Dear Fellow Shareholder,

We close this fiscal year with a deep sense of gratitude for the trust you have given us and are proud of the milestones that were crossed in 2023. With the completed reorganization of certain of the former series of Pacific Funds and Investment Managers trusts with the funds of Aristotle Funds Series Trust, we can now look to the future and focus on growing our mutual fund platform and working hard every day to deliver investment results for you, our valued shareholders.

Market volatility was a recurring theme for most of 2023 and leading into 2024. For the year ended March 31, 2024, the MSCI ACWI Index (net), a representation of equity markets around the world, posted a full-year return of 23.22%. Domestically, large-cap U.S. equity, as depicted by the S&P 500 Index, rose 29.88%, as large technology companies regained their lead in the first quarter of 2024 after showing more modest performance in the second half of 2023. The U.S. small-cap equity market rallied in 2023 and finished the fiscal year on a strong note with the Russell 2000 Index posting a trailing 12-month return of 19.71%.

Fixed income markets also finished in positive territory. Ending March 31, 2024, trailing one-year returns for the Bloomberg Global Aggregate Bond Index and Bloomberg U.S Aggregate Bond Index were 0.49% and 1.70%, respectively. On the credit side, the Bloomberg U.S. Credit Bond Index posted a 4.15% return for the year, while the Bloomberg U.S. Corporate Bond Index was slightly above that with a return of 4.43%. In general, below investment-grade outperformed investment-grade debt given the supportive economy and elevated inflation. Representing high yield bonds, the Bloomberg U.S. High Yield 2% Issuer Capped Bond Index returned 11.15%. The Credit Suisse Leveraged Loan Index was a top performer, ending the year up 12.40%. Elevated inflation has resulted in higher interest rates at the short end of the yield curve, providing a tailwind for floating rate instruments. The loan asset class continues to perform exceptionally well in this prolonged higher rate environment.

In comparison to late 2022, when markets were bracing for a recession, the end of 2023 and start of 2024 seem to indicate a more optimistic tone. A resilient U.S. economy coupled with a strong employment backdrop have provided enough support through a minor banking crisis and geopolitical conflicts in Europe and the Middle East. The result has been elevated inflation, corresponding central bank policies, strong equity returns and more attractive fixed income yields. Add to this the economic recovery in Europe and Asia. Investors’ rate-cut expectations now tend to be more aligned with the Federal Reserve’s forecasts for a continued “higher for longer” environment.

You may reach out to the Aristotle Funds team via email at funds@aristotlecap.com, via phone at (844) 274-7885 to speak with an Investor Services Representative, or by visiting our website at www.aristotlefunds.com. Our website provides additional information on the funds through fund-specific market commentaries and fact sheets and lets you hear from our portfolio management teams through insight pieces, charts library and podcasts. As always, we welcome your questions and comments.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Core Income (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.85%, 1.60%, 0.45%, and 0.55% for Class A, Class C, Class I, and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented on April 1, 2024.

Bloomberg US Aggregate Bond Index measures the performance of the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, which includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Results include the reinvestment of all distributions.

After an impressive rally in late 2023, bond market performance was mixed in early 2024 as investors adjusted their expectations of interest rate cuts. The Federal Reserve (the Fed) dashed investor hopes of an early year rate cut as strong job growth continued, and inflation remained persistently above the Fed’s target of 2%. At both its January and March meetings the Federal Open Market Committee left the fed funds rate range unchanged at 5.25% to 5.50%, a 23-year high. The Fed’s Summary of Economic Projections (SEP) released In March Indicates three rate cuts in 2024. The recent inflation Consumer Price Index and Producer Price Index releases in March may temper both the expected start date of rate cuts as well as their magnitude. The SEP also forecast three cuts in both 2025 and 2026.

The total return for investment-grade bonds, as represented by the Bloomberg U.S. Aggregate Bond Index, was 1.70% for the year ended March 31, 2024. While the picture is not perfect in all segments of credit markets, fundamentals remain in a largely positive position. Dispersion among sectors remains present, but overall we retain a favorable view of corporate fundamentals. Additionally, credit sectors performed relatively well in the short to intermediate sections of the curve versus longer-dated portions of the curve.

The Bloomberg U.S. High Yield 2% Issuer Capped Bond Index returned 11.15% for the year. The high yield sector outperformed the investment-grade bond market over the period as investors favored the combination of attractive yields and credit exposure in a largely supportive economy. While elevated financing rates of high yield companies created potential for increase default activity, many borrowers extended out maturities. We are not anticipating a high level of bonds to reach maturity this year or next year. Many companies are expecting the Fed to be well into a rate-cut campaign before bond maturities spike. Default rates have been rising, but remain low.

The Credit Suisse Leveraged Loan Index (CSLL Index) returned 12.40% for the year ended March 31, 2024. A potential knock down effect of the elevated inflationary estimates seen in March is that the loan asset class is seeing increased investor interest. The loan asset class continues to perform exceptionally well in what may be a “higher for longer” rate environment. As measured by the four-year effective yield, the CSLL Index currently offers investors a yield of over 10% with a coupon of 9.24%—both of which remain supported by an elevated Secured Overnight Financing Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Core Income Fund – Class I-2 posted a return of 4.27%, outperforming its benchmark, the Bloomberg U.S. Aggregate Bond Index, which posted a return of 1.70%.

The Fund’s emphasis on corporate credit and sector allocation positioning contributed to relative outperformance. Floating rate holdings across bank loans and investment-grade collateralized loan obligation (CLO) debt was beneficial. The Fund’s duration remains below benchmark; however, the range has narrowed over the reporting period. Shorter-than-benchmark duration contributed to relative performance. The Fund has upgraded the quality of the portfolio over the last few quarters, adding exposure to credits within more resilient, less cyclical sectors. Corporate fundamentals have held up reasonably well and leverage remains broadly manageable. However, we still view an economic slowdown with higher levels of volatility and greater sector and credit dispersion as a possibility. Combining floating rate securities with intermediate and longer duration fixed rate securities in a barbell structure we believe positions the Fund to withstand a continued high level of interest rate uncertainty.

On a sector basis, we continue to find value in Banking, Technology and Utilities. Within the Fund’s asset-backed securities (ABS) allocation, we have maintained exposure to high grade (AAA/AA) CLO debt securities which we believe to be attractive on a risk-adjusted basis. Student Loan and Auto ABS positions are high quality and primarily AAA-rated. We continue to like larger, liquid bank loans that offer attractive, low duration yield with stable credit profiles.

The Fund’s allocations to floating rate bank loans (12.0%) and high yield bonds (4.5%) contributed to relative outperformance. The allocation to ABS/CLO was also a positive return contributor led by floating rate, senior CLO debt securities (6.0%). The Fund’s focus on corporate credit and relative underweight to U.S. Treasuries and agency mortgage-backed securities (MBS) was beneficial. On a sector basis, Capital Goods, Consumer Cyclicals and Technology contributed to relative returns. A lack of exposure to commercial mortgage-backed securities (CMBS), agency debt and municipal debt detracted.

As of March 31, 2024, the Fund’s allocation was as follows: investment grade corporate bonds (38.7%), bank loans (14.4%), government bonds (21.7%), ABS (14.4%), and high yield (2.7%). The Fund’s cash position was 1.3%.

The economic back drop, especially in the U.S., remains to be a positive for Corporate fundamentals. While there remains to be dispersion across sectors (semis troughing, leisure cresting, and commercial real estate in freefall), overall corporate fundamentals are still solid. Many sectors are performing well, such as utilities, consumer staples, manufacturing, and travel-related industries, and we do not expect that to change in the near term. The U.S. consumer has been a stabilizing force despite tighter monetary policy.

However, one area we are becoming more concerned with is intentional leveraging. Management teams are more comfortable with growth outlooks and balance sheets. They are using the liquidity in the debt markets to repurchase shares, payout dividends, and acquisitions. This is a modest negative for fundamentals thus far and we continue to monitor. Also, we expect economic slowing going forward. The slowing will weigh on ratings, as well on those sectors already struggling (mostly in well-known areas such as property-related sectors).

Investment-grade corporate technicals benefited from the move higher in interest rates over the course in early 2024. 10-year Treasury yields rose by over 30 basis points in the first quarter of 2024. This helped move Investment-grade corporate yields to 5.3% as of March 31, 2024. Retail flows into fixed income continued to be strong as a result. Institutional demand remained strong as clients were able to get another bite at higher back-end rates. While U.S. Government budget funding and higher near-term inflation could keep pressure on rates, we could see technical pressure in MBS and Treasuries subside a bit with the Fed’s recalibration of their quantitative tightening (QT) efforts. A reduction in the roll-off of those securities could be another positive technical for broader fixed income.

Stable fundamentals and strong technicals continue to benefit corporate spreads. Corporate spreads are now within shouting distance (about 10 basis points) of the post Great Financial Crisis tights seen in 2021. All-in yields are still attractive at 5.3%, but spread cushion is less robust. Corporate yields and spreads are in the 90th and 8th percentiles over the past 10 years. While index level spreads are at the tighter end of their historical range, we continue to find attractive opportunities within certain sectors as well as at the individual corporate level.

We are finding value in industries that are seeing stability in the top line and/or cash flows, including lodging/leisure, airline related (AEETCs and aircraft lessors), utilities, U.S. global systemically important banks (G-SIBs), and food and beverage. Sectors we remain wary of include metals & mining, retail, office and retail REITS, regional banks, and chemicals. Merger and acquisition activity may pick up in 2024, especially in the tech and healthcare sectors. Those activities pose both risk and potential investment opportunities. Inflation, geopolitical conflicts, and the U.S. elections late this year all pose risks the market must contend with. Inflation has been resilient, which pushes potential Fed cuts further into the horizon. This leaves us favoring certain floating-rate asset classes (high-quality bank loans and senior CLOs) given the attractive spread/yield profiles, which help absorb rate volatility.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds ESG Core Bond (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on December 14, 2020 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.48% and 0.48% for Class I and Class I-2 as of the most recent prospectus dated October 19, 2023, as supplemented on April 1, 2024.

Bloomberg US Aggregate Bond Index measures the performance of the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, which includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Results include the reinvestment of all distributions.

After an impressive rally in late 2023, bond market performance was mixed in early 2024 as investors adjusted their expectations of interest rate cuts. The Federal Reserve (the Fed) dashed investor hopes of an early year rate cut as strong job growth continued, and inflation remained persistently above the Fed’s target of 2%. At both its January and March meetings the Federal Open Market Committee left the fed funds rate range unchanged at 5.25% to 5.50%, a 23-year high. The Fed’s Summary of Economic Projections (SEP) released In March Indicates three rate cuts in 2024. The recent inflation Consumer Price Index and Producer Price Index releases in March may temper both the expected start date of rate cuts as well as their magnitude. The SEP also forecast three cuts in both 2025 and 2026.

The total return for investment-grade bonds, as represented by the Bloomberg U.S. Aggregate Bond Index, was 1.70% for the year ended March 31, 2024. While the picture is not perfect in all segments of credit markets, fundamentals remain in a largely positive position. Dispersion among sectors remains present, but overall we retain a favorable view of corporate fundamentals. Additionally, credit sectors performed relatively well in the short to intermediate sections of the curve versus longer-dated portions of the curve.

The Bloomberg U.S. High Yield 2% Issuer Capped Bond Index returned 11.15% for the year. The high yield sector outperformed the investment-grade bond market over the period as investors favored the combination of attractive yields and credit exposure in a largely supportive economy. While elevated financing rates of high yield companies created potential for increase default activity, many borrowers extended out maturities. We are not anticipating a high level of bonds to reach maturity this year or next year. Many companies are expecting the Fed to be well into a rate-cut campaign before bond maturities spike. Default rates have been rising, but remain low.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle ESG Core Bond Fund – Class I-2 posted a return of 3.23%, outperforming its benchmark, the Bloomberg U.S. Aggregate Bond Index, which posted a return of 1.70%.

