Pioneer Fundamental Growth Fund - Performance Analysis and Market Commentary | March 31, 2020
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QUARTERLY
Pioneer Fundamental Growth Fund
UPDATE
Performance Analysis and Market Commentary | March 31, 2020
Average Annual Total Returns for Class Y Shares
Quarter-
Month YTD 1-Year 3-Year 5-Year 10-Year
to-Date
Pioneer Fundamental Growth Fund
(FUNYX) -11.39% -16.30% -16.30% -1.84% 8.39% 8.29% 11.71%
Russell 1000 Growth Index
(Benchmark) -9.84% -14.10% -14.10% 0.91% 11.32% 10.36% 12.97%
Gross expense ratio: 0.77%
Call 1-800-225-6292 or visit amundipioneer.com/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. NAV results represent the percent change in net asset value per share. All results are historical and assume
the reinvestment of dividends and capital gains. 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Otherwise, fee waivers can be rescinded at any time.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.
Market Review
― The long US equity bull market came to an abrupt end in the first quarter of 2020 as efforts to contain the spread of COVID-19 in
the US caused much of the domestic economy to grind to a halt. Social distancing guidelines resulted in the cancellation of all
professional sporting events and large public gatherings. In the most affected states, governors required non-essential
businesses to close. The economic carnage was deep and immediate. The travel and restaurant industries were hardest hit as
people stayed at home and worked remotely. Initial unemployment claims rose more than ten-fold in the week ended March 21,
to 3.3 million, which was more than three times the previous high in October of 1982. Despite the containment efforts, the
number of COVID-19 cases in the US grew exponentially. According to the Centers for Disease Control (CDC), there were 30
confirmed COVID-19 cases in the US on March 1. By the end of the month, the number was 186,101.
― Fixed-income and equity markets reacted swiftly and violently to the spread of the virus and the need for aggressive containment
measures. Interest rates plunged to historic lows. The Standard & Poor’s 500 Index (the S&P 500) plummeted 34% from its peak
on February 19 to the trough on March 23. Markets recovered partially in late March as Congress approved $2 trillion in fiscal
stimulus, designed to provide financial assistance to individuals and businesses in need. The Federal Reserve (Fed), meanwhile,
cut interest rates to zero and expanded its balance sheet in an effort to add liquidity across many markets.
― The decline in equities was notable not just for its speed and depth. As the market fell from its peak, it became clear that many
typically defensive areas of the market were not acting as defensively as would normally have been the case in a recessionary
scenario. For the first quarter, within the equity universe of the Fund’s benchmark, the Russell 1000 Growth Index (the Russell
Index), performance for consumer staples stocks (-14.5%) declined as much as the benchmark’s performance (-14.1%). Since
consumer staples companies sell essential products that consumers need even during recessions, historically, share prices of
consumer products stocks have usually fallen by considerably less than the overall equity markets during corrections. That was
not the case in the first quarter of 2020. Health care (-12%), which, like consumer staples, has tended to hold up well during
See Glossary of Frequently Used Terms, for terms in bold.Performance Analysis and Market Commentary | March 31, 2020
market corrections, only modestly outperformed the Russell Index in the first quarter. A deferral in elective surgeries to free up
hospital capacity for COVID-19 patients was the main reason behind the sector’s slump.
― Somewhat counterintuitively, information technology (-11%) was a defensive sector this quarter. Typically, sectors that lead the
way up during bull markets also have tended suffer the worst declines during bear markets. Information technology has been the
best-performing sector within US equities in recent years, and yet has managed to outperform other sectors on the way down.
There are a few reasons for this. First, a remote workforce requires greater use of technology. Second, the balance sheets of the
leading information technology companies have remained exceptionally strong, which means they are not as vulnerable to
financial ruin if the economy remains in recession for an extended period. And finally, lower interest rates tend to support higher
equity valuations as the discount rate on future earnings falls. That said, it is expected that the decline in gross domestic product
(GDP) in the next quarter or two will easily be among the largest in history. Information technology companies are not immune to
economic activity, which is why, historically, the sector has not acted defensively.
