William Blair Large Cap Growth Fund Fund Manager Commentary
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First Quarter 2021 William Blair Large Cap Growth Fund Fund Manager Commentary Market Overview Top 10 Holdings 1 as of 3/31/21 Following a volatile yet robust year in 2020, dominated by the Company % of Fund COVID-19 pandemic, U.S. equity indices generally advanced further in the first quarter of 2021 as the U.S. economy Microsoft Corp. 10.9 continued to demonstrate improvement. Economic data in the Amazon.com, Inc. 8.8 quarter trended positively as manufacturing activity exceeded expectations and unemployment rates continued to decline, Alphabet Inc. 7.7 primarily driven by robust job growth in March. The Federal Mastercard Inc. 4.9 Open Market Committee (FOMC) reiterated its commitment to maintain a low target federal funds rate for an extended period PayPal Holdings, Inc. 4.5 of time as the economy continues to recover. President Biden Unitedhealth Group Inc. 4.0 took office with a Democrat-controlled Congress, paving the way for higher levels of fiscal stimulus. Accordingly, a $1.9 Accenture PLC 3.4 trillion COVID relief bill was passed late in the quarter, pushing Texas Instruments Inc. 3.3 massive stimulus to U.S. households and businesses. U.S. Treasury yields moved higher in anticipation of economic NIKE, Inc. 3.2 growth and inflation, benefiting certain segments of the market Lam Research Corp. 3.2 more than others, most notably traditional value sectors such as Financials, Energy, and Materials. Conversely, high- Total Top 10 53.9 growth/high-multiple stocks broadly came under some pressure, as higher yields compressed valuation multiples. outperformance. As it relates to Apple, our decision not to own While volatility moderated from heightened 2020 levels, retail the stock, due to the maturity of the high-end smart phone, investor activity caused transitory disruptions early in the tablet and PC markets, created a significant headwind to relative quarter. Improvements in corporate earnings growth buoyed performance in 2020 given the revaluation of the company’s equities as corporations reported fourth quarter profits that services business. This began to reverse during the first quarter. broadly exceeded Wall Street’s expectations. Within the market, Lam Research, a global supplier of wafer fabrication equipment companies that experienced considerable COVID disruption in and services, benefitted from robust demand for semiconductor 2020 saw a strengthening of demand (e.g. travel and equipment and reported growth in its installed base and entertainment related), while “COVID beneficiaries” saw a services business. Other top contributors during the quarter flattening of demand for their products, further indicating included Alphabet (Communication Services), Live Nation progress to a more normal business environment. Entertainment (Communication Services) and Marriott (Consumer Discretionary). Alphabet Inc., an internet search Despite a recent uptick in new cases of COVID-19, there has engine company, reported accelerating growth across its core been a significant decline in the number of new cases in the U.S. segments, most notably in YouTube. Conversely, our top relative to late 2020. COVID-19 related hospitalizations and individual detractors were Copart (Industrials), Advanced Micro deaths continued to trend downwards throughout the quarter Devices (Information Technology), Guidewire (Information as many states and businesses reopened. The rate of Technology), Nike (Consumer Staples) and Equifax vaccinations accelerated faster than anticipated across the (Industrials). Copart, the leading online auction platform for country, driving growing confidence in eventual herd immunity salvage vehicles, reported unit volumes below expectations due and a return to more normal lifestyles and economic activity. to COVID-related headwinds. Despite reporting strong results, shares of fabless semiconductor company Advanced Micro Fund Performance Devices declined along with many of its peers as valuations of longer-duration growth companies were pressured by rising The William Blair Large Cap Growth Fund (Class N shares) interest rates. outperformed its benchmark during the first quarter, primarily driven by stock-specific dynamics. Notably, the fund benefited from continuing to own a number of stocks that continued to 1Listed holdings are presented to illustrate examples of the securities that the recover in the first quarter after the companies experienced Fund has bought and do not represent all of the Fund's holdings or future COVID-related business headwinds last year. Stock selection in investments. Information about the Fund's holdings should not be considered Information Technology was strong, including our positions in investment advice. There is