Given the environmental, social and governance (ESG) mandate of this Fund, factors related to credit fundamentals and the ESG ratings of the Fund’s holdings were assessed, with a focus on ESG risk (ranging from negligible to severe) and ESG quality (ranging from industry best-in-class, leader, average, laggard, or worst-in-class). At the end of the reporting period, the Fund held corporates considered to have overall slightly lower ESG risk associated with them, compared to the benchmark. In addition, the Fund held no corporates considered to have high or severe risk associated with ESG factors, while the benchmark held 15.47%. The Fund also had a higher percentage of corporates considered best-in-class and leaders for ESG (48.02%) compared to those in the benchmark (35.84%). The Fund held no companies deemed worst-in-class, while the benchmark held 0.32%.

The Fund had no exposure to corporate bonds, asset-backed securities (ABS) and mortgage-related securities directly involved in: (i) the extraction of thermal coal, coal power generation and providing tailor-made products and services that support thermal coal extraction that contribute materially to company revenue (over 9.99%); (ii) the production of tobacco; or (iii) the production of controversial military weapons (i.e., weapons that have a disproportionate and indiscriminate impact on civilian populations, sometimes even years after a conflict has ended); and (iv) serious financial crime¹.

The Fund’s significant average underweight to Agency mortgage-backed securities (MBS) versus the benchmark (2.42% versus 27.49%) and average overweight to ABS (16.18% versus 1.35%) were strong contributors to relative performance. While economic data coupled with supportive employment data remained in place, persistent and elevated inflation has led to expectations of interest rate policy remaining higher for longer. This revision in rate expectations has led to higher Treasury rates throughout the yield curve. As a result, exposure to ABS, most notably to CLOs, contributed to relative performance due to their relatively short duration.

An overweight exposure to corporate bonds versus the benchmark (average 56.63% versus average 24.76%) also contributed positively to relative performance. Within corporate sectors, an overweight and security selection in Financials, Capital Goods, Consumer Cyclicals and Technology contributed to relative performance.

While the Fund’s underweight to U.S. Treasuries compared to the benchmark (20.36% versus 41.40%) was modestly positive, the selection of longer-term Treasuries versus shorter-term ones more than offset this gain and became an overall detractor to relative performance.

The corporate sectors that were the most significant detractors to relative performance were Electric Utilities, Insurance and real estate investment trusts (REITs).

As of March 31, 2024, the Fund’s carbon intensity (measured as tons of carbon dioxide equivalent per million (USD) of revenue) was 77% lower than that of the benchmark. Five green bonds from companies Eversource Energy, Healthpeak Properties, NiSource, Sumitomo Mitsui Financial and American Homes 4 Rent made up 3.09% of the Fund.

The economic back drop, especially in the U.S., remains to be a positive for Corporate fundamentals. While there remains to be dispersion across sectors (semis troughing, leisure cresting, and commercial real estate in freefall), overall corporate fundamentals are still solid. Many sectors are performing well, such as utilities, consumer staples, manufacturing, and travel-related industries, and we do not expect that to change in the near term. The U.S. consumer has been a stabilizing force despite tighter monetary policy.

However, one area we are becoming more concerned with is intentional leveraging. Management teams are more comfortable with growth outlooks and balance sheets. They are using the liquidity in the debt markets to repurchase shares, payout dividends, and acquisitions. This is a modest negative for fundamentals thus far and we continue to monitor. Also, we expect economic slowing going forward. The slowing will weigh on ratings, as well on those sectors already struggling (mostly in well-known areas such as property-related sectors).

Investment-grade corporate technicals benefited from the move higher in interest rates over the course in early 2024. 10-year Treasury yields rose by over 30 basis points in the first quarter of 2024. This helped move Investment-grade corporate yields to 5.3% as of March 31, 2024. Retail flows into fixed income continued to be strong as a result. Institutional demand remained strong as clients were able to get another bite at higher back-end rates. While U.S. Government budget funding and higher near-term inflation could keep pressure on rates, we could see technical pressure in mortgage-backed securities (MBS) and Treasuries subside a bit with the Fed’s recalibration of their quantitative tightening (QT) efforts. A reduction in the roll-off of those securities could be another positive technical for broader fixed income.

Stable fundamentals and strong technicals continue to benefit corporate spreads. Corporate spreads are now within shouting distance (about 10 basis points) of the post Great Financial Crisis tights seen in 2021. All-in yields are still attractive at 5.3%, but spread cushion is less robust. Corporate yields and spreads are in the 90th and 8th percentiles over the past 10 years. While index level spreads are at the tighter end of their historical range, we continue to find attractive opportunities within certain sectors as well as at the individual corporate level.

We are finding value in industries that are seeing stability in the top line and/or cash flows, including lodging/leisure, airline related (AEETCs and aircraft lessors), utilities, U.S. global systemically important banks (G-SIBs), and food and beverage. Sectors we remain wary of include metals & mining, retail, office and retail REITS, regional banks, and chemicals. Merger and acquisition activity may pick up in 2024, especially in the tech and healthcare sectors. Those activities pose both risk and potential investment opportunities. Inflation, geopolitical conflicts, and the U.S. elections late this year all pose risks the market must contend with. Inflation has been resilient, which pushes potential Fed cuts further into the horizon. This leaves us favoring certain floating-rate asset classes (high-quality bank loans and senior CLOs) given the attractive spread/yield profiles, which help absorb rate volatility.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Floating Rate Income (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.03%, 1.78%, 0.70%, and 0.78% for Class A, Class C, Class I, and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented on April 1, 2024.

Credit Suisse Leveraged Loan Index tracks the investable market of the U.S. dollar-denominated leveraged loan market. It consists of issues rated “5B” or lower, meaning that the highest-rated issues included in this index are Moody’s/S&P ratings of Baa1/BB+ or Ba1/BBB+. All loans are funded term loans with a tenure of at least one year and are made by issuers domiciled in developed countries. Results include the reinvestment of all distributions.

After an impressive rally in late 2023, bond market performance was mixed in early 2024 as investors adjusted their expectations of interest rate cuts. The Federal Reserve (the Fed) dashed investor hopes of an early year rate cut as strong job growth continued, and inflation remained persistently above the Fed’s target of 2%. At both its January and March meetings the Federal Open Market Committee left the fed funds rate range unchanged at 5.25% to 5.50%, a 23-year high. The Fed’s Summary of Economic Projections (SEP) released In March Indicates three rate cuts in 2024. The recent inflation Consumer Price Index and Producer Price Index releases in March may temper both the expected start date of rate cuts as well as their magnitude. The SEP also forecast three cuts in both 2025 and 2026.

Short-duration investment-grade bonds, as represented by the Bloomberg 1-3 Year U.S. Government/Credit Bond Index, returned 3.49% for the year ended March 31, 2024. The short end of the curve tended to fare better than the long end in early 2024, as hopes were dashed of a rate cut by the Fed. The Fed’s dot plot in March indicated three rate cuts, though some investors expect only one or two cuts following the strong jobs report in late March. This has allowed the front end of the curve to remain more attractively elevated than was anticipated to start the year.

The total return for investment-grade bonds, as represented by the Bloomberg U.S. Aggregate Bond Index, was 1.70% for the year ended March 31, 2024. While the picture is not perfect in all segments of credit markets, fundamentals remain in a largely positive position. Dispersion among sectors remains present, but overall we retain a favorable view of corporate fundamentals. Additionally, credit sectors performed relatively well in the short to intermediate sections of the curve versus longer-dated portions of the curve.

The Bloomberg U.S. High Yield 2% Issuer Capped Bond Index returned 11.15% for the year. The high yield sector outperformed the investment-grade bond market over the period as investors favored the combination of attractive yields and credit exposure in a largely supportive economy. While elevated financing rates of high yield companies created potential for increase default activity, many borrowers extended out maturities. We are not anticipating a high level of bonds to reach maturity this year or next year. Many companies are expecting the Fed to be well into a rate-cut campaign before bond maturities spike. Default rates have been rising, but remain low.

The Credit Suisse Leveraged Loan Index (CSLL Index) returned 12.40% for the year ended March 31, 2024. A potential knock down effect of the elevated inflationary estimates seen in March is that the loan asset class is seeing increased investor interest. The loan asset class continues to perform exceptionally well in what may be a “higher for longer” rate environment. As measured by the four-year effective yield, the CSLL Index currently offers investors a yield of over 10% with a coupon of 9.24%—both of which remain supported by an elevated Secured Overnight Financing Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Floating Rate Income Fund – Class I-2 posted a return of 12.76%, outperforming its benchmark, the Credit Suisse Leveraged Loan Index (CSLLI), which posted a return of 12.40%.

With economic indicators consistently surpassing expectations and a renewed outlook for higher interest rates, the Fund was well positioned to capitalize on conditions during the reporting period. With approximately 90% of the Fund invested in floating rate loans, the impact of interest rates drifting higher has improved yields, without the expense of price erosion. The strong economic and technical environment facilitated material price appreciation, in addition to an already elevated coupon return. The Fund carried a coupon advantage over the index, contributing to its outperformance in this environment, which was achieved by maintaining an underweight position in lower spread BB-rated loans and favoring single B-rated and CCC-rated loans. Aware of the potential pressures on leveraged loan issuers, the Fund remained underweight to stressed loans priced below $90, thus providing a buffer against potential adverse economic scenarios. Additionally, we maintain an overweight to second lien loans, which underscores our conviction in their relative value.

The Fund’s underweight to loans BB-rated and above, as well as an overweight to second lien loans, contributed to performance. Security selection in Healthcare, Chemicals, and Utilities detracted from performance. An underweight to, and selection within, Media/Telecom contributed to performance. The Fund’s selection within higher priced loans above par ($100) also contributed to performance.

As of March 31, 2024, the Fund’s allocation was as follows: investment grade corporate bonds (56.6%), bank loans (7.7%), government bonds (4.2%) and asset-backed securities (28.9%). The Fund’s cash position was 2.6%.

Loans continue to outperform in fixed income. Amidst the backdrop of a resilient U.S. economy, the market has dialed back its expectation for rate cuts this year – with consensus currently calling for two cuts in 2024 (compared to six at the start of the year). We believe the mantra of “higher for longer” provides a meaningful tailwind for loans, as investors can continue to clip an outsized coupon. Notably, we would highlight that the coupon of the CSLLI ended at 9.24% on March 31, 2024, well above its 30-year average of 6.06%.

By sector, we remain overweight financials, information technology and aerospace and defense, while being underweight media/telecom, chemicals and retail. We continue to favor financials (insurance brokers) and information technology (software) given their subscription-based business models, which provide strong revenue and cash flow visibility. We view these credits as more resilient in a downturn. We are underweight media/telecom due to secular concerns and chemicals due to the sector’s high degree of cyclicality. We remain underweight distressed CCC-rated loans, with our CCC exposure largely concentrated in performing second-lien loans.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds High Income (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.95%, 1.70%, 0.55%, and 0.65% for Class A, Class C, Class I, and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented on April 1, 2024.

Bloomberg US High-Yield 2% Issuer Capped Bond Total Return Index is an issuer-constrained version of the Bloomberg US Corporate High-Yield Bond Total Return Index that covers the U.S. dollar-denominated, high yield, fixed-rate corporate bond market and limits issuer exposures to a maximum of 2% and redistributes the excess market value index-wide on a pro-rata basis. Results include the reinvestment of all distributions.

After an impressive rally in late 2023, bond market performance was mixed in early 2024 as investors adjusted their expectations of interest rate cuts. The Federal Reserve (the Fed) dashed investor hopes of an early year rate cut as strong job growth continued, and inflation remained persistently above the Fed’s target of 2%. At both its January and March meetings the Federal Open Market Committee left the fed funds rate range unchanged at 5.25% to 5.50%, a 23-year high. The Fed’s Summary of Economic Projections (SEP) released In March Indicates three rate cuts in 2024. The recent inflation Consumer Price Index and Producer Price Index releases in March may temper both the expected start date of rate cuts as well as their magnitude. The SEP also forecast three cuts in both 2025 and 2026.

