Performance Review

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Annualized Performance
as of 3/31/2018
Inception:--

Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than that shown here.

For Benchmark information click here

The views expressed in this investment report represent the opinions of PNC Capital Advisors, LLC and are not intended to predict or depict performance of any investment. All information contained herein is for informational purposes and should not be construed as investment advice. It does not constitute an offer, solicitation or recommendation to purchase any security. The information herein was obtained by various sources; we do not guarantee its accuracy or completeness. Fund performance quoted above is for class I shares. Past performance does not guarantee future results. These views are as of the date of this publication and are subject to change based on subsequent developments.

International investments are subject to special risks not ordinarily associated with domestic investments, including currency fluctuations, economic and political change and differing accounting standards that may adversely affect portfolio securities. These risks may be heightened in emerging markets. Investments in value companies can continue to be undervalued for long periods of time and be more volatile than the stock market in general. Investments in growth companies can be more sensitive to the company's earnings and more volatile than the stock market in general. The Fund may invest a portion of its assets in derivatives. Derivative instruments include options, futures and options on futures. A small investment in derivatives could have a potentially large impact on the Fund’s performance. The Fund may be unable to terminate or sell a derivatives position. Derivative counterparties may suffer financial difficulties and may not fulfill their contractual obligations.

PNC International Equity Fund (class I) returned 1.39% in the first quarter versus a return of -1.33% for the benchmark MSCI ACWI ex USA Index.

Growth Strategy

In terms of country attribution, the Fund outperformed both on a country allocation basis and a stock selection basis. Positive country allocation effects came from an overweight to Kenya, along with underweights to Australia and Canada. Negative country allocation effects came from an overweight to Germany, along with underweights to Taiwan and Japan. Positive selection effects came from stock selection in Japan, Canada, and France. Negative selection effects came from stock selection in the United Kingdom, Thailand, and Sweden.

In terms of sector attribution, the fund outperformed both on a sector allocation basis and a stock selection basis. Positive sector allocation effects came from an overweight to Technology, along with underweights to Consumer Staples and Energy. Negative sector allocation effects came from an overweight to Materials, along with underweights to Utilities and Financials. Positive selection effects came from stock selection in Financials, Health Care, and Technology. Negative selection effects came from stock selection in Consumer Staples, Materials, and Telecom.

In the broader market, International investors continue to witness broad-based, synchronized global growth. However, volatility is starting to increase and the rate of growth appears to be slowing, as global central banks begin withdrawing liquidity and decreasing their balance sheets. This is in large part a continuation from last quarter. U.S. tax policy changes will likely boost global growth temporarily, but increasing trade protectionism is a risk for the global economy and markets.

Both global manufacturing and non-manufacturing purchasing managers' indexes remain in expansionary territory and near multi-year highs, indicative of growth throughout the global economy. Emerging markets generally continued to outperform despite the increase in volatility, as commodity prices remained stable throughout the quarter.

Market expectations around inflation and interest rates are incorporating new data points. Prices of most major industrial metals continued to increase, while oil prices were down on rising rig counts and an oversupply in the U.S. Select agricultural prices spiked on supply fears due to droughts in major growing regions around the world. In the U.S., Jerome Powell's start as chairman of the Federal Reserve, combined with strong employment reports and higher-than-expected U.S. wage growth in January, reinforced expectations for higher domestic


inflation and more Fed interest-rate hikes than previously anticipated. The European Central Bank reduced its level of quantitative easing and the euro strengthened, while the Bank of Japan remains focused on jump-starting inflation.

China lifted its two-term presidential limit, which could effectively keep President Xi Jinping in power indefinitely. With little domestic opposition, his drive to increase China's global influence and establish economic and technology leadership will likely accelerate. Additionally, Yi Gang took over as governor of the People's Bank of China. He replaces Zhou Xiaochuan, who helped build China's modern financial system.

Value Strategy

Global markets were volatile during the first quarter of 2018. Markets rose in January on the back of tax reform, synchronized global growth and consumer spending. By February, U.S. stock indices experienced the largest decline since August 2011. Investors were concerned that rising inflation would force interest rates higher, and erode profitability for companies already trading at elevated valuations. Fiscal tightening was signaled by the European Central Bank and Bank of Japan, leading to similar company-level worries. In March, trade wars between the U.S. and China shifted sentiment, with tariffs exacted by both countries.

Positive momentum continues in nearly all global economies, both developed and emerging. Recent company meetings echoed this drive, pointing to good business demand, inventory restocking and new purchasing trends. Raw material/commodity prices are rising, and supply-demand metrics are proving favorable, especially in electronics and tech components. As a result, select Information Technology companies remain on the investment team;s radar, as do Financial, Consumer Discretionary and Industrials sector stocks. Generally speaking, the Fund's managers already have a healthy weighting in many of these named sectors or applicable sub-sectors; therefore, they may seek to replace current portfolio holdings with more attractively-valued companies at opportune periods. Regardless of sector, the majority of undervalued, but fundamentally strong, companies remain centralized in Asia (China, Japan, Korea, Taiwan) and the U.S.

The Fund benefits from a globally diverse analyst team, all of whom conduct on-the-ground research, meet with companies/competitors, visit manufacturing plants, and carefully analyze prospective companies using local and global accounting standards. The Fund's managers continue to believe in the merits of this bottom-up investment philosophy, and strive to improve the valuation and risk profile of the portfolio.


Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than that shown here. Select a Fund to view the most recent month-end performance information or go to each Fund's snapshot page to view most recent month-end performance as well as any waiver or expense reimbursement information.

The information contained in this piece should not be considered legal or tax advice; questions regarding your specific situation should be directed to your legal or tax advisor.

NOT FDIC INSURED | NO BANK OR FEDERAL GOVERNMENT GUARANTEE | MAY LOSE VALUE

You should consider the investment objectives, risks, charges, and expenses of the PNC Funds carefully before investing. A prospectus or summary prospectus with this and other information may be obtained at 800-622-FUND (3863) or pncfunds.com. Please read it carefully before investing.

PNC Capital Advisors, LLC, a subsidiary of The PNC Financial Services Group Inc., serves as investment adviser and co-administrator to PNC Funds and receives fees for its services. PNC Funds are distributed by PNC Funds Distributor, LLC, which is not affiliated with the adviser and is not a bank.

This site shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of shares of the PNC Funds in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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