Pioneer Core Fairness Fund Q2 2024 Efficiency And Market Commentary

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Month-to-Date

Quarter-to-Date

Year-to-Date

1-Year

3-Year

5-Year

10-Year

Pioneer Core Equity Fund (MUTF:PVFYX)

1.47%

-0.87%

7.40%

13.64%

4.93%

12.23%

10.56%

S&P 500 Index (Benchmark)

3.59%

4.28%

15.29%

24.56%

10.01%

15.05%

12.86%

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Total Return

2Q 2024

Year-to-Date

S&P 500® Index (SPX)

4.28%

15.29%

Russell 1000® Value Index (RLV)

-2.17%

6.62%

Russell 1000® Growth Index (RLG)

8.33%

20.70%

Source: Morningstar. Data as of June 30, 2024. Data is based on past performance, which is no guarantee of future results.

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Gross and Net expense ratio: 0.66%

Call 1-800-225-6292 or visit Amundi US for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Class Y shares are not subject to sales charges and are available for limited groups of investors, including institutional investors. Initial investments are subject to a $5 million investment minimum, which may be waived in some circumstances. All results are historical and assume the reinvestment of dividends and capital gains. Periods of less than one year are actual, not annualized. Other share classes are available for which performance and expenses will differ.

Performance results reflect any applicable expense waivers in effect during the periods shown. Without such waivers, fund performance would be lower. Waivers may not be in effect for all funds. Certain fee waivers are contractual through a specified period. Otherwise, fee waivers can be rescinded at any time. See the prospectus and financial statements for more information.

*As of June 30, 2024, the Portfolio did not own Apple, Nvidia, or Tesla. Amazon, Alphabet, Meta Platforms and Microsoft are holdings in the portfolio.

See glossary of frequently used terms for definitions. Diversification does not assure a profit or protect against loss.

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Investment Approach

Pioneer Core Equity focuses on high-quality, sustainable US large-cap companies trading at attractive valuations with the goal of maximizing risk-adjusted returns over a full market cycle.

The Portfolio represents and combines the best ideas from the Amundi US Equity Research team of experienced career analysts with a disciplined portfolio construction and risk management framework.

The portfolio managers seek to build a portfolio of companies with quality business models that can grow and/or sustain economic profitability beyond what the market is currently pricing into valuations.

Market Review

The S&P 500 Index (SPX) returned 4.28% in the second quarter on the back of continued enthusiasm for artificial intelligence and the Magnificent Seven. Six of the Magnificent Seven* stocks (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla) outperformed in the quarter, with only Meta Platforms (META) underperforming the S&P 500 Index. Nvidia (NVDA) alone contributed more than 30% of the SPX return.

The outperformance of the Magnificent Seven caused the SPX to outpace the returns of the average stock in the quarter. The S&P 500 Equal Weighted Index, which measures the performance of all stocks equally, returned -2.63%. Growth stocks continued to outperform value stocks, with the Russell 1000 Growth Index (RLG) returning 8.33%, compared to the -2.17% return of the Russell 1000 Value Index (RLV).

Year-to-date, the SPX returned 15.29%, with 31 record closing highs during the period. The strong performance of the SPX was driven by a combination of rising stock valuations as measured by price-to-earnings (P/E) multiples along with better than expected earnings (most notably, from Nvidia). The Russell 1000 Growth Index (RLG) outperformed the Russell 1000 Value Index (RLV), with returns of 20.70% and 6.62% respectively, largely due to sustained enthusiasm for artificial intelligence.

Performance Review

For the quarter, the Portfolio underperformed the 4.28% return of the S&P 500 Index. The main reason for the Portfolio’s underperformance was weaker security selection in the information technology, communication services and consumer discretionary sectors. In addition, sector allocation results detracted during the quarter, led by our decision to underweight information technology. In contrast, positive security selection in healthcare, energy and materials contributed to relative performance.

Among individual holdings, the largest relative detractor was our decision to avoid owning benchmark constituent Nvidia (which contributed over 30% of the S&P 500 Return for the period) for valuation reasons. Nvidia, which is a leading manufacturer of graphic processing units, remains at the forefront of AI and in the increasing demand for AI-ready hardware components and a continued increase in its data center revenue. While we believe Nvidia is a well-positioned company, we do not believe that its current valuation aligns with its future growth prospects.

Another relative detractor was our overweight position in Ulta Beauty (ULTA). The stock was weaker in the quarter after the company cited slowing consumer trends in the first quarter. We continue to view Ulta as a high-quality and attractively valued stock with the retail category, relative to its own history and peers; and although it is influenced by overall consumer spending trends, we view it as being more resilient, fundamentally, compared to others in the sector.