The total return for investment-grade bonds, as represented by the Bloomberg U.S. Aggregate Bond Index, was 1.70% for the year ended March 31, 2024. While the picture is not perfect in all segments of credit markets, fundamentals remain in a largely positive position. Dispersion among sectors remains present, but overall we retain a favorable view of corporate fundamentals. Additionally, credit sectors performed relatively well in the short to intermediate sections of the curve versus longer-dated portions of the curve.

The Bloomberg U.S. High Yield 2% Issuer Capped Bond Index returned 11.15% for the year. The high yield sector outperformed the investment-grade bond market over the period as investors favored the combination of attractive yields and credit exposure in a largely supportive economy. While elevated financing rates of high yield companies created potential for increase default activity, many borrowers extended out maturities. We are not anticipating a high level of bonds to reach maturity this year or next year. Many companies are expecting the Fed to be well into a rate-cut campaign before bond maturities spike. Default rates have been rising, but remain low.

The Credit Suisse Leveraged Loan Index (CSLL Index) returned 12.40% for the year ended March 31, 2024. A potential knock down effect of the elevated inflationary estimates seen in March is that the loan asset class is seeing increased investor interest. The loan asset class continues to perform exceptionally well in what may be a “higher for longer” rate environment. As measured by the four-year effective yield, the CSLL Index currently offers investors a yield of over 10% with a coupon of 9.24%—both of which remain supported by an elevated Secured Overnight Financing Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle High Yield Bond Fund – Class I-2 posted a return of 10.67%, underperforming its benchmark, the Bloomberg U.S. High Yield 2% Issuer Capped Bond Index, which posted a return of 11.15%.

Increasingly optimistic market sentiment and continued economic resilience provided a backdrop for positive high yield performance during the reporting period. Credit selection was the primary contributor to the Fund’s relative underperformance versus the benchmark. Portfolio positioning included an above index option adjusted spread positioning. Contributing to this was a modest overweight to select CCC-rated credits. The overweight to CCC was beneficial as lower rated/higher spread credits outperformed. Strong balance sheet positioning continues to be a positive factor for the broad high yield asset class. However, industry and individual credit selection are becoming increasingly important as credit spreads have tightened and a slowdown in economic activity remains a possibility. We continue to find opportunities in sectors that benefit from broad secular themes such as infrastructure spending. There remains attractive relative value in floating rate bank loans and high yield collateralized loan obligation (CLO) debt securities, and we have largely maintained those exposures. Duration positioning was neutral to slightly shorter than benchmark throughout the reporting period.

Credit selection contributed to relative returns, most notably in the CCC-rated area. The Fund’s allocation to floating rate CLO debt securities and bank loans was also a positive return factor. Investment grade corporate bond exposure of approximately 5.7% detracted. On a sector basis, Capital Goods, Basic Industry and Electric Utilities were notable relative return contributors. Consumer Cyclicals, Technology and Finance companies were among sectors that detracted.

As of March 31, 2024, the Fund’s allocation was as follows: high yield bonds (80.4%), bank loans (6.6%), investment grade corporate bonds (4.8%) and CLO debt securities (5.6%). The ending cash position was 2.2%.

The high-yield market rally that began in 2023 continued into the first quarter of 2024. Inflation and expectations for future inflation continued to fall as investors priced in significant Fed interest rate cuts. However, it remains unclear as to whether the economy – still flush with liquidity driven by unprecedented levels of fiscal stimulus created during the pandemic – will slow sufficiently to return inflation to the targeted 2% level. That said, the near- to intermediate-term economic outlook in the U.S. remains positive and resilient. While some consumers are showing early signs of slowing spending, economic growth coming from business investment led by $1 trillion in government stimulus targeting infrastructure, clean energy and critical industries such as semiconductor manufacturing are helping fuel growing business investment and strong labor markets.

The risks around a ballooning federal budget, the ever-evolving geopolitical backdrop in an election year in the U.S. and the feeling that an economic downturn has to occur at some point after several years of rampant growth, remain concerns we will be actively monitoring. However, borrower credit profiles are much stronger relative to previous cycles, thereby in our view improving the ability for the asset class to withstand an economic downturn aligned with a historically more normalized default rate. We believe this affords us a margin of safety in the event of more negative economic scenarios.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Short Duration Income (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.75%, 1.50%, 0.39%, and 0.49% for Class A, Class C, Class I, and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented on April 1, 2024.

Bloomberg US 1-3 Year Government/Credit Bond Index measures the performance of a subset of the Bloomberg US Aggregate Bond Index and includes investment grade U.S. dollar-denominated, fixed-rate Treasuries, government-related and corporate securities with maturities of one to three years. Results include the reinvestment of all distributions.

After an impressive rally in late 2023, bond market performance was mixed in early 2024 as investors adjusted their expectations of interest rate cuts. The Federal Reserve (the Fed) dashed investor hopes of an early year rate cut as strong job growth continued, and inflation remained persistently above the Fed’s target of 2%. At both its January and March meetings the Federal Open Market Committee left the fed funds rate range unchanged at 5.25% to 5.50%, a 23-year high. The Fed’s Summary of Economic Projections (SEP) released In March Indicates three rate cuts in 2024. The recent inflation Consumer Price Index and Producer Price Index releases in March may temper both the expected start date of rate cuts as well as their magnitude. The SEP also forecast three cuts in both 2025 and 2026.

Short-duration investment-grade bonds, as represented by the Bloomberg 1-3 Year U.S. Government/Credit Bond Index, returned 3.49% for the year ended March 31, 2024. The short end of the curve tended to fare better than the long end in early 2024, as hopes were dashed of a rate cut by the Fed. The Fed’s dot plot in March indicated three rate cuts, though some investors expect only one or two cuts following the strong jobs report in late March. This has allowed the front end of the curve to remain more attractively elevated than was anticipated to start the year.

The total return for investment-grade bonds, as represented by the Bloomberg U.S. Aggregate Bond Index, was 1.70% for the year ended March 31, 2024. While the picture is not perfect in all segments of credit markets, fundamentals remain in a largely positive position. Dispersion among sectors remains present, but overall we retain a favorable view of corporate fundamentals. Additionally, credit sectors performed relatively well in the short to intermediate sections of the curve versus longer-dated portions of the curve.

The Bloomberg U.S. High Yield 2% Issuer Capped Bond Index returned 11.15% for the year. The high yield sector outperformed the investment-grade bond market over the period as investors favored the combination of attractive yields and credit exposure in a largely supportive economy. While elevated financing rates of high yield companies created potential for increase default activity, many borrowers extended out maturities. We are not anticipating a high level of bonds to reach maturity this year or next year. Many companies are expecting the Fed to be well into a rate-cut campaign before bond maturities spike. Default rates have been rising, but remain low.

The Credit Suisse Leveraged Loan Index (CSLL Index) returned 12.40% for the year ended March 31, 2024. A potential knock down effect of the elevated inflationary estimates seen in March is that the loan asset class is seeing increased investor interest. The loan asset class continues to perform exceptionally well in what may be a “higher for longer” rate environment. As measured by the four-year effective yield, the CSLL Index currently offers investors a yield of over 10% with a coupon of 9.24%—both of which remain supported by an elevated Secured Overnight Financing Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Short Duration Income Fund – Class I-2 posted a return of 5.77%, outperforming its benchmark, the Bloomberg 1-3 Year U.S. Government/Credit Bond Index, which posted a return of 3.49%.

Within the Fund, credit outperformed government exposure over the quarter due to credit spread tightening and income advantage. While economic data coupled with supportive employment data remained in place, persistent and elevated inflation has led to expectations of interest rate policy remaining higher for longer. This change in outlook proved to be a positive for the Fund given its focus on the front end of the curve, shorter duration assets and floating rate exposures. Going forward, we expect the elevated yields in corporate credit to provide a buffer from anticipated rate and spread volatility that may occur.

On a total return basis by asset class, the Fund’s exposures to floating rate loans, asset-backed securities (ABS) and collateralized loan obligation (CLO) exposures were the most positive contributors to total return. U.S. government exposures detracted on a total return basis due to higher duration positioning, but the Fund’s overall underweight to U.S. government securities proved to be a positive for relative performance versus the benchmark. By credit quality, a barbell-like approach performed best over the reporting period with AAA-, BBB-, and B-rated exposures being the strongest contributors to return. Securitized assets (ABS/CLOs), Consumer Cyclicals and Capital Goods sectors contributed most to return.

As of March 31, 2024, the Fund’s allocation was as follows: investment-grade bonds (42.4%), ABS (23.6%), floating-rate loans (18.7%), government bonds (13.3%), and high-yield bonds (1.3%). The ending cash position was 0.7%.

The economic back drop, especially in the U.S., remains to be a positive for Corporate fundamentals. While there remains to be dispersion across sectors (semis troughing, leisure cresting, and commercial real estate in freefall), overall corporate fundamentals are still solid. Many sectors are performing well, such as utilities, consumer staples, manufacturing, and travel-related industries, and we do not expect that to change in the near term. The U.S. consumer has been a stabilizing force despite tighter monetary policy.

However, one area we are becoming more concerned with is intentional leveraging. Management teams are more comfortable with growth outlooks and balance sheets. They are using the liquidity in the debt markets to repurchase shares, payout dividends, and acquisitions. This is a modest negative for fundamentals thus far and we continue to monitor. Also, we expect economic slowing going forward. The slowing will weigh on ratings, as well on those sectors already struggling (mostly in well-known areas such as property-related sectors).

Investment-grade corporate technical benefited from the move higher in interest rates over the course in early 2024. 10-year Treasury yields rose by over 30 basis points in the first quarter of 2024. This helped move Investment-grade corporate yields to 5.3% as of March 31, 2024. Retail flows into fixed income continued to be strong as a result. Institutional demand remained strong as clients were able to get another bite at higher back-end rates. While U.S. Government budget funding and higher near-term inflation could keep pressure on rates, we could see technical pressure in mortgage-backed securities (MBS) and Treasuries subside a bit with the Fed’s recalibration of their quantitative tightening (QT) efforts. A reduction in the roll-off of those securities could be another positive technical for broader fixed income.

Stable fundamentals and strong technicals continue to benefit corporate spreads. Corporate spreads are now within shouting distance (about 10 basis points) of the post Great Financial Crisis tights seen in 2021. All-in yields are still attractive at 5.3%, but spread cushion is less robust. Corporate yields and spreads are in the 90^th and 8^th percentiles over the past 10 years. While index level spreads are at the tighter end of their historical range, we continue to find attractive opportunities within certain sectors as well as at the individual corporate level.

We are finding value in industries that are seeing stability in the top line and/or cash flows, including lodging/leisure, airline related (AEETCs and aircraft lessors), utilities, U.S. global systemically important banks (G-SIBs), and food and beverage. Sectors we remain wary of include metals & mining, retail, office and retail REITS, regional banks, and chemicals. Merger and acquisition activity may pick up in 2024, especially in the tech and healthcare sectors. Those activities pose both risk and potential investment opportunities. Inflation, geopolitical conflicts, and the U.S. elections late this year all pose risks the market must contend with. Inflation has been resilient, which pushes potential Fed cuts further into the horizon. This leaves us favoring certain floating-rate asset classes (high-quality bank loans and senior CLOs) given the attractive spread/yield profiles, which help absorb rate volatility.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Strategic Income (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.94%, 1.69%, 0.59%, and 0.69% for Class A, Class C, Class I, and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented on April 1, 2024.

Bloomberg US Aggregate Bond Index measures the performance of the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, which includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Results include the reinvestment of all distributions.

