Trade Rationale

We exited Accenture as advances in AI, once a meaningful tailwind to our thesis, have become what we expect will be a durable and accelerating headwind. We initiated the position in January 2015 at approximately $89 per share, with a thesis centered on the long-term shift toward outsourced services and consulting demand driven by the complexity of migrating from on-premises infrastructure to the cloud.

On December 30, we exited our position in Diageo (DEO) and initiated a 1.25% position in NetEase (NTES). This reallocation reflects evolving global consumer dynamics, including the expansion of the global middle class alongside aging populations in developed markets. Younger consumers are increasingly moderating alcohol consumption and reallocating discretionary spending toward digital entertainment, particularly online gaming.

Two portfolio companies, DuPont de Nemours and Honeywell, recently completed previously announced spins of certain businesses into separate publicly traded companies. Alongside these actions, we increased our weight in each of the new companies while also adjusting the weight of DuPont de Nemours to reflect its lower post-spin weight. We did not alter our weight in HON, as the size of the spin relative to the remaining company was not significant enough to materially impact the position weight.

Solstice Advanced Materials is the result of Honeywell’s spin-off of its Advanced Materials segment. The company holds advantaged positions across several end-markets with strong exposure to multiple long-term secular tailwinds.

We added Waste Management at a model weight of 2.50% due to the company’s entrenched market position, inflation-resilient business model, and upcoming acceleration in free cash flow following a multi-year investment cycle.

 We rebalanced Novo Nordisk back up to its model weight of 3.75%. We believe that following the substantial downdraft, its valuation is extremely compelling, even when revising down growth expectations....

 Our decision to exit Amgen was paired with our rebalance of NVO, in part to offset the increase in Health Care sector exposure. With multiple major products facing increased competition and/or facing LOE (loss of exclusivity) over the next few years—such as Prolia, Enbrel, and Otezla—we don’t believe that AMGN’s pipeline is robust enough to offset these revenue declines....

We believe that on a broad market level, this recovery is overly optimistic and not currently justified by existing information.

In alignment with this view, we have reduced our positions in a number of companies within the strategy that are more exposed to potential macroeconomic headwinds. To be clear, we remain confident in the underlying long-term investment theses of these holdings, however we believe that it is prudent to reduce the portfolio’s risk in the current environment.

We have recently made the following changes to better align it with an uncertain and volatile macroeconomic environment. Following Liberation Day, major indices plunged and bordered on bear market territory. However, since then, we have seen almost a complete recovery in stock prices. The full impact of most of the retaliatory tariffs were suspended, however there have not been any definitive agreements with major trade partners signed, and the volatility of policy rhetoric from the administration has persisted. We believe that on a broad market level, this recovery is overly optimistic and not currently justified by existing information.

On March 11th, we rebalanced our positions in Novo Nordisk (NVO) and Gilead Sciences (GILD) to their model weights. At the strategy level, these adjustments maintain our current level of Health Care sector exposure while capitalizing on a notable divergence in recent share price performance between the two holdings.