― What did not surprise this quarter was the performance of cyclical sectors, which were the hardest hit by the downturn. As oil
demand plummeted, and OPEC (Organization of Petroleum Exporting Countries) added supply in an attempt to get Russia to
limit its oil production and curtail US shale production, the energy sector (-53%) nosedived. Meanwhile, stock prices in the
industrials and materials sectors declined by 26% and 20%, respectively.
Performance Attribution vs. Benchmark – Class Y shares
― Pioneer Fundamental Growth Fund’s Class Y shares returned -16.3% in the first quarter, while the Fund’s benchmark, the
Russell Index, returned -14.1%.
― Much of the Fund’s benchmark-relative underperformance in the first quarter occurred before the correction began in late
February as investors favored high-growth, high price-to-earnings (P/E) stocks in an environment featuring low corporate
earnings growth and low interest rates. Due to our valuation discipline in managing the portfolio, the Fund was approximately 9%
underweight relative to the Russell Index in stocks with P/E multiples of 34X and higher. The consistent underweight to the
highest-P/E stocks means the Fund can lag the benchmark when high-P/E stocks perform well relative to stocks that we believe
are reasonably valued.
― From the peak of the market in late February to the trough in late March, the Fund’s performance was in line with the benchmark.
In most previous market corrections, the Fund has outperformed from peak to trough, due to our requirement that all portfolio
holdings meet our strict quality criteria related to profitability, sustainable competitive advantages, secular growth opportunities,
and valuation. Our process also seeks to limit risk at the security, sector, and portfolio levels. The result is a portfolio featuring
stocks of companies with lower debt levels and other qualities that we believe may help facilitate solid longer-term earnings and
profitability. Historically, investors have typically sought out such stocks during uncertain times, given their relative stability and
predictability. That was not uniformly the case in the first quarter, given the unique nature of the current market decline. As
discussed earlier, some stocks that have historically been defensive – meaning that they have declined much less than the
overall equity markets – actually underperformed the Russell Index during the three-month period.
Relative Detractors
― Individual portfolio positions that detracted from the Fund’s benchmark-relative returns in the first quarter included Raytheon and
Broadcom, which were two of the biggest drags on relative performance. In addition, to illustrate the points made above, other
detractors from benchmark-relative results included three stocks that have traditionally been defensive in nature but
underperformed over the three-month period: Ecolab, O’Reilly Auto Parts, and Ross Stores.
― Raytheon, a major defense contractor, struggled during the first quarter. Concerns regarding the company’s pending merger with
United Technologies, a major producer of aircraft engines and other products for the aerospace industry, was one factor driving
the stock’s underperformance. We exited the Fund’s position before quarter-end, as it was not clear to us how Raytheon’s
shareholders would benefit from this merger, particularly given the weak outlook for aircraft demand in light of the travel
restrictions caused by the ongoing pandemic. We had based our previous investment case for Raytheon on the company’s
historically strong returns on capital, its competitive advantages in technology and distribution, and its exposure to defense
spending, which has tended to be more resilient during periods of economic weakness. Post-merger, the expectation is that the
focus for nearly half of the combined company’s revenues will be on the aerospace industry, which has typically been far more
cyclical.
― Another position that detracted from the Fund’s benchmark-relative returns this quarter was Broadcom, which we also sold from
the portfolio prior to quarter-end. Recent acquisitions have significantly changed the company’s business mix, while adding
significant leverage to its balance sheet. Broadcom’s strategy of acquiring businesses, then subsequently reducing costs by
dramatically cutting personnel and other expenses, has provided near-term boost to profits, but it was unclear to us how the
See Glossary of Frequently Used Terms, for terms in bold.Performance Analysis and Market Commentary | March 31, 2020
company could sustain competitiveness and growth over the long term. In addition, the company’s heavy reliance on debt had
increased financial risk.