After an impressive rally in late 2023, bond market performance was mixed in early 2024 as investors adjusted their expectations of interest rate cuts. The Federal Reserve (the Fed) dashed investor hopes of an early year rate cut as strong job growth continued and inflation remained persistently above the Fed’s target of 2%. At both its January and March meetings, the Federal Open Market Committee left the fed funds rate range unchanged at 5.25% to 5.50%, a 23-year high. The Fed’s Summary of Economic Projections (SEP) released In March Indicates three rate cuts in 2024. The recent inflation Consumer Price Index and Producer Price Index releases in March may temper both the expected start date of rate cuts as well as their magnitude. The SEP also forecast three cuts in both 2025 and 2026.

The total return for investment-grade bonds, as represented by the Bloomberg U.S. Aggregate Bond Index, was 1.70% for the year ended March 31, 2024. While the picture is not perfect in all segments of credit markets, fundamentals remain in a largely positive position. Dispersion among sectors remains present, but overall we retain a favorable view of corporate fundamentals. Additionally, credit sectors performed relatively well in the short to intermediate sections of the curve versus longer-dated portions of the curve.

The Bloomberg U.S. High Yield 2% Issuer Capped Bond Index returned 11.15% for the year. The high yield sector outperformed the investment-grade bond market over the period as investors favored the combination of attractive yields and credit exposure in a largely supportive economy. While elevated financing rates of high yield companies created potential for increase default activity, many borrowers extended out maturities. We are not anticipating a high level of bonds to reach maturity this year or next year. Many companies are expecting the Fed to be well into a rate-cut campaign before bond maturities spike. Default rates have been rising, but remain low.

The Credit Suisse Leveraged Loan Index (CSLL Index) returned 12.40% for the year ended March 31, 2024. A potential knock down effect of the elevated inflationary estimates seen in March is that the loan asset class is seeing increased investor interest. The loan asset class continues to perform exceptionally well in what may be a “higher for longer” rate environment. As measured by the four-year effective yield, the CSLL Index currently offers investors a yield of over 10% with a coupon of 9.24%—both of which remain supported by an elevated Secured Overnight Financing Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Strategic Income Fund – Class I-2 posted a return of 8.46%, outperforming its benchmark, the Bloomberg U.S. Aggregate Bond Index, which posted a return of 1.70%.

Sector allocation, credit selection and duration positioning contributed to the Fund’s outperformance on a relative basis. The Fund’s emphasis on credit securities and underweight to U.S. government bonds was broadly beneficial. Corporate credit holdings across high yield, bank loans and investment grade averaged approximately 90%. The allocation to collateralized loan obligations (CLO) debt securities averaged 5.0%. Floating rated positions averaged 24% across bank loans and CLO debt securities. These assets contributed attractive returns and were insulated from rising rates. High yield and investment-grade corporate bond holdings also had a positive relative return impact, with tightening credit spreads offsetting the impact of rising rates. Shorter-than-benchmark duration was a positive contributing factor due to increased rate volatility. The Fund maintains a higher overall credit quality relative to historical average positioning. This includes higher-than-average exposure to investment-grade securities and lower allocation to high yield bonds. While the economy continues to perform well, opportunities to add risk at more attractive levels may evolve as tighter monetary conditions take hold and consumer surplus savings is depleted. Investment-grade corporate bonds continue to provide reasonable compensation given the uncertainties that remain. Floating rate bank loans and investment grade rated CLO debt provide attractive yield and balances well with the Fund’s fixed rate exposures. We continue to favor BBB-rated securities within the investment-grade corporate sleeve.

The Fund’s focus on credit assets and relative underweight to U.S. government securities contributed to quarterly relative returns. Out-of-benchmark allocations to high yield bonds and floating rate bank loan were strong contributors to relative performance. Investment grade CLO debt was also a positive return contributor. Duration positioning also contributed to relative performance. On a sector basis, Capital Goods, Midstream Energy, and Consumer Products contributed. A lack of exposure to commercial mortgage-backed securities, agency debt and municipal debt detracted.

As of March 31, 2024, the Fund’s allocation was as follows: investment-grade corporate bonds (44.6%), floating-rate bank loans (23.6%), high yield bonds (19.2%) and asset-backed securities (6.0%). The ending cash position was 2.6%.

The U.S. economy displayed resilience in the first quarter of 2024, buoyed by robust consumer and government spending. The jobs market remains robust, providing a boost to consumers, albeit somewhat offset by continued inflationary pressures. Despite potential uncertainties surrounding deficit spending in the long term, it currently supports overall economic activity.

Fixed income markets had a very strong close to 2023 as the Fed began to discuss its willingness to lower the fed funds rate solely based on subdued inflation, even if the economic data remains strong. The rally appears to have been a bit premature, as inflation data in the beginning of 2024 has been choppy at best and potentially concerning if it is the start of any sort of reacceleration. While we maintain a medium-term outlook favoring lower rates and inflation, the Fed may require more certainty, with upcoming inflation figures under close scrutiny.

We believe starting yields across the liquid-credit universe provide a healthy amount of cushion for potentially softer and more volatile times as the year progresses. In the Fund, given what we believe is currently priced in, we maintain an up-in-quality theme with a higher allocation to investment-grade corporates and lower exposure to below investment-grade issues relative to history. We continue to like the relative value of bank loans and CLO tranches compared to high yield and maintain an overweight in those sectors. We reduced overall portfolio duration starting late last year and maintain that stance today, although the recent back-up in rates has made things a bit more attractive out the curve. We anticipate a volatile year and will look to use the flexibility of the Fund to manage through the volatility.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Ultra Short Income (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on June 28, 2019 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.57%, 0.32%, and 0.32% for Class A, Class I and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented on November 6, 2023.

Bloomberg Short Treasury Total Return Index is composed of all U.S. Treasuries that have a remaining maturity between one and twelve months. Results include the reinvestment of all distributions.

After an impressive rally in late 2023, bond market performance was mixed in early 2024 as investors adjusted their expectations of interest rate cuts. The Federal Reserve (the Fed) dashed investor hopes of an early year rate cut as strong job growth continued, and inflation remained persistently above the Fed’s target of 2%. At both its January and March meetings the Federal Open Market Committee left the fed funds rate range unchanged at 5.25% to 5.50%, a 23-year high. The Fed’s Summary of Economic Projections (SEP) released In March Indicates three rate cuts in 2024. The recent inflation Consumer Price Index CPI and Producer Price Index PPI releases in March may temper both the expected start date of rate cuts as well as their magnitude. The SEP also forecast three cuts in both 2025 and 2026.

Short-duration investment-grade bonds, as represented by the Bloomberg 1-3 Year U.S. Government/Credit Bond Index, returned 3.49% for the year ended March 31, 2024. The short end of the curve tended to fare better than the long end in early 2024, as hopes were dashed of a rate cut by the Fed. The Fed’s projections in March indicated three rate cuts, though some investors expect only one or two cuts following the strong jobs report in late March. This has allowed the front end of the curve to remain more attractively elevated than was anticipated to start the year.

The total return for investment-grade bonds, as represented by the Bloomberg U.S. Aggregate Bond Index, was 1.70% for the year ended March 31, 2024. While the picture is not perfect in all segments of credit markets, fundamentals remain in a largely positive position. Dispersion among sectors remains present, but overall we retain a favorable view of corporate fundamentals. Additionally, credit sectors performed relatively well in the short to intermediate sections of the curve versus longer-dated portions of the curve.

The Bloomberg U.S. High Yield 2% Issuer Capped Bond Index returned 11.15% for the year. The high yield sector outperformed the investment-grade bond market over the period as investors favored the combination of attractive yields and credit exposure in a largely supportive economy. While elevated financing rates of high yield companies created potential for increase default activity, many borrowers extended out maturities. We are not anticipating a high level of bonds to reach maturity this year or next year. Many companies are expecting the Fed to be well into a rate-cut campaign before bond maturities spike. Default rates have been rising, but remain low.

The Credit Suisse Leveraged Loan Index (CSLL Index) returned 12.40% for the year ended March 31, 2024. A potential knock down effect of the elevated inflationary prints seen in March is that the loan asset class is seeing increased investor interest. The loan asset class continues to perform exceptionally well in what may be a “higher for longer” rate environment. As measured by the four-year effective yield, the CSLL Index currently offers investors a yield of over 10% with a coupon of 9.24%—both of which remain supported by an elevated Secured Overnight Financing Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Ultra Short Income Fund – Class I-2 posted a return of 6.18%, outperforming its benchmark, the Bloomberg Short Treasury Index, which posted a return of 5.17%.

Rates at the short end of the Treasury curve remained relative stable following a year of rapidly increasing policy rates, with 3-month rates increasing by 56 basis points over the reporting period. Elevated starting yields and reduced front-end rate volatility contributed to positive returns for the Short Treasury benchmark. The Fund’s emphasis on corporate and securitized credit contributed to relative outperformance. Investment grade corporate bonds and floating rate bank loans were positive contributors. Corporate bond exposures remain focused primarily on A- and BBB-rated credits. Floating rate loan positions averaged 6.1% of the portfolio, with most of that exposure allocated to investment grade rated loan issues. The portfolio allocation to securitized assets was primarily AAA-rated. Securitized assets were broadly positive on a relative return basis. The portfolio’s average duration of 0.49 years was slightly longer than benchmark duration of 0.32 years.

Corporate credit and asset-backed securities (ABS) sectors were positive return contributors for the quarter. AAA-rated collateralized loan obligations (CLO) debt securities contributed as did the Fund’s allocation to bank loans. Longer than benchmark duration was a modest detractor. On a sector basis, Communications, Consumer Cyclicals, and Transportation were positive relative return contributors while the Technology sector detracted.

As of March 31, 2024, the Fund’s allocation was as follows: investment grade corporate bonds (56.6%), bank loans (7.7%), government bonds (4.2%), ABS (28.9%). The Fund’s cash position was 2.6%.

The economic back drop, especially in the U.S., remains to be a positive for corporate fundamentals. While there remains to be dispersion across sectors (semis troughing, leisure cresting and commercial real estate in freefall), overall corporate fundamentals are still solid. Many sectors are performing well, such as utilities, consumer staples, manufacturing, and travel-related industries, and we do not expect that to change in the near term. The U.S. consumer has been a stabilizing force despite tighter monetary policy.

However, one area we are becoming more concerned with is intentional leveraging. Management teams are more comfortable with growth outlooks and balance sheets. They are using the liquidity in the debt markets to repurchase shares, pay dividends and fund acquisitions. This is a modest negative for fundamentals thus far and we continue to monitor these developments. Also, we expect economic slowing going forward. The slowing will weigh on ratings and on those sectors already struggling (mostly in well-known areas such as property-related sectors).

Investment-grade corporate technicals benefited from the move higher in interest rates over the course of early 2024. Ten-year Treasury yields rose by over 30 basis points in the first quarter of 2024. This helped move investment-grade corporate yields to 5.3% as of March 31, 2024. Retail flows into fixed income continued to be strong as a result. Institutional demand remained strong as clients were able to get another bite at higher back-end rates. While U.S. Government budget funding and higher near-term inflation could keep pressure on rates, we could see technical pressure in mortgage-backed securities (MBS) and Treasuries subside a bit with the Fed’s recalibration of their quantitative tightening (QT) efforts. A reduction in the roll-off of those securities could be another positive technical for broader fixed income.

Stable fundamentals and strong technicals continue to benefit corporate spreads. Corporate spreads are now within shouting distance (about 10 basis points) of the post Great Financial Crisis tights seen in 2021. All-in yields are still attractive at 5.3%, but spread cushion is less robust. Corporate yields and spreads are in the 90th and 8th percentiles, respectively, over the past 10 years. While index level spreads are at the tighter end of their historical range, we continue to find attractive opportunities within certain sectors as well as at the individual corporate level.

