In his 2020 Outlook, Natixis Investment Managers Chief Market Strategist David Lafferty reviews key themes that dominated 2019 and highlights expectations for the upcoming year. The base case is that the slow-but-steady 10+ year expansion remains on track for now. Risks appear to be balanced as the market maintains a holding pattern, waiting for developments on global trade, Brexit and the 2020 US elections. Investors should seek to construct their portfolios in a well-diversified manner, knowing that the big gains experienced in 2019 across stocks and bonds may temper performance for the upcoming year.

In an environment where fixed income’s expected returns could be closely correlated with carry or yield, the focus should be on higher quality names. Corporate bonds remain in demand, but there are cracks forming in weaker credits like CCC-rated debt. From a stock perspective, there is a bias toward European equities compared to the United States, based on valuations and the potential for multiple expansion. Based on those assessments, the following funds may offer value within a well-diversified portfolio.

Loomis Sayles Core Plus Bond Fund (NERYX)
  • A core fixed income fund that is benchmark aware and focused on relative returns, but seeks competitive returns by tactically allocating to “plus” sectors.
  • The ballast securities held by the Fund have the potential to earn their carry in 2020, as the Outlook calls for yields to remain range-bound.
  • According to the Outlook, while inflation is expected to be under control, the potential for rising inflation remains a key risk. Diversification from the “plus” sectors, combined with the Fund’s notable allocation to US Treasury Inflation Protected Securities, can help protect investors from a sudden uptick in inflation.
  • The portfolio managers have reduced high yield credit exposure to strategy lows from highs in 2015, and re-allocated that capital into higher quality investments.
Loomis Sayles Investment Grade Bond Fund (LSIIX)
  • An investment grade focused fund that uses a multisector approach, allowing managers to seek out the best values in the global bond markets.
  • Significant allocation to corporate bonds, deemed in the Outlook as having “additional room to run in aggregate,” with a heavy skew towards investment grade credit quality where the risk/return characteristics appear more attractive.
  • Strategy has an increased liquidity profile to provide dry powder for buying opportunities if spreads widen due to market or event-driven volatility.
  • As noted in the Outlook, credit research is paramount, and the portfolio managers have adjusted the Fund’s credit exposure to become more defensive, moving up in quality and capital structure as the economy moves through the late expansion phase of the credit cycle.
Oakmark International Fund (OAKIX)
  • The Oakmark International Fund is a concentrated portfolio based on individual security selection to determine allocations.
  • The portfolio managers purchase high quality companies that are led by strong management and trade at a significant discount to the team’s estimate of intrinsic value.
  • Current portfolio allocations show an overweight to European domiciled stocks with global revenue streams and strong earnings, which the team believes trade at a discount largely due to macro factors.
WCM Focused International Growth Fund (WCMIX)
  • An active international growth fund where the team’s investment focus is based on the fact that successful companies are often reinforced by intentional cultures focused on simple, achievable goals.
  • The managers look for companies that are industry leaders with sustainable, growing competitive advantages, corporate culture emphasizing strong, high quality and experienced management, low or no debt, and attractive relative valuations.
  • While the outlook for 2020 certainly includes a number of potential risks that could bubble up, WCM believes that investing in an intentional way and focusing on companies that have not only an edge but the ability to withstand short-term volatility will allow them to be successful in the coming year.
  • Currently the portfolio is expressing conviction through an overweight to European equities that have diversified revenue sources from a business driver standpoint as well as country of domicile.
Gateway Fund (GTEYX)
  • A low volatility equity fund that has used index options to consistently reduce the risk of equity investing for more than 40 years. The fund combines a diversified stock portfolio that tracks the S&P 500® with an actively managed portfolio of written index call options and purchased index put options, designed to maintain a consistent level of market exposure and relative risk profile.
  • Option-writing strategies like Gateway’s typically aim to deliver better risk-adjusted returns over the long term than equity-only strategies through exposure to the volatility risk premium (VRP). VRP expresses itself in index option markets through the pricing of implied volatility relative to the realized volatility the index experiences. Cboe® Volatility Index (VIX) levels consistently price above the realized volatility of the S&P 500®. A continuation of richer-than-normal option pricing combined with low realized volatility creates the potential for option-writing strategies to deliver attractive risk-adjusted returns with lower-than-normal volatility. In the current environment of low bond yields with the potential to rise over time, there are advantages to seeking attractive risk-adjusted returns through option-writing strategies.
  • If low, range-bound or increasing yields keep bond returns low, diversified investors may benefit from an allocation to the Gateway Fund as it generally does not have interest rate sensitivity and can complement bonds’ historical profile of low volatility and attractive risk-adjusted returns.
  • For investors who anticipate that recent market tranquility is temporary, Gateway’s approach, which seeks to consistently deliver lower risk and less downside than the equity market, may be an appealing way to reduce equity market exposure and risk.
Risks

Gateway Fund

Equity securities are volatile and can decline significantly in response to broad market and economic conditions. Options may be used for hedging purposes, but also entail risks related to liquidity, market conditions and credit that may increase volatility. The value of the fund's positions in options may fluctuate in response to changes in the value of the underlying asset. Selling call options may limit returns in a rising market.