no guarantee that the Fund will continue to hold Lam Research and Texas Instruments, as well as not owning any one particular security or stay invested in any one particular sector. Holdings are subject to change at any time and are as of the date shown above. Apple, which was the largest individual contributor to Top ten holdings are shown as a percentage of total net assets. +1 800 742 7272 | willliamblairfunds.com 1 William Blair Large Cap Growth Fund First Quarter 2021 Fund Manager Commentary Outlook in government spending also creates concern around higher levels of inflation, placing further scrutiny on the Fed’s Looking forward, there is a continued sense of optimism around commitment to maintain an accommodative stance on U.S. economic potential as the economy recovers. Gross monetary policy. domestic product (GDP), job growth and earnings growth are likely to accelerate and consumer confidence and spending are Our investment philosophy leads us to companies with durable expected to increase as states reopen, vaccines continue to businesses, whose stock prices are not reflective of our long- rollout and fiscal stimulus is distributed. An elevated U.S. term fundamental expectations, that we believe can outperform savings rate, in aggregate, could further augment consumer over a market cycle. As we continue to navigate through the spending and economic growth. However, some uncertainty COVID-19 disruption and subsequent economic recovery, we remains surrounding vaccine efficacy against new COVID-19 remain focused on bottom-up, fundamental analysis and variants. Additionally, President Biden’s proposed legislation identifying companies with superior management, high barriers focused on increased infrastructure spending is likely to be to entry and differentiated products or services that are funded in part by corporate tax hikes, which could dampen underappreciated by the market. corporate profitability. While bolstering the economy, the surge INVESTMENT PERFORMANCE (AS OF 3/31/21) QTR YTD 1 Y 3 Y 5 Y 10 Y Class I (SI: 12/27/99) 2.16% 2.16% 59.77% 23.77% 22.20% 17.18% Class N (SI: 12/27/99) 2.10% 2.10% 59.41% 23.47% 21.92% 16.90% Russell 1000® Growth Index3 0.94% 0.94% 62.74% 22.80% 21.05% 16.63% Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Returns shown assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate with market and economic conditions and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call +1 800 742 7272, or visit our Web site at www.williamblairfunds.com. Class N shares are available to the general public without a sales load. Class I shares are available only to investors who meet certain eligibility requirements. EXPENSE RATIOS Gross Net Expense Expense Class I 0.78% 0.65% Class N 1.09% 0.90% Expenses shown are as of the most recent prospectus. The Fund’s Adviser has contractually agreed to waive fees and/or reimburse expenses to limit fund operating expenses until 4/30/21. +1 800 742 7272 | willliamblairfunds.com 2 William Blair Large Cap Growth Fund First Quarter 2021 Fund Manager Commentary IMPORTANT DISCLOSURES The Fund’s returns will vary, and you could lose money by investing in the Fund. The Fund invests most of its assets in equity securities of large cap domestic growth companies where the primary risk is that the value of the equity securities it holds might decrease in response to the activities of those companies or market and economic conditions. Individual securities may not perform as expected or a fund used by the Adviser may fail to produce its intended result. Different investment styles tend to shift in and out of favor depending on market conditions and investor sentiment, and at times when the investment style used by the Adviser for the Fund is out of favor, the Fund may underperform other equity funds that use different investment styles. The Fund invests most of its assets in equity securities of domestic growth companies, including common stocks and other forms of equity investments (e.g., convertible securities). Convertible securities are at risk of being called before intended, which may have an adverse effect on investment objectives. The Fund is not intended to be a complete investment program. The Fund is designed for long- term investors. The Russell 1000 Growth Index consists of large-capitalization companies with above average price-to-book ratios and forecasted growth rates. The Index is unmanaged, does not incur fees or expenses, and cannot be invested in directly. This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions. Please carefully consider the Fund’s investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Fund’s prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272. Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss. 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