We are finding value in industries that are seeing stability in the top line and/or cash flows, including lodging/leisure, airline related (AEETCs or enhanced equipment trust certificates and aircraft lessors), utilities, U.S. global systemically important banks (G-SIBs), and food and beverage. Sectors we remain wary of include metals and mining, retail, office and retail real estate investment trusts (REITs), regional banks, and chemicals. Merger and acquisition activity may pick up in 2024, especially in the tech and healthcare sectors. Those activities pose both risk and potential investment opportunities. Inflation, geopolitical conflicts and the U.S. elections late this year all pose risks the market must contend with. Inflation has been resilient, which pushes potential Fed cuts further into the horizon. This leaves us favoring certain floating-rate asset classes (high-quality bank loans and senior CLOs) given in our view the attractive spread/yield profiles, which help absorb rate volatility.

 

The Fund performance shown in the chart above includes the performance of the Aristotle Core Equity Fund (the “Predecessor Fund”), a series of Investment Managers Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on October 23, 2023 (the “October 2023 Reorganization”). The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2017 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.91%, 0.66% and 0.66% for Class A, Class I and Class I-2 as of the most recent prospectus dated April 1, 2024.

S&P 500^® Index is a capitalization-weighted index of 500 stocks. The Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Results include the reinvestment of all distributions.

For the year ended March 31, 2024, the U.S. equity market, as represented by the S&P 500 Index, posted a full-year return of 29.88%. The increase was primarily driven by the performance of the seven largest companies in the Index, which were responsible for more than half of the S&P 500’s gains. Additionally, after underperforming value in 2022 by the largest amount since 2000, growth continued to recover, as the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 18.73% over the 12-month period ended March 31, 2024.

Macroeconomic news was dominated by inflation, central bank policies, regional bank failures and geopolitical conflicts, while other topics, such as artificial intelligence and congressional politics, made headlines as well. Economic data points were mixed throughout the year and corporate earnings were just as unpredictable.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Core Equity Fund – Class I-2 posted a return of 30.85%, outperforming the S&P 500 Index, which recorded a return of 29.88%.

During the year, the Fund’s outperformance relative to the S&P 500 Index was entirely due to security selection. Security selection in Information Technology and Consumer Discretionary added the most to relative performance. Conversely, security selection in Health Care and Consumer Staples detracted from relative performance. Sector allocation marginally detracted from relative performance. An underweight to Communication Services and an overweight to Health Care detracted value, while an overweight to Information Technology and an underweight to Real Estate contributed positively.

From a security selection standpoint, top contributors within the Fund during the period included: semiconductor designer, developer and supplier Broadcom; multinational technology company NVIDIA Corporation; Trane Technologies, an American manufacturing company focused on heating, ventilation, and air conditioning and refrigeration systems; workflow automation platform solutions provider ServiceNow; and Apple, the American designer, developer and seller of consumer electronics, computer software and online services.

Top detractors during the period included: food processor Darling Ingredients; commercial-stage biotechnology company Adaptive Biotechnologies; American pharmaceutical company Eli Lilly & Company; Bio-Techne, a global developer, manufacturer and supplier of reagents, analytical instruments and precision diagnostics; and multinational cosmetics company Estée Lauder Companies.

During the period, we added the following positions to the Fund: Silicon-to-Software^TM products and services provider Synopsys; US-based entertainment streaming business Netflix; enterprise IT environments provider Oracle; social networking Meta Platform; pharmaceutical company Eli Lilly; and biotechnology company Vertex Pharmaceuticals.

We exited the following positions: pharmaceutical and biotechnology company Catalent; multinational mass media and entertainment conglomerate The Walt Disney Company; integrated circuit manufacturer Microchip Technology; low-cost variety store chain Dollar General Corporation; multinational pharmaceutical company Bristol-Myers Squibb Company; and multinational food, snack and beverage corporation Pepsico.

The equity markets finished the first quarter of 2024 strong despite a rise in interest rates due to inflation staying above the targeted level set by the Federal Reserve. Expectations for a 2024 rate reduction have been pushed out into the back half of the year. A resilient U.S. economy has provided support for higher corporate profits. The first quarter’s double-digit returns, on top of a very strong fourth quarter, leave equity valuations at the high end of historical averages. Continued uncertainty around geopolitical tensions and the pending U.S. presidential election will add to market volatility. Although we believe a pause in equity prices is likely, higher earnings and an easing interest rate cycle should help support equity prices for the balance of the year. Our focus will continue to be at the company level, with an emphasis on seeking to invest in companies with secular tailwinds or strong product-driven cycles.

 

The Fund performance shown in the chart above includes the performance of PF Growth Fund (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class P Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.95%, 0.70% and 0.70% for Class A, Class I and Class I-2 as of the most recent prospectus dated October 19, 2023, as supplemented November 6, 2023.

Russell 1000^® Growth Index measures the performance of the large capitalization growth segment of the U.S. equity universe. It includes those Russell 1000^® Index companies that are considered more growth oriented relative to the overall market as defined by the index provider. The Russell 1000^® Growth Index is constructed to provide a comprehensive and unbiased barometer for the large capitalization growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true large capitalization opportunity set and that the represented companies continue to reflect growth characteristics. Results include the reinvestment of all distributions.

For the year ended March 31, 2024, the U.S. equity market, as represented by the S&P 500 Index, posted a full-year return of 29.88%. The increase was primarily driven by the performance of the seven largest companies in the Index, which were responsible for more than half of the S&P 500’s gains. Additionally, after underperforming value in 2022 by the largest amount since 2000, growth continued to recover, as the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 18.73% over the 12-month period ended March 31, 2024.

Macroeconomic news was dominated by inflation, central bank policies, regional bank failures and geopolitical conflicts, while other topics, such as artificial intelligence and congressional politics, made headlines as well. Economic data points were mixed throughout the year, and corporate earnings were just as unpredictable.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Growth Equity Fund – Class I posted a return of 32.55%, underperforming the Russell 1000 Growth Index, which recorded a return of 39.00%.

Aristotle Atlantic Partners, LLC (Aristotle Atlantic) took over management of the Fund effective April 17, 2023 as the sub-adviser,. As such, the performance and attribution summary below reflect the period of time Aristotle Atlantic had sub-advisory responsibility over the Fund, which is just shy of a 12-month period.

Since Aristotle Atlantic took over management of the Fund, the Fund’s outperformance relative to the Russell 1000 Growth Index was due to both security selection and sector allocation. Security selection in Health Care and Consumer Staples and an overweight to Health Care detracted the most to relative performance. Conversely, security selection in Consumer Discretionary and Information Technology and an underweight to Energy detracted from relative performance.

From a security selection standpoint, top detractors within the Fund during the period included: commercial-stage biotechnology company Adaptive Biotechnologies; food processor Darling Ingredients; Bio-Techne, a global developer, manufacturer and supplier of reagents, analytical instruments and precision diagnostics; American multinational computer software company Adobe; and brain health medicines biopharmaceutical company Sage Therapeutics.

Top contributors during the period included: multinational technology company NVIDIA Corporation; Korean manufacturer of motor vehicles Kia Corporation; American multinational automotive and clean energy company Tesla; Apple, the American designer, developer and seller of consumer electronics, computer software and online services; and workflow automation platform solutions provider ServiceNow.

Due to the change of sub-adviser for the Fund noted above, the Fund experienced a transition that resulted in a number of buys and sells designed to realign the portfolio of the Fund with the investment strategy of Aristotle Atlantic. The portfolio activities described below reflect the buys and sells made after this change.

For the period April 18, 2023 through March 31, 2024, we added the following positions to the Fund: US-based entertainment streaming business Netflix; provider of financial information and analytics S&P Global; social networking Meta Platforms; diversified software company Adobe; developer and operator of proprietary technology applications Uber Technologies; and Datalog, an observability and security platform for cloud applications.

We exited the following positions: low-cost variety store chain Dollar General; MSCI, a global provider of equity, fixed income and real estate indices, multi-asset portfolio analysis tools, environmental, social and governance and climate products; diversified financial services and bank holding company Ameriprise Financial; American cybersecurity technology company CrowdStrike Holdings; Dutch semiconductor designer and manufacturer NXP Semiconductors; Sage Therapeutics, a biopharmaceutical company that develops and commercializes brain health medicines; Iovance Biotechnologies, a biopharmaceutical start-up that works to develop tumor-infiltrating lymphocyte therapies against cancer; American energy technology company Enphase Energy; cybersecurity company Tenable Holdings; and American producer and marketer of beer, wine, and spirits Constellation Brands.

Equity markets in the first quarter finished strong despite a rise in interest rates due to inflation staying above the targeted level set by the Federal Reserve. Expectations for a 2024 rate reduction have been pushed out into the back half of the year. A resilient U.S. economy has provided support for higher corporate profits. The first quarter’s double-digit returns, on top of a very strong fourth quarter, leave equity valuations at the high end of historical averages. Continued uncertainty around geopolitical tensions and the pending U.S. presidential election will add to market volatility. Although we believe a pause in equity prices is likely, higher earnings and an easing interest rate cycle should help support equity prices for the balance of the year. Our focus will continue to be at the company level, with an emphasis on seeking to invest in companies with secular tailwinds or strong product-driven cycles.

 

The Fund performance shown in the chart above includes the performance of the Aristotle International Equity Fund (the “Predecessor Fund”), a series of Investment Managers Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on October 23, 2023 (the “October 2023 Reorganization”). The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.04%, 0.79% and 0.79% for Class A, Class I and Class I-2 as of the most recent prospectus dated April 1, 2024.

MSCI All Country World (“ACWI”) ex USA Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. As of December 31, 2023, the MSCI ACWI Index consists of the following developed market country indices—Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom—and of the following emerging market country indices—Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. Results include the reinvestment of dividends after the deduction of withholding tax, applying the tax rate to non-resident individuals who do not benefit from double taxation treaties.

MSCI Europe, Australasia and Far East (“EAFE”) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. As of December 31, 2023, the MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.] Results include the reinvestment of dividends after the deduction of withholding tax, applying the tax rate to non-resident individuals who do not benefit from double taxation treaties.

For the year ended March 31, 2024, global equity markets, as represented by the MSCI ACWI Index (net), posted a full-year return of 23.22%. The MSCI ACWI Growth Index (net), which represents the performance of growth companies within the Index, returned 28.21% over the period, outperforming the 18.01% return of its value counterpart, the MSCI ACWI Value Index (net).

Though global markets trended in a positive direction throughout the year, the world still had its share of twists and turns in the form of a banking crisis and geopolitical conflicts in Europe, the Middle East and Asia. Furthermore, inflation, corresponding central bank policies and economic recovery in areas like Europe and Asia generated significant headlines and proved to be key macroeconomic factors.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle International Equity Fund – Class I-2 posted a return of 14.03%, underperforming its primary benchmark, the MSCI EAFE Index (net), which posted a return of 15.32%, but outperforming its secondary benchmark, the MSCI ACWI ex USA Index (net), which recorded a return of 13.26%.

During the year, the Fund’s underperformance relative to the MSCI EAFE Index (net) can be attributed to security selection, while allocation effects had a positive impact. Security selection in Industrials, Financials and Consumer discretionary detracted the most from relative performance. Conversely, security selection in Energy, Health Care and Consumer Staples contributed to relative performance.

Regionally, security selection was responsible for the Fund’s underperformance, while allocation effects had a positive impact. Security selection in Asia and the U.K. detracted from relative performance, while security selection in Europe and the Middle East and exposure to Canada contributed to relative performance.

From a security selection standpoint, top detractors within the Fund during the period included: British business services group Rentokil Initial; Hong Kong-based multinational insurance and finance corporation AIA Group; Japan-based FANUC, the global manufacturer of industrial robots as well as control systems for machine tools; and Japanese multinational conglomerate companies Daikin Industries and Sony Group.

Top contributors during the period included: Canadian uranium producer Cameco; Munich Reinsurance, the world’s largest reinsurance company; Safran, a French multinational company that designs, develops and manufactures aircraft engines, spacecraft propulsion systems as well as various aerospace and defense-related equipment or their components; Germany-based vendor of software for architects, engineers and the construction industry Nemetschek; and Pan Pacific International, the Japanese discount and general merchandise retailer.