Loomis Sayles Investment Grade Bond Fund

Fixed income securities may carry one or more of the following risks: credit, interest rate (as interest rates rise bond prices usually fall), inflation and liquidity. Foreign and emerging market securities may be subject to greater political, economic, environmental, credit, currency and information risks. Foreign securities may be subject to higher volatility than US securities due to varying degrees of regulation and limited liquidity. These risks are magnified in emerging markets. Below investment grade fixed income securities may be subject to greater risks (including the risk of default) than other fixed income securities. Mortgage-related and asset-backed securities are subject to the risks of the mortgages and assets underlying the securities. Other related risks include prepayment risk, which is the risk that the securities may be prepaid, potentially resulting in the reinvestment of the prepaid amounts into securities with lower yields.

Loomis Sayles Core Plus Bond Fund

Fixed income securities may carry one or more of the following risks: credit, interest rate (as interest rates rise bond prices usually fall), inflation and liquidity. Mortgage-related and asset-backed securities are subject to the risks of the mortgages and assets underlying the securities. Other related risks include prepayment risk, which is the risk that the securities may be prepaid, potentially resulting in the reinvestment of the prepaid amounts into securities with lower yields. Below investment grade fixed income securities may be subject to greater risks (including the risk of default) than other fixed income securities. Foreign and emerging market securities may be subject to greater political, economic, environmental, credit, currency and information risks. Foreign securities may be subject to higher volatility than US securities due to varying degrees of regulation and limited liquidity. These risks are magnified in emerging markets. Currency exchange rates between the US dollar and foreign currencies may cause the value of the fund’s investments to decline. Inflation protected securities move with the rate of inflation and carry the risk that in deflationary conditions (when inflation is negative) the value of the bond may decrease.

Oakmark International Fund

Equity securities are volatile and can decline significantly in response to broad market and economic conditions. Value investing carries the risk that a security can continue to be undervalued by the market for long periods of time. Foreign and emerging market securities may be subject to greater political, economic, environmental, credit, currency and information risks. Foreign securities may be subject to higher volatility than US securities, due to varying degrees of regulation and limited liquidity. These risks are magnified in emerging markets. Currency exchange rates between the US dollar and foreign currencies may cause the value of the fund’s investments to decline. Concentrated investments in a particular region, sector, or industry may be more vulnerable to adverse changes in that industry or the market as a whole.

WCM Focused International Growth Fund

Foreign and emerging market securities may be subject to greater political, economic, environmental, credit, currency, and information risks. Foreign securities may be subject to higher volatility than US securities, due to varying degrees of regulation and limited liquidity. These risks are magnified in emerging markets. Equity securities are volatile and can decline significantly in response to broad market and economic conditions. Currency exchange rates between the US dollar and foreign currencies may cause the value of the fund’s investments to decline. Growth stocks may be more sensitive to market conditions than other equities, as their prices strongly reflect future expectations. Concentrated investments in a particular region, sector, or industry may be more vulnerable to adverse changes in that industry or the market as a whole.

Beta: Measures the volatility of a security or a portfolio in comparison to the market as a whole.

Diversification does not guarantee a profit or protect against a loss.

Disclosure
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary. • This document may contain references to third party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis”) and does not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products. • The index information contained herein is derived from third parties and is provided on an “as is” basis. The user of this information assumes the entire risk of use of this information. Each of the third party entities involved in compiling, computing or creating index information disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to such information.

Natixis Distribution, L.P. (fund distributor, member FINRA/SIPC) and Loomis Sayles & Company, L.P. are affiliated.

Before investing, consider the Fund’s investment objectives, risks, charges, and expenses. Please visit im.natixis.com or call us at 800-862-4863 for a prospectus or a summary prospectus containing this and other information. Read it carefully.

Before investing, consider the fund’s investment objectives, risks, charges, and expenses. Call 1-800-OAKMARK to obtain a prospectus and, if available, a summary prospectus containing this and other information. Read it carefully.

Before investing, consider the fund’s investment objectives, risk, charges, and expenses. Visit www.wcminvestfunds.com, im.natixis.com or call 800-862-4863 for a prospectus or a summary prospectus containing this and other information. Read it carefully.

Natixis Distribution, L.P. is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by member companies of Natixis Investment Managers. • Natixis Distribution, L.P. is located at 888 Boylston Street, Suite 800, Boston, MA 02199-8197. • 800-862-4863 • im.natixis.com • Member FINRA | SIPC

2346635.2.1