Marsh

Marsh & McLennan was sold due to recent market dynamics in both its insurance brokerage and consulting businesses. Global commercial insurance rates continued to decline into the third quarter and the softening rate environment will be a near-term headwind on brokerage revenues and cash flows. In addition, we believe MMC’s consulting related businesses will slow because the uncertain macro environment is weighing on corporate discretionary spending. We expect both factors will ultimately result in slower near-term dividend growth.

We initiated new positions in global insurance broker Marsh & McLennan, which is a high-quality compounder, overly discounted due to transitory softness in industry pricing. This presents an attractive opportunity as we believe the current valuation does not reflect its long-term potential. By investing in Marsh & McLennan, we are positioning ourselves to benefit from its strong fundamentals and recovery in pricing, which we expect to materialize over time.

Marsh & McLennan has been a strong contributor to the Fund’s returns over time since its inception. While the company faces pockets of cyclical weakness, it is well-managed and performing solidly, which supports its continued holding in the Fund.

Marsh & McLennan declined during the quarter based on a modest revenue miss, diminishing insurance pricing and a dip in adjusted operating margin. This decline comes after an extended period of strong performance and despite beating earning per share expectations.

Marsh & McLennan is mentioned as part of the financial sector, which outperformed during the quarter. The letter notes that US commercial insurance rates rose an average of 3% during the first quarter, and while insured losses can pressure insurance companies in the short term, they should benefit from higher premium growth in the future. The letter also highlights that the insurance component of the S&P 500 currently trades at a significant discount compared to the overall index.

Marsh & McLennan was one of the leading contributors to the portfolio's outperformance in Q1. The strategy's underweight to the 'Magnificent Seven' benefitted the strategy during the quarter, as these companies experienced an average decline of 16%. Marsh & McLennan's performance reflects its strong positioning within the market, contributing positively amidst broader market volatility.

Marsh & McLennan has been a strong performer in our portfolio, delivering positive returns during the quarter. We view the company as an important component of our diversified approach, providing 'insurance' through its lower-beta profile that tends to hold up well in downturns. This aligns with our strategy of leveraging volatility to enhance portfolio stability and growth potential.