― Ecolab provides cleaning and sanitizing solutions as well as water treatment equipment. The business has historically generated
growth over time and has tended to show resiliency during recessions. The stock outperformed the Russell Index by 15% during
the Great Recession of 2008/2009, and by 9% during the 2018 market correction. In the first-quarter 2020 correction, however,
Ecolab’s shares underperformed by nearly 9%, primarily due to market concerns about declining sales driven by the widespread
shutdowns of the restaurant and hotel industries. We view the decline in the stock as unwarranted, as we believe the potential
benefits from an increased focus on sanitization in the wake of the COVID-19 pandemic has Ecolab well positioned going
forward.
― O’Reilly, a leading auto parts retailer, has generated high returns on capital and has had a competitive advantage based on parts
availability that has been difficult for competitors to replicate. Consumers buy fewer new cars during recessions, which often
means they spend more money on repairing older cars, making O’Reilly’s business model somewhat recession-resistant. That
has translated into good relative stock performance during the past two major market corrections. However, O’Reilly’s stock
underperformed the Russell Index by 2% in the first quarter as miles driven in the US has plummeted, while consumers are
avoiding any unnecessary contact with stores and repair shops. Once non-essential businesses reopen, miles driven are likely to
increase, and so will the need for repairs.
― A third “defensive” portfolio holding that unexpectedly detracted from the Fund’s benchmark-relative returns in the first quarter
was Ross Stores, an off-price apparel retailer. The stock had outperformed the market handily during the Great Recession
almost 12 years ago, because while customers were spending less on apparel, off-price retail represented a higher percentage
of their spending. Ross Stores’ story this quarter was similar to O’Reilly’s, as customers in the current environment are not
shopping in stores, and the vast majority of Ross Stores have closed. As a result, the stock has come under near-term pressure,
but we have not altered our long-term investment case that Ross may be a prime beneficiary of the shift away from full-price
apparel department stores to off-price stores. We believe the shift is likely to accelerate once people go back to work, as they will
be more budget-conscious than they were preceding the recession. Moreover, we think Ross may have an opportunity to
purchase excess apparel inventory from manufacturers and full-price retailers at greatly discounted prices.
Relative Contributors
― As mentioned earlier, the first-quarter correction was unique in that some typically defensive stocks underperformed, while some
less-defensive stocks fared better than expected and actually behaved more like defensive stocks. This was especially the case
in the information technology sector. One example in that sector was the Fund’s position in Adobe, which outperformed this
quarter after underperforming during both the 2018 market correction and the Great Recession. Adobe is a leader in digital
content creation software that has derived most of its revenue from subscriptions. With many consumers still able to use their
Adobe software while working from home, the expectation is that Adobe may see less impact on its business than companies in
many other industries.
― Some historically defensive stocks did in fact behave defensively in the first quarter, including the Fund’s position in Progressive,
a leading property-and-casualty insurer, which was the top positive contributor to benchmark-relative results. Consumers need
insurance for their automobiles and homes even during a recession. The drastic reduction in miles driven by motorists in the
current environment has resulted in significantly fewer auto insurance claims, which in turn could lead to higher earnings for
Progressive this year.
― Another positive contributor to the Fund’s relative performance in the first quarter was Amazon.com, which has also
outperformed during the correction as online shopping by consumers increased, as did cloud computing needs in a remote-
working environment. Amazon had also outperformed in the Great Recession, but not in the 2018 correction, when high-
valuation stocks generally underperformed.
― Finally, video game publisher Electronic Arts outperformed the Russell Index during the market correction and benefited the
Fund’s benchmark-relative results this quarter, as people spent more time at home, thus providing a tailwind for digital
downloads and in-game transactions. Traditionally a discretionary purchase, shares of gaming stocks have typically
underperformed during recessions as consumers reduce spending.