Conversely, our overweight position in Alphabet (GOOG,GOOGL) was the top individual contributor to performance during the quarter. The stock reported one of the strongest quarters for the company since early 2022, based on reported growth acceleration across the board, its first-ever dividend and a new $70B stock buyback.

In addition, our decision to own an out-of-benchmark position in Pure Storage (PSTG), which is a data storage provider, was another top individual relative contributor to performance during the quarter. Although the stock retreated a bit late in the quarter, Pure Storage was up double-digits mid-quarter on increased confidence of gaining traction with cloud titans. In our view, Pure Storage is the most innovative enterprise storage vendor with a financial model that could continue to scale nicely over the next few years, and is attractively valued given its growth opportunities.

Top Relative Detractors and Contributors – Second Quarter 2024

Relative Contributors

Average % of Portfolio

Relative Detractors

Average % of Portfolio

─

Alnylam Pharmaceuticals (ALNY)

0.6%

─

Nvidia

Apple

–

─

Pure Storage

1.7%

─

Alphabet

Intel (INTC)

5.5%

–

─

Walt Disney (DIS)

2.7%

─

Ulta Beauty

1.4%

─

Colgate-Palmolive (CL)

2.3%

─

Keysight Technologies (KEYS)

2.6%

Click to enlarge Securities listed above are holdings of the Portfolio, or benchmark components that were not held in the Portfolio, and the percentage of the Portfolio’s invested assets they represented as of quarter-end, shown in descending order from greatest to least, in terms of contribution to or detraction from the Portfolio’s performance relative to the benchmark. See Page 5 for more information about performance attribution.
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Top 10 Holdings (as of June 30, 2024)

% of Portfolio

1. Amazon (AMZN)

2. Alphabet (GOOGL)

6.3%

6.0%

6. Bank of New York Mellon (BK)

3.3%

7. Advanced Micro Devices (AMD)

3.1%

Microsoft (MSFT)

Cisco Systems (CSCO)

4.9%

3.5%

Charles Schwab (SCHW)

Microchip Technology (MCHP)

2.9%

5. International Business Machines (IBM)

3.5%

10. Truist Financial (TFC)

2.8%

Click to enlarge The portfolio is actively managed and current information is subject to change. The holdings listed should not be considered recommendations to buy or sell any security.
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Market Outlook and Positioning

There is a wide and increasing gap between the performance of the Cap Weighted Indicis and the average stock (Equally Weighted Indices). A large part of this may be due to the superior earnings growth of the Magnificent Seven over the past 12 months, and most particularly year-to-date. This may in part be driven by what appears to be a slowing economy, as the lagged impact of prior rate hikes takes effect despite the positive fiscal stimulus, while much of Magnificent Seven earnings growth has been driven by the AI theme and investments.

This earnings outperformance gap is expected to decline in the second half, and during 2025 as year-over-year growth rates for the Magnificent Seven decline, and the earnings of the broader market increase somewhat. We believe if current expectations for AI related earnings suffer any kind of setback, then Cap Weighted Indices may struggle.

Inflation has been moderating of late, after surprising to the upside earlier in the year. However, further progress may prove to be slower than currently anticipated, as the stickier elements remain quite firm. The Fed may continue its pause for longer than currently anticipated and disappoint the market should it not start to ease in September. Still, the Fed could react with potential cuts if the economy weakens faster than expected or if there is some kind of negative shock, for example an adverse geopolitical event.

While it would be unusual for the economy to fall into recession during an election year, we believe the risks of recession toward year-end or early 2025 remain elevated, no matter how the elections unfold later this year.

Overall, we remain cautious, as elevated valuations reflect an optimistic outcome with respect to the economy, interest rates, inflation, the federal debt, and the elections.

While the valuation gap between the top and average stocks is still growing, albeit at a slower pace, we believe the fundamentals behind the top stocks do not support such a large valuation differential, and the market could be set to normalize. Against this backdrop, we are focused on bottom-up, fundamental stock picking and we are opportunistically taking advantage of market volatility to pursue investments in what we believe are high-quality names whose valuations are meaningfully below where we think they should be, and that should offer a favorable risk/reward trade-off.

From a positioning perspective, the Portfolio’s largest overweight allocations at quarter end included materials, financials and energy. Conversely, the largest sector underweights included information technology, healthcare and industrials.

The Portfolio has a meaningful overweight in the financial services industry where we own a few non-spread financials that, in our view, are not subject to interest rate or credit risks, which is something that we have concerns about in an evolving economy. The Portfolio also owned a couple of spread financials that we believe do not have credit risk.