During the period, we added Daikin Industries, a Japanese multinational conglomerate company specializing in commercial and residential air conditioner manufacturing. We exited French multinational software corporation Dassault Systèmes and Sandoz Group, a Swiss-German company that focuses on generic pharmaceuticals and biosimilars.

Despite the U.S. economy’s continued expansion, economic data remain mixed. Additionally, investors face uncertainty the rest of the year, whether it be the path of central bank policy, the outcome of the 2024 U.S. presidential election, or the potential for new and/or escalating geopolitical conflicts.

However, while our analysis considers long-term developments in the macroeconomy, we focus most of our time and attention on individual companies that, in our opinion, possess a combination of qualities that are sustainable and difficult to reproduce. It is our belief that a diversified portfolio of investments in these companies will thrive over full market cycles.

 

The Fund performance shown in the chart above includes the performance of the Aristotle Small Cap Equity Fund (the “Predecessor Fund”), a series of Investment Managers Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on October 23, 2023 (the “October 2023 Reorganization”). The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines, and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on October 30, 2015. The Fund’s performance figures in the table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.17%, 1.92%, 0.92, 0.92% and 0.87% for Class A, Class C, Class I, Class I-2 and Class R6 as of the most recent prospectus dated April 1, 2024.

Russell 2000^® Index measures the performance of the small-capitalization segment of the U.S. equity universe. It includes approximately 2,000 of the smallest securities based on a combination of their market capitalization and current index membership. The Russell 2000^® Index is constructed to provide a comprehensive and unbiased barometer for the small-capitalization segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-capitalization opportunity set. Results include the reinvestment of all distributions.

Volatility was a recurring theme for most of 2023 and leading into 2024. After a tumultuous year in 2022, the U.S. small-cap equity market rallied in 2023 and finished the year ending March 31, 2024 on a strong note with the Russell 2000 Index posting a full-year return of 19.71%. Over the past 12 months, the Russell 2000 Growth Index led, gaining 20.35% versus 18.75% for the Russell 2000 Value Index. For the full year, Energy, Information Technology and Industrials fared best. Utilities and Communication Services were the only two sectors to finish in negative territory, while Materials also lagged.

Macroeconomic news was dominated by inflation, central bank policies, regional bank failures and geopolitical conflicts, while other topics, such as artificial intelligence and congressional politics, made headlines as well. Economic data points were mixed throughout the year, and corporate earnings were just as unpredictable.

The Federal Reserve’s (the Fed) dovish commentary was a primary catalyst for the “everything rally” that ensued into year end. At the mid-December meeting, Chair Jerome Powell made public comments that suggested the Fed had interest rate cuts on its mind, saying cuts were “a topic of discussion” among Fed members. At the time of this writing, markets are currently pricing in several rate cuts in 2024. However, the situation remains fluid as a host of uncertainties could potentially alter the pace and direction of policy moves throughout the year.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Small Cap Equity Fund – Class I-2 posted a return of 9.83%, underperforming the Russell 2000 Index, which recorded a return of 19.71%.

During the year, the Fund’s underperformance relative to the Russell 2000 Index was entirely due to security selection. Security selection in Health Care and Information Technology detracted the most from relative performance. Conversely, security selection in Materials and Utilities added to relative performance. Sector allocation added value on a relative basis. An overweight to Industrials and Information Technology proved to be positive to relative performance, while an underweight to Energy detracted value and an underweight to Financials proved to be flat.

From a security selection standpoint, top detractors within the Fund during the period included: Colorado-based health care services company ModivCare; provider of secure sensor and safety-critical processing subsystems for the aerospace and defense markets Mercury Systems; developer and manufacturer of point-of-care and near-patient diagnostic solutions QuidelOrtho; personal care products marketer Nu Skin Enterprises; and automotive services company Monro. Top contributors during the period included: outdoor living products manufacturer AZEK Company; regional bank Customers Bancorp; Itron, a global manufacturer and distributor of electric, water and gas meters and advanced meter systems; American-Irish aviation leasing company AerCap Holdings; and provider of parking management, payment services, facility maintenance and event logistics solutions SP Plus Corporation.

During the period, we added the following positions to the Fund: pure-play contract logistics company GXO Logistics; artificial intelligence-powered voice recognition software and services provider Cerence; oilfield services company Patterson-UTI Energy (through its acquisition of existing holding NexTier); global sports and entertainment company TKO Group Holdings (through its acquisition of existing holding World Wrestling Entertainment); upstream energy asset owner Northern Oil & Gas; and Power School, a leading provider of cloud-based software for K-12 education in North America.

We exited the following positions: intellectual property licensing business Adeia; spin off from iStar and Safehold merger Star Holdings; mobile resource management solutions supplier CalAmp; biopharmaceutical company Coherus Biosciences; ATN International, provider of telecommunications services to rural, niche, and other under-served markets; and marine shipping company Capital Product Partners.

The Fund experienced some portfolio changes as a result of merger and acquisition activities. NexTier Oilfield Solutions, a provider of hydraulic fracturing and other completion-oriented oilfield services to exploration and production companies in the U.S., was removed from the portfolio by virtue of its merger with Patterson-UTI Energy. U.S. Xpress Enterprises, a Tennessee-based trucking company, was removed from the Fund after being acquired by

Knight-Swift Transportation. World Wrestling Entertainment, an integrated media and entertainment company, was removed from the Fund following its merger with Endeavor Group-owned UFC. The new publicly listed company that will combine the two entities will operate under the name TKO Group Holdings. Finally, SP Plus, a provider of parking management, payment services, facility maintenance and event logistics solutions, was removed from the Fund after being acquired by Metropolis Technologies.

Our current positioning is a function of our bottom-up security selection process and our ability to identify what we view as attractive investment candidates, regardless of economic sector definitions. Overweights in Industrials and Information Technology are mostly a function of our underlying company-specific views rather than any top-down predictions for each sector. Conversely, we continue to be underweight in Consumer Discretionary, as we have been unable to identify what we consider to be compelling long-term opportunities that fit our discipline given the rising risk profiles of many retail businesses and a potential deceleration in goods spending following a period of strength. While the portfolio’s allocation to Health Care is modestly below that of the benchmark, we remain underweight the Biotechnology industry as many companies within that group do not fit our discipline due to their elevated levels of binary risk. Given our focus on long-term business fundamentals, patient investment approach and low portfolio turnover, the strategy’s sector positioning generally does not change significantly from quarter to quarter. However, we may take advantage of periods of volatility by adding selectively to certain companies when appropriate.

We remain optimistic about the long-term potential for the small-cap segment of the U.S. market, although we readily admit that making short-term calls about the future direction of the market following a strong run (+30% since the Russell 2000’s October 2023 low) is a challenging and dubious task. As we look out to the remainder of 2024, while we are encouraged by the continuing signs of economic stability, we recognize that calls for a soft landing are now consensus, that sentiment may be overly optimistic and that markets seem priced for very little risk. So, despite greater clarity over the Fed’s path from here, there remains a long list of items creating uncertainty that could lead to greater volatility in 2024. These include, but are not limited to, geopolitical tensions, U.S. equity index concentration issues, ongoing commercial real estate concerns, the looming presidential election and signs that inflationary pressures have not yet dissipated. We realize that most of these issues are well known, but the timing and magnitude of the impact of any and all of these issues remains unpredictable. Therefore, as always, we will avoid the temptation to forecast their outcome in favor of assessing the potential impact from a range of potential outcomes within our company-specific, bottom-up analysis and quality focus.

From an asset class perspective, valuations of small-cap versus large-cap equities remain near multi-decade lows, which we believe suggests a more favorable setup for small-caps relative to large-caps in the periods to come (16.0x price/earnings ratio for the Russell 2000 Index versus 21.8x price/earnings ratio for the Russell 1000 Index). Additionally, earnings growth is expected to improve for small-caps in 2024 and outpace that of large-caps, which we believe provides further fundamental support and potential upside for the asset class. Against a backdrop of moderating inflation, normalized interest rates and a still-growing U.S. economy, it looks to us that small-cap’s lengthy stretch of relative underperformance may be long in the tooth. If the economy continues to stabilize, our view is that valuations are likely to rise for businesses that have largely sat out the mega-cap performance regime. It also helps that the well-noted concentration in large-caps is reaching 50-year highs and that small-cap valuation relative to large-cap is at multi-decade lows. Therefore, any fundamentally driven repositioning is likely to benefit small-caps more than larger companies, in our view. Lastly, we believe smaller-caps remain better positioned to benefit from reshoring of U.S. manufacturing, the CHIPS Act, and several infrastructure projects on the horizon.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Small/Mid-Cap (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. Prior to the Reorganization, Great Lakes Advisors, LLC served as the sub-adviser to the Predecessor Fund, replacing Rothschild & Co Asset Management US Inc., which previously served as sub-adviser to the Predecessor Fund since its inception. Aristotle Capital Boston, LLC is the sub-adviser to the Fund and employs a different investment approach than the Predecessor Fund’s sub-advisers. If the Fund’s current sub-adviser and strategies had been in place for periods prior to April 17, 2023, the performance information shown below would have been different. The chart above assumes an initial gross investment of $10,000 made on December 31, 2014 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended

March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.15%, 1.90%, 0.85% and 0.90% for Class A, Class C, Class I and Class I-2 as of the most recent prospectus dated October 19, 2023, as supplemented on April 1, 2024.

Russell 2500^® Index measures the performance of the small to mid-capitalization segment of the U.S. equity universe, commonly referred to as “smid” cap. It includes approximately 2,500 of the smallest securities based on a combination of their market capitalization and current index membership. The Russell 2500^® Index is constructed to provide a comprehensive and unbiased barometer for the small to mid-capitalization segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small to mid-capitalization opportunity set. Results include the reinvestment of all distributions.

Volatility was a recurring theme for most of 2023 and leading into 2024. After a tumultuous year in 2022, the U.S. small/mid-cap equity market rallied in 2023 and finished the year ending March 31, 2024 on a strong note with the Russell 2500 Index posting a full-year return of 21.43%. Over the past 12 months, both the Russell 2500 Growth Index and the Russell 2500 Value Index were mostly in line with one another, posting returns of 21.12% and 21.33%, respectively, a stark contrast from the style differences of recent past. For the full year, Industrials, Energy and Financials fared best. Communication Services was the only sector to finish in negative territory, while Utilities and Real Estate also lagged.

Macroeconomic news was dominated by inflation, central bank policies, regional bank failures and geopolitical conflicts, while other topics, such as artificial intelligence and congressional politics, made headlines as well. Economic data points were mixed throughout the year, and corporate earnings were just as unpredictable.

The Federal Reserve’s (the Fed) dovish commentary was a primary catalyst for the “everything rally” that ensued into year end. At the mid-December meeting, Chair Jerome Powell made public comments that suggested the Fed had interest rate cuts on its mind, saying cuts were “a topic of discussion” among Fed members. At the time of this writing, markets are currently pricing in several rate cuts in 2024. However, the situation remains fluid as a host of uncertainties could potentially alter the pace and direction of policy moves throughout the year.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Small/Mid Cap Equity Fund – Class I-2 posted a return of 13.39%, underperforming the Russell 2500 Index, which recorded a return of 21.43%.

Aristotle Capital Boston, LLC (Aristotle Boston) took over management of the Fund as sub-adviser effective April 17, 2023 in connection with a fund merger transaction. As such, the performance and attribution summary below reflect the period of time Aristotle Boston had sub-advisory responsibility over the Fund, which is just shy of a 12-month period.

Since Aristotle Boston took over management of the Fund, the Fund’s underperformance relative to the Russell 2500 Index was entirely due to security selection. Security selection in Industrials and Information Technology detracted the most from relative performance. Conversely, security selection in Materials and Real Estate added to relative performance. Sector allocation added value on a relative basis. An overweight to Information Technology and Industrials proved to be positive to relative performance, while an overweight to Health Care and an underweight to Consumer Discretionary detracted value.

