3,000 constituents, the Index covers approximately 85% of the global investable equity opportunity set. The MSCI ACWI Growth Index captures large and mid-cap securities exhibiting overall growth style characteristics across 23 developed markets countries and 24 emerging markets countries. The MSCI ACWI Value Index captures large and mid-cap securities exhibiting overall value style characteristics across 23 developed markets countries and 24 emerging markets countries. The MSCI ACWI ex USA Index captures large and mid-cap representation across 22 of 23 developed markets countries (excluding the United States) and 24 emerging markets countries. With approximately 2,300 constituents, the Index covers approximately 85% of the global equity opportunity set outside the United States. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 24 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. The S&P 500® Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices. The Brent Crude Oil Index is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. The MSCI Japan Index is designed to measure the performance of the large and mid-cap segments of the Japanese market. With approximately 250 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in Japan. The Bloomberg Global Aggregate Bond Index is a flagship measure of global investment grade debt from 28 local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. The MSCI United Kingdom Index is designed to measure the performance of the large and mid-cap segments of the U.K. market. With nearly 100 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in the United Kingdom. The MSCI Europe Index captures large and mid-cap representation across 15 developed markets countries in Europe. With approximately 430 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization across the European developed markets equity universe. These indexes have been selected as the benchmarks and are used for comparison purposes only. The volatility (beta) of the Composite may be greater or less than the respective benchmarks. It is not possible to invest directly in these indexes.

The opinions expressed herein are those of Aristotle Capital Boston, LLC (Aristotle Boston) and are subject to change without notice.

Past performance is not indicative of future results. The information provided in this report should not be considered financial advice or a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings. The performance attribution presented is of a representative account from Aristotle Boston’s Small Cap Equity Composite. The representative account is a discretionary client account which was chosen to most closely reflect the investment style of the strategy. The criteria used for representative account selection is based on the account’s period of time under management and its similarity of holdings in relation to the strategy. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will be profitable, or that the investment recommendations or decisions Aristotle Boston makes in the future will be profitable or equal the performance of the securities discussed herein. Aristotle Boston reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Recommendations made in the last 12 months are available upon request.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses.

Effective January 1, 2022, the Aristotle Small Cap Equity Composite has been redefined to exclude accounts with meaningful industry-specific restrictions or substantial values-based screens hampering implementation of the small cap strategy.

Effective January 1, 2022, the Russell 2000 Value Index was removed as the secondary benchmark for the Aristotle Capital Boston Small Cap Equity strategy.

All investments carry a certain degree of risk, including the possible loss of principal. Investments are also subject to political, market, currency and regulatory risks or economic developments. International investments involve special risks that may in particular cause a loss in principal, including currency fluctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs.

These risks typically are greater in emerging markets. Securities of small‐ and medium‐sized companies tend to have a shorter history of operations, be more volatile and less liquid. Value stocks can perform differently from the market as a whole and other types of stocks. The material is provided for informational and/or educational purposes only and is not intended to be and should not be construed as investment, legal or tax advice and/or a legal opinion. Investors should consult their financial and tax adviser before making investments.

The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass.

The firm’s coverage of Signature Bank includes time at a predecessor firm.

Aristotle Capital Boston, LLC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Aristotle Boston, including our investment strategies, fees and objectives, can be found in our Form ADV Part 2, which is available upon request. ACB-2310-17

Sources: CAPS Composite Hub, Russell Investments

Composite returns for periods ended September 30, 2023 are preliminary pending final account reconciliation.

^*The Aristotle Small Cap Equity Composite has an inception date of November 1, 2006 at a predecessor firm. During this time, Jack McPherson and Dave Adams had primary responsibility for managing the strategy. Performance starting January 1, 2015 was achieved at Aristotle Boston.

^**For the period November 2006 through December 2006.

Past performance is not indicative of future results. Performance results for periods greater than one year have been annualized.

Effective January 1, 2022, the Aristotle Small Cap Equity Composite has been redefined to exclude accounts with meaningful industry-specific restrictions or substantial values-based screens hampering implementation of the small cap strategy.

Effective January 1, 2022, the Russell 2000 Value was removed as the secondary benchmark for the Aristotle Capital Boston Small Cap Equity strategy.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses. Please see important disclosures enclosed within this document.

The Russell 2000® Index measures the performance of the small cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 Growth® Index measures the performance of the small cap companies located in the United States that also exhibit a growth probability. The Russell 2000 Value® Index measures the performance of the small cap companies located in the United States that also exhibit a value probability. The Russell 1000® Index measures the performance of the large cap segment of the U.S. equity universe. The Russell 1000 Index is a subset of the Russell 3000® Index, representing approximately 90% of the total market capitalization of that index. It includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The volatility (beta) of the composite may be greater or less than the benchmarks. It is not possible to invest directly in these indices.