In health care, our biggest conviction was in the equipment and services segment, as we believe that hospital surgical procedures will remain strong, now that Covid is further behind us. In addition, we held stocks in the managed care sector, as we believe the market has overly discounted the viability of the industry.

In terms of notable buys and sells this quarter, within the staples universe, we trimmed holdings in the household and personal products group after a strong run. We added to a position we view as a top operator within consumer staples. The stock has a diverse product mix and remains a defensive stalwart that is, in our view, trading at a relative discount. In addition, within healthcare, we trimmed our exposure to the equipment and services group to add to a pharmaceutical stock, which, in our view, has strong potential resulting from anticipated readouts of three high probability product readouts over the next six months.

As we look at the Portfolio today, we are pleased with our current positioning. The Portfolio is meaningfully cheaper than its S&P 500 benchmark and its beta remains less than one. We continue to believe in our call on value over growth, which started in late 2020, and while this view did not render the results that we expected over the last 12 months, we have high conviction in the future prospects of this view and our positioning going forward. Separating the potential strong performers from the rest of the market will be key to portfolio performance over the next year and beyond. With so much uncertainty and variability across industries and companies, we believe it is essential today to actively manage portfolios as we find opportunities across markets and industries.

Performance Attribution: Additional Information

This performance attribution seeks to identify and quantify the drivers of portfolio performance relative to that of its benchmark. Using FactSet software, we create hypothetical subportfolios by segmenting the portfolio and its benchmark, then measure the value (weight) and returns of those hypothetical subportfolios. This lets us measure the performance impact of a decision to overweight or underweight a portfolio segment. It also lets us measure the performance impact of a specific security selection within each segment.

The Russell 1000 Growth Index measures the performance of the large-capitalization growth sector of the US equity market. The Russell 1000 Value Index measure the performance of the large-capitalization value sectors of the US equity market. The S&P 500 Index measures the performance of the broad US stock market. Indices are unmanaged and their returns assume reinvestment of dividends and do not reflect any fees or expenses. It is not possible to invest directly in an index.

The portfolio is actively managed and current information is subject to change. The sectors/holdings discussed should not be considered recommendations to buy or sell any security.

Glossary of Frequently Used Terms

Alpha- measures risk-adjusted performance, representing excess return relative to the return of the benchmark. A positive alpha suggests risk adjusted value added by the manager versus the index.

Beta – measures an investment’s sensitivity to market movements in relation to an index. A beta of 1 indicates that the security’s price has moved with the market. A beta of less than 1 means that the security has been less volatile than the market. A beta of greater than 1 indicates that the security’s price has been more volatile than the market.

Basis Point- A unit of measure used to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. In most cases, it refers to changes in interest rates and bond yields.

Correlation- The degree to which assets or asset class prices have moved in relation to one another. Correlation ranges from -1 (always moving in opposite directions) through 0 (absolutely independent) to 1 (always moving together).

Cost of Capital — Represents a calculation of the minimum return a company would need to justify a capital- budgeting project, such as building a new factory.

Credit Spreads (or Spreads) – The differences in yield between two fixed-income securities with similar maturities.

Dividend yield- refers to a stock’s annual dividend payments to shareholders, expressed as a percentage of the stock’s current price.

Earnings Per Share (‘EPS’) – The portion of a company’s profit allocated to each outstanding share of common stock.

Price to Earnings (P/E) Ratio- The price of a stock divided by its earnings per share.

Standard Deviation- A statistical measure of the historic volatility of a portfolio; a lower standard deviation indicates historically less volatility. Trailing P/E (price/earnings)- The sum of a company’s price-to-earnings, calculated by taking the current stock price and dividing it by the trailing earnings per share for the past 12 months.

Wide Moat – a type of sustainable competitive advantage possessed by a business that makes it difficult for rivals to wear down its market share. Upside/Downside Capture- The ratio of the upside and downside of an investment versus a benchmark. These ratios explain how an investment typically performs in relation to a benchmark index.

Yield Curve (Curve)- A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates.

A Word about Risk

The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment. Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions.

The views expressed are those of Amundi US and are current through June 30, 2024. These views are subject to change at any time based on market or other conditions, and Amundi US disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for strategies are based on many factors, may not be relied upon as an indication of trading intent on behalf of any strategy or portfolio.

Before investing, consider the product’s investment objectives, risks, charges and expenses. Contact your financial professional or Amundi Asset Management US for a prospectus or a summary prospectus containing this information. Read it carefully.

Individuals are encouraged to seek advice from their financial, legal, tax and other appropriate professionals before making any investment or financial decisions or purchasing any financial, securities or investment-related product or service, including any product or service described in these materials. Amundi US does not provide investment advice or investment recommendation.