See Glossary of Frequently Used Terms, for terms in bold.Performance Analysis and Market Commentary | March 31, 2020
Top Relative Detractors and Contributors
% of % of
Relative Contributors Relative Detractors
Portfolio Portfolio
― Progressive 3.5% ― Raytheon N/A*
― Eli Lilly 2.3% ― Stanley Black & Decker 2.2%
― Adobe 3.3% ― Broadcom N/A*
― Electronic Arts 2.8% ― Emerson Electric N/A*
― Amazon.com 7.2% ― Booking Holdings 1.7%
Securities listed represent holdings of the portfolio, descending in order from greatest to least, in terms of contribution to or detraction from portfolio
performance relative to the benchmark. See last page for more information about performance attribution.
* Stock was in the portfolio during the quarter, but sold prior to quarter-end.
Top 10 Holdings
% of % of
Portfolio Portfolio
1 Microsoft 7.4% 6 PepsiCo 4.1%
2 Amazon.com 7.2% 7 Progressive 3.5%
3 Alphabet 6.5% 8 Adobe 3.3%
4 Apple 4.6% 9 Intercontinental Exchange 3.1%
5 MasterCard 4.5% 10 Thermo Fisher Scientific 3.1%
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.
New Additions & Deletions
― During the first quarter, the market turmoil provided opportunities for us to purchase a number of stocks that had been on our
watch list, some for a number of years. We added six new holdings to the portfolio this quarter, and exited four positions. In
January, we added Motorola Solutions and Fidelity National Information Services. More recently, we added Roche Holdings,
Illinois Tool Works, Salesforce.com, and Rockwell Automation. Meanwhile, we closed Fund positions in Tractor Supply,
Raytheon, Broadcom, and Emerson Electric.
― Motorola Solutions provides end-to-end public safety solutions for governments and first responders. The company has
generated strong returns on growth capital and trades at an attractive valuation relative to its information technology peers. We
believe the stable business model, with a demonstrated increase in recurring revenue within software, could lead to positive
growth for Motorola over time.
See Glossary of Frequently Used Terms, for terms in bold.Performance Analysis and Market Commentary | March 31, 2020
― Fidelity National Information Services (FNIS) is a premier global payment services provider. The company provides transaction-
processing and electronic banking services, and has benefited from the continued growth in e-commerce. FNIS has a wide moat
around its business, driven by high switching costs and technological advantages. The stock has also traded at a valuation we
believe is attractive, and has generated strong returns on growth capital.
― Roche Holdings is one of the world’s largest pharmaceutical and diagnostic companies. Roche’s new-drug pipeline appears
promising, and the company has been an innovator in the field of new diagnostic technologies. Roche has also been producing
COVID-19 diagnostic kits for use in their existing systems and is currently testing an existing drug for severe COVID-19
infections. Roche has generated consistently high returns on capital and has a wide competitive moat driven by its strong
distribution, diverse and innovative products, and deep financial resources, given its strong balance sheet. The company has
generated stable earnings, and the stock has been trading at an attractive valuation.
― Illinois Tool Works is a diversified manufacturer of fasteners, components, and specialty equipment, including industrial fluids,
welding products, and measurement systems. The company has a disciplined management team that has delivered consistent
results and high returns on capital. The recent volatility in the markets provided an opportunity for us to add shares of this high-
quality company to the portfolio at an attractive valuation.
― Rockwell Automation, an industrial company, is a market leader in discrete and process automation. Though cyclical, the
company has generated high returns on capital that we believe are sustainable, given its competitive advantages in technological
innovation, its extensive distribution network, and large installed base. We believe Rockwell may benefit from the secular trend of
factory automation, and the stock recently has been trading at an attractive valuation given the recent declines in the market.
― Salesforce.com is a leading provider of customer-relationship management software. The company has been growing its market
share in enterprise software by broadening its product offerings and expanding its distribution. Recurring customer subscriptions
have generated the majority of the company’s revenues, and Salesforce.com’s software is integral to its customers’ sales
operations, while customer loyalty has been high. The company has generated steady and consistent returns on growth capital
while maintaining its strong competitive advantages. The recent market volatility provided an opportunity to initiate a position in
the stock at an attractive valuation.