From a security selection standpoint, top detractors within the Fund during the period included: developer and manufacturer of point-of-care and near-patient diagnostic solutions QuidelOrtho; personal care products marketer Nu Skin Enterprises; automotive services company Monro; multinational food processing company Treehouse Foods; Coherus Biosciences, a commercial-stage biopharmaceutical company engaged in the development and commercialization of biosimilar and immune-oncology therapeutics for major regulated markets; and Matthews International, a company that provides brand solutions, memorialization products, and industrial technologies worldwide.

Top contributors during the period included: outdoor living products manufacturer AZEK Company;

Carlisle Companies, a supplier of construction products that make buildings more energy efficient and resilient; Itron, a global manufacturer and distributor of electric, water and gas meters and advanced meter systems; designer and manufacturer of high-performance semiconductor products MACOM Technology Solutions; and American-Irish aviation leasing company AerCap Holdings.

As noted above, on April 17, 2023 Aristotle Boston assumed management of the Fund. Consequently, the Fund experienced a transition that resulted in repositioning designed to realign the portfolio with the investment strategy of Aristotle Boston. The portfolio activities described below reflect the buys and sells made after the change in sub-adviser.

For the period April 18, 2023 through March 31, 2024, we added the following positions to the Fund: pure-play contract logistics company GXO Logistics; Pool Corporation, the world’s largest wholesale distributor of swimming pool supplies and equipment; oilfield services company Patterson-UTI Energy

(through its acquisition of existing holding NexTier); global sports and entertainment company TKO Group Holdings (through its acquisition of existing holding World Wrestling Entertainment); upstream energy asset owner Northern Oil & Gas; LKQ Corporation, North American market leader in alternative collision repair parts; and Power School, a leading provider of cloud-based software for K-12 education in North America.

We exited the following positions: intellectual property licensing business Adeia; Albemarle, the world’s largest lithium producer; spin off from iStar and Safehold merger Star Holdings; mobile resource management solutions supplier CalAmp; and biopharmaceutical company Coherus Biosciences.

The Fund experienced some portfolio changes as a result of merger and acquisition activities. NexTier Oilfield Solutions, a provider of hydraulic fracturing and other completion-oriented oilfield services to exploration and production companies in the U.S., was removed from the portfolio by virtue of its merger with Patterson- UTI Energy. World Wrestling Entertainment, an integrated media and entertainment company, was removed from the Fund following its merger with Endeavor Group-owned UFC. The new publicly listed company that will combine the two entities will operate under the name TKO Group Holdings.

Our current positioning is a function of our bottom-up security selection process and our ability to identify what we view as attractive investment candidates, regardless of economic sector definitions. Overweights in Industrials and Information Technology are mostly a function of our underlying company-specific views rather than any top-down predictions for each sector. Conversely, we continue to be underweight in Consumer Discretionary, as we have been unable to identify what we consider to be compelling long-term opportunities that fit our discipline given the rising risk profiles of many retail businesses and a potential deceleration in goods spending following a period of strength. We also continue to be underweight in Real Estate due to structural challenges for various end markets within the sector. Given our focus on long-term business fundamentals, patient investment approach, and low portfolio turnover, the strategy’s sector positioning generally does not change significantly from quarter to quarter. However, we may take advantage of periods of volatility by adding selectively to certain companies when appropriate.

We remain optimistic about the long-term potential for the small/mid-cap segment of the U.S. market, although we readily admit that making short-term calls about the future direction of the market following a strong run (+30% since the Russell 2500’s October 2023 low) is a challenging and dubious task. As we look out to the remainder of 2024, while we are encouraged by the continuing signs of economic stability, we recognize that calls for a soft landing are now consensus, that sentiment may be overly optimistic and that markets seem priced for very little risk. So, despite greater clarity over the Fed’s path from here, there remains a long list of items creating uncertainty that could lead to greater volatility in 2024. These include, but are not limited to, geopolitical tensions, U.S. equity index concentration issues, ongoing commercial real estate concerns, the looming presidential election and signs that inflationary pressures have not yet dissipated. We realize that most of these issues are well known, but the timing and magnitude of the impact of any and all of these issues remains unpredictable. Therefore, as always, we will avoid the temptation to forecast their outcome in favor of assessing the potential impact from a range of potential results within our company-specific, bottom-up analysis and quality focus.

From an asset class perspective, valuations of small/mid-cap versus large-cap equities remain near multi-decade lows, which we believe suggests a more favorable setup for small/mid-caps relative to large-caps in the periods to come (16.2x price/earnings ratio for the Russell 2500 Index versus 21.8x price/earnings ratio for the Russell 1000 Index). Additionally, earnings growth is expected to improve for small/mid-caps in 2024 and outpace that of large-caps, which we believe provides further fundamental support and potential upside for the asset class. In the event that the economy continues to stabilize, our view is that valuations are likely to rise for businesses that have largely sat out the mega cap performance regime. It also helps that the well-noted concentration in large caps is reaching 50-year highs and small/mid-cap valuation relative to large-cap is at multi-decade lows. Therefore, any fundamentally driven repositioning is likely to benefit small/mid-caps more than larger companies, in our view. Lastly, we believe small/mid-caps remain better positioned to benefit from reshoring of U.S. manufacturing, the CHIPS Act, and several infrastructure projects on the horizon.

 

The Fund performance shown in the chart above includes the performance of the Aristotle/Saul Global Equity Fund (the “Predecessor Fund”), a series of Investment Managers Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on October 23, 2023 (the “October 2023 Reorganization”). The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.04%, 0.79% and 0.79% for Class A, Class I and Class I-2 as of the most recent prospectus dated April 1, 2024.

MSCI All Country World (“ACWI”) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of December 31, 2023 the MSCI ACWI Index consists of the following developed market country

indices—Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States—and of the following emerging market country indices—Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. Results include the reinvestment of dividends after the deduction of withholding tax, applying the tax rate to non-resident individuals who do not benefit from double taxation treaties.

MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, including the U.S. & Canada. As of December 31, 2023, the MSCI World Index consists of the following developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. Results include the reinvestment of dividends after the deduction of withholding tax, applying the tax rate to non-resident individuals who do not benefit from double taxation treaties.

For the year ended March 31, 2024, global equity markets, as represented by the MSCI ACWI Index (net), posted a full-year return of 23.22%. The MSCI ACWI Growth Index (net), which represents the performance of growth companies within the Index, returned 28.21% over the period, outperforming the 18.01% return of its value counterpart, the MSCI ACWI Value Index (net).

Though global markets trended in a positive direction throughout the year, the world still had its share of twists and turns in the form of a banking crisis and geopolitical conflicts in Europe, the Middle East and Asia. Furthermore, inflation, corresponding central bank policies and economic recovery in areas like Europe and Asia generated significant headlines and proved to be key macroeconomic factors.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle/Saul Global Equity Fund – Class I-2 posted a return of 19.33%, underperforming its primary benchmark, the MSCI ACWI Index (net), which posted a return of 23.22%, and is secondary benchmark, the MSCI World Index (net), which recorded a return of 25.11%.

During the year, the Fund’s underperformance relative to the MSCI ACWI Index (net) was due to both security selection and sector allocation. Security selection in Information Technology and Industrials detracted the most to relative performance, as did an overweight to the Materials sector. Conversely, security selection in Energy and Consumer Discretionary, as well as a lack of exposure to the Utilities sector, contributed to relative performance.

Regionally, security selection and allocation effects were responsible for the Fund’s underperformance relative to the primary benchmark. Security selection in Japan and North America detracted from relative performance, while security selection in Europe and an underweight to Emerging Markets contributed to relative performance.

From a security selection standpoint, top detractors within the Fund during the period included: American chemical manufacturing company FMC Corporation; Hong Kong-based multinational insurance and finance corporation AIA Group; British business services group Rentokil Initial; FANUC, a Japanese manufacturer of industrial robots and control systems for machine tools; and Japanese multinational conglomerate Sony Group. Top contributors during the period included: homebuilder Lennar Corporation; American supplier of aggregates and heavy building materials Martin Marietta Materials; Canadian uranium producer Cameco Corporation; Oshkosh, an American industrial company that designs and builds specialty trucks, military vehicles, truck bodies, airport fire apparatus and access equipment; and Munich Re, the world’s largest reinsurance company.

During the period, we added Ireland-based global biopharmaceutical company Jazz Pharmaceuticals and MonotaRO Company, a Japanese e-commerce company of industrial supply products. We exited Canadian auto parts, systems and assembly company Magna International and Kubota, the Japanese maker of tractors and construction machinery.

Despite the U.S. economy’s continued expansion, economic data remain mixed. Additionally, investors face uncertainty the rest of the year, whether from the path of central bank policy, the outcome of the 2024 U.S. presidential election, or the potential for new and/or escalating geopolitical conflicts.

However, while our analysis considers long-term developments in the macroeconomy, we focus most of our time and attention on individual companies that, in our opinion, possess a combination of qualities that are sustainable and difficult to reproduce. It is our belief that a diversified portfolio of investments in these companies will thrive over full market cycles.

 

The Fund performance shown in the chart above includes the performance of the Aristotle Value Equity Fund (the “Predecessor Fund”), a series of Investment Managers Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on October 23, 2023 (the “October 2023 Reorganization”). The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on August 31, 2016 into Class I Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 0.95%, 0.70%, 0.70% and 0.62% for Class A, Class I, Class I-2 and Class R6 as of the most recent prospectus dated April 1, 2024.

Russell 1000^® Value Index measures the performance of the large capitalization value segment of the U.S. equity universe. It includes those Russell 1000^® Index companies that are considered more value oriented relative to the overall market as defined by the index provider. The Russell 1000^® Value Index is constructed to provide a comprehensive and unbiased barometer for the large capitalization value segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true large capitalization opportunity set and that the represented companies continue to reflect value characteristics. Results include the reinvestment of all distributions.

S&P 500^® Index is a capitalization-weighted index of 500 stocks. The Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Results include the reinvestment of all distributions.

For the year ended March 31, 2024, the U.S. equity market, as represented by the S&P 500 Index, posted a full-year return of 29.88%. The increase was primarily driven by the performance of the seven largest companies in the Index, which were responsible for more than half of the S&P 500’s gains. Additionally, after underperforming value in 2022 by the largest amount since 2000, growth continued to recover, as the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 18.73% over the 12-month period ended March 31, 2024.

Macroeconomic news was dominated by inflation, central bank policies, regional bank failures and geopolitical conflicts, while other topics, such as artificial intelligence and congressional politics, made headlines as well. Economic data points were mixed throughout the year and corporate earnings were just as unpredictable.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Value Equity Fund – Class I-2 posted a return of 24.05%, outperforming its primary benchmark, the Russell 1000 Value Index, which posted a return of 20.27%, but underperforming its secondary benchmark, the S&P 500 Index, which recorded a return of 29.88%.

During the year, the Fund’s outperformance relative to the Russell 1000 Value Index was due to security selection, while sector allocation slightly detracted. Security selection in Materials and Health Care contributed the most to relative performance, as did an underweight to the Health Care sector. Conversely, security selection in Real Estate and Utilities, as well as an underweight to the Financials sector, detracted from relative performance.

From a security selection standpoint, top contributors within the Fund during the period included: supplier of aggregates and heavy building materials Martin Marietta Materials; motion and control technologies corporation Parker-Hannifin; homebuilder Lennar; multinational technology corporation Microsoft; and American bank holding company Capital One Financial. Top detractors during the period included: regulated electric utility and natural gas delivery company Xcel Energy; seed and crop protection company Corteva; shared communications infrastructure provider Crown Castle; Japanese multinational conglomerate Sony Group; and simulation software engineering company Ansys.