― As discussed earlier, we exited the Fund’s positions in Raytheon and Broadcom, primarily due to issues involving merger-and-
acquisition activities that we believe altered our investment case for both stocks.
― We sold the Fund’s shares of retail farm store chain Tractor Supply in February, due to concerns about the company’s
competitive position and management changes. Tractor Supply’s sales growth has been slowing, while operating profit margins
have declined, at least partly because of increased competitive pressure. In addition, a new CEO joined the company in January,
and he has no previous CEO experience.
― Lastly, we sold Emerson Electric, a manufacturer of automation solutions as well climate technologies for commercial and
residential use. One of Emerson’s major end-markets for automation solutions is the oil and gas industry. In our view, the outlook
for capital spending in the oil and gas industry is poor due to weak oil prices, and we do not expect a significant recovery in
spending in the medium term.
Market Outlook and Positioning
― We believe the economic damage from the ongoing pandemic will be severe, though mitigated in part by the aggressive fiscal
and monetary stimulus announced so far. The extent of the damage depends of how long the containment measures remain in
place. We believe an improvement in equity prices and the beginning of a new bull market for stocks may occur prior to an
economic recovery. Whether the market lows of March 23 represent the trough for this cycle – or whether the trough occurs in
the future – likely depends on the degree to which the current mitigation efforts are successful in bringing down the number of
new COVID-19 cases to much lower levels.
― There are many possible scenarios currently in play, ranging from the optimistic view that containment will be imminently
successful and a V-shaped recovery will ensue, to more pessimistic views that a global depression will result. We are of the
opinion that a lopsided “V” is most likely to occur at some point, but that the slope of the recovery will not be as steep as the
decline, and could possibly include some setbacks should further waves of COVID-19 infections occur. The markets will almost
certainly remain volatile as a result, and precisely timing the market low remains a futile task. Meanwhile, equity valuations have
become increasingly attractive, in our view, and those improved valuations have provided opportunities for investors with a long-
term investment horizon.
― We strongly believe that the best approach to equity investing is to seek to acquire shares of companies that are highly
profitable, and that have strong balance sheets and sustainable business models. Such companies, in our view, must be capable
of surviving a prolonged and deep recession, but then still have the financial firepower to invest and thrive during the subsequent
See Glossary of Frequently Used Terms, for terms in bold.Performance Analysis and Market Commentary | March 31, 2020
recovery, while weaker competitors struggle. Despite the difficult first quarter, the Fund has a proven long-term record of
delivering solid risk-adjusted returns in good times and bad. We believe the portfolio’s positioning may potentially mitigate risk
going forward, while providing the Fund with the potential to participate in the upside when US equities recover.
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 S&P 500 Index
measures the performance of the broad US stock market. Indices are unmanaged and their returns assume reinvestment of dividends and, unlike
mutual fund returns, do not reflect any fees or expenses associated with a mutual fund. It is not possible to invest directly in an index.
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).
Dividend yield – refers to a stock's annual dividend payments to shareholders, expressed as a percentage of the stock's current price.
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.
The views expressed are those of Amundi Pioneer and are current through 3/31/20. These views are subject to change at any time based on market or
other conditions, and Amundi Pioneer 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
portfolio.
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 Fund invests in a limited number of securities
and, as a result, the Fund’s performance may be more volatile than the performance of other funds holding more securities. At times, the Fund's
investments may represent industries or industry sectors that are interrelated or have common risks, making it more susceptible to any economic,
political, or regulatory developments or other risks affecting those industries and sectors.
These risks may increase share price volatility.
Before investing, consider the product’s investment objectives, risks, charges and expenses. Contact your advisor or
Amundi Pioneer Asset Management 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 advisers 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 Pioneer does not provide investment advice or investment recommendation.
Securities offered through Amundi Pioneer Distributor, Inc.
Underwriter of Pioneer mutual funds, Member SIPC
60 State Street Boston, Massachusetts 02109
amundipioneer.com/us
2020 Amundi Pioneer Asset Management
31620-04-0420
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