During the period, we added the following positions to the Fund: video game company Activision Blizzard, industrial technology company Teledyne Technologies, diversified regional bank U.S. Bancorp; home improvement retailer Lowe’s Company; and energy company TotalEnergies. We exited the following positions: video game company Activision Blizzard; property and casualty insurer Cincinnati Financial; energy manufacturing and logistics company Phillips 66; and food distributor Sysco.

Despite the U.S. economy’s continued expansion, economic data remain mixed. Additionally, investors face uncertainty the rest of the year, whether it be the path of central bank policy, the outcome of the 2024 U.S. presidential election, or the potential for new and/or escalating geopolitical conflicts.

However, while our analysis considers long-term developments in the macroeconomy, we focus most of our time and attention on individual companies that, in our opinion, possess a combination of qualities that are sustainable and difficult to reproduce. It is our belief that a diversified portfolio of investments in these companies will thrive over full market cycles.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Portfolio Optimization Aggressive-Growth (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class A Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.09%, 1.84%, and 0.84% for Class A, Class C and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented November 6, 2023.

Bloomberg US Aggregate Bond Index measures the performance of the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, which includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Results include the reinvestment of all distributions.

S&P 500^® Index is a capitalization-weighted index of 500 stocks. The Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Results include the reinvestment of all distributions.

Aristotle Portfolio Optimization Composite Benchmarks: The composite benchmarks for the Portfolio Optimization Funds show the performance of a combination of three or more broad-based market indices that represent fixed income, domestic equity, international equity and cash asset class categories in weights that are fixed and specific to each Fund. The composition of each Fund’s composite benchmark is shown below. Results include the reinvestment of all distributions. Aristotle Portfolio Optimization Aggressive Growth Composite Benchmark is 69% S&P 500, 26% MSCI EAFE, and 5% Bloomberg US Aggregate Bond Indices.

Volatility was a recurring theme for most of 2023 and leading into 2024. For the year ended March 31, 2024, global equity markets, as represented by the MSCI ACWI Index (net), posted a full-year return of 23.22%. The MSCI ACWI Growth Index (net), which represents the performance of growth companies within the Index, returned 28.21% over the period, outperforming the 18.01% return of its value counterpart, the MSCI ACWI Value Index (net). Domestically, the large-cap U.S. equity market, as represented by the S&P 500 Index, posted a full-year return of 29.88%. The increase was primarily driven by the performance of the seven largest companies in the Index, which were responsible for more than half of the S&P 500’s gains. Additionally, after underperforming value in 2022 by the largest amount since 2000, growth continued to recover, as the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 18.73% over the 12-month period ended March 31, 2024. The U.S. small-cap equity market rallied in 2023 and finished the year ending March 31, 2024 on a strong note with the Russell 2000 Index posting a full-year return of 19.71%. Over the past 12 months, the Russell 2000 Growth Index led, gaining 20.35% versus 18.75% for the Russell 2000 Value Index. Meanwhile, fixed income markets also rose, as the Bloomberg Global Aggregate Bond Index and the Bloomberg U.S Aggregate Bond Index increased 0.49% and 1.70%, respectively.

Though global markets trended in a positive direction throughout the year, the world still had its share of twists and turns in the form of a banking crisis and geopolitical conflicts in Europe, the Middle East and Asia. Furthermore, inflation, corresponding central bank policies and economic recovery in areas like Europe and Asia generated significant headlines and proved to be key macroeconomic factors.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Portfolio Optimization Aggressive Growth Fund – Class A posted a return of 19.48%, underperforming the 24.49% return of the Aristotle Portfolio Optimization Aggressive Growth Composite Benchmark, which is comprised of 69% S&P 500 Index, 26% MSCI EAFE Index (net) and 5% Bloomberg U.S. Aggregate Bond Index. The Fund outperformed the Bloomberg U.S. Aggregate Bond Index, which posted a return of 1.70%, but underperformed the S&P 500 Index, which recorded a return of 29.88%.

Among the domestic equity group, our exposure to large-cap growth predominantly contributed to performance over the trailing 12 months. Continued enthusiasm over artificial intelligence significantly benefitted a handful of large tech companies over the past few quarters. However, Aristotle Growth Equity Fund underperformed its benchmark, which detracted from performance. On the other hand, Aristotle Core Equity Fund outperformed its benchmark, which contributed to performance. Over the trailing 12-month period, value stocks detracted from performance, as the environment has been unfavorable for the financial sector. Exposure to commercial real estate also held back performance.

Within the international equity group, exposure to emerging markets detracted from performance over the trailing 12 months. Chinese stocks primarily detracted from performance, as the country struggles to recover from its economic woes. Additionally, Aristotle International Equity Fund underperformed the MSCI EAFE Index (net), which dragged performance for the trailing 12-month period.

Among the fixed income group, exposure to credit sectors such as high yield bonds contributed to performance as they outperformed the Bloomberg U.S. Aggregate Bond Index over the trailing 12 months. Additionally, Aristotle Core Income Fund outperformed its benchmark and contributed to performance. Finally, the exposure to short-term bonds and the outperformance from Aristotle Short Duration Income Fund further contributed to performance.

Given the strength of the U.S. economy, the Federal Reserve (Fed) has yet to feel the immediate need to initiate a rate cut campaign – even though inflation has decelerated since peaking in 2022. In fact, core personal consumption expenditure (PCE) has dipped below 3%, as it slowly approaches the Fed’s target of 2%.

Fed officials have acknowledged that if they cut rates too early they risk reigniting inflation and the Consumer Price Index surprised to the upside for March, though the main index and the core index were both below 4% versus a year ago. On the other hand, some Fed officials also realize constricting monetary policy too tightly and too long could stall economic activity. Given that the U.S. economy is mainly driven by consumption, the health of the labor market remains critical in supporting spending and economic activity more broadly.

Despite the announced layoffs within the tech sector over the past several quarters, the unemployment rate continues to remain below 4% and jobless claims have yet to show signs of weakness in the labor market. To no surprise, the hot labor market was one of the main contributors to the rise in inflation

we saw in recent years. Coming out of the pandemic, many companies aggressively hired workers as stimulus checks were distributed and economic uncertainty started to abate. This ultimately created an environment that led to many dissatisfied workers who quit for various reasons, also referred to as the Great Resignation. Whether people quit to retire, relocate, and/ or find better opportunities, the competition among employers to fill vacancies led to higher wages. The combination of stimulus checks and higher wealth created by robust stock and real estate markets encouraged some of the older and experienced workers to leave the workforce. In turn, employers in industries that experienced high quit rates responded by raising wages to rebuild their staff.

Eventually, the stimulus savings shrank and economic activity slowed as the Fed aggressively raised interest rates. Now, conditions have changed; workers are embracing their jobs, and the quit rate has reversed to levels normally seen during recessionary periods.

This should mean that services inflation, which was the main driver of inflation, is likely to continue its downward path. While hiring activity has slowed over the past several quarters, the labor market appears to be stabilizing rather than deteriorating, as the unemployment rate remains low and job openings remain relatively high compared to past levels. These conditions should hold as long as business and consumer confidence remain healthy. The deceleration in inflation has boosted consumer sentiment, which tends to dictate future retail spending.

For the time being, it appears that the Fed may be close to achieving the elusive soft-landing scenario. Despite the aggressive rate hikes, the U.S. economy has yet to meaningfully slowdown. Still, the market expects the Fed to cut rates later this year. Even Fed Chairman Jerome Powell has hinted at cutting rates sometime this year. Nonetheless, this will all depend on how the economy evolves throughout the year.

Despite the solid economy, one reason the Fed may want to cut rates may be related to the coming debt maturity wall. This is when large amounts of debt mature, and borrowers will need to either pay back their loans or refinance their debt. This is particularly a concern within the commercial real estate (CRE) sector. A recent Fitch Ratings study showed that less than half of CRE borrowers would be able to refinance their debt due to mature this year (mainly because of higher interest rates). Unless interest rates fall, CRE default rates will likely continue climbing, which will force banks to take more losses.

Nevertheless, if the Fed starts to cut rates before debt maturities come due, then some of the pressures should dissipate. Lower rates should help keep debt delinquencies under control and prevent a systemic deterioration in the economy. If inflation continues to normalize to the Fed’s target rate, Powell and his fellow Federal Open Market Committee members may engineer a successful rotation in the economy and avoid a spiraling downturn.

For now, the probability of a recession has fallen to a point where we have begun to take on more equity risk in our portfolios. Instead of making aggressive moves at this point, we are taking calculated risks until we have more clarity. While conditions are steadily improving, we realize much will depend on how the Fed addresses the various risks on the horizon. As always, we will continue to monitor these risks and adjust our allocations accordingly.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Portfolio Optimization Conservative (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class A Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.14%, 1.89%, and 0.89% for Class A, Class C and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented November 6, 2023.

Bloomberg US Aggregate Bond Index measures the performance of the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, which includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Results include the reinvestment of all distributions.

S&P 500^® Index is a capitalization-weighted index of 500 stocks. The Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Results include the reinvestment of all distributions.

Aristotle Portfolio Optimization Composite Benchmarks: The composite benchmarks for the Portfolio Optimization Funds show the performance of a combination of three or more broad-based market indices that represent fixed income, domestic equity, international equity and cash asset class categories in weights that are fixed and specific to each Fund. The composition of each Fund’s composite benchmark is shown below. Results include the reinvestment of all distributions. Aristotle Portfolio Optimization Conservative Composite Benchmark is 71% Bloomberg US Aggregate Bond, 17% S&P 500, 7% ICE BofA U.S. 3-Month T-Bill, and 5% MSCI EAFE Indices.

Volatility was a recurring theme for most of 2023 and leading into 2024. For the year ended March 31, 2024, global equity markets, as represented by the MSCI ACWI Index (net), posted a full-year return of 23.22%. The MSCI ACWI Growth Index (net), which represents the performance of growth companies within the Index, returned 28.21% over the period, outperforming the 18.01% return of its value counterpart, the MSCI ACWI Value Index (net). Domestically, the large-cap U.S. equity market, as represented by the S&P 500 Index, posted a full-year return of 29.88%. The increase was primarily driven by the performance of the seven largest companies in the Index, which were responsible for more than half of the S&P 500’s gains. Additionally, after underperforming value in 2022 by the largest amount since 2000, growth continued to recover, as the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 18.73% over the 12-month period ended March 31, 2024. The U.S. small-cap equity market rallied in 2023 and finished the year ending March 31, 2024 on a strong note with the Russell 2000 Index posting a full-year return of 19.71%. Over the past 12 months, the Russell 2000 Growth Index led, gaining 20.35% versus 18.75% for the Russell 2000 Value Index. Meanwhile, fixed income markets also rose, as the Bloomberg Global Aggregate Bond Index and the Bloomberg U.S Aggregate Bond Index increased 0.49% and 1.70%, respectively.

Though global markets trended in a positive direction throughout the year, the world still had its share of twists and turns in the form of a banking crisis and geopolitical conflicts in Europe, the Middle East and Asia. Furthermore, inflation, corresponding central bank policies and economic recovery in areas like Europe and Asia generated significant headlines and proved to be key macroeconomic factors.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Portfolio Optimization Conservative Fund – Class A posted a return of 8.01%, outperforming the 7.08% return of the Aristotle Portfolio Optimization Conservative Composite Benchmark, which is comprised of 71% Bloomberg U.S. Aggregate Bond Index, 17% S&P 500 Index, 7% ICE BofA Merril Lynch U.S. 3-Month Treasury Bill Index and 5% MSCI EAFE Index (net). The Fund outperformed the Bloomberg U.S. Aggregate Bond Index, which posted a return of 1.70%, but underperformed the S&P 500 Index, which recorded a return of 29.88%.

Among the domestic equity group, our exposure to large-cap growth predominantly contributed to performance over the trailing 12 months. Continued enthusiasm over artificial intelligence significantly benefited a handful of large tech companies over the past few quarters. However, Aristotle Growth Equity Fund underperformed its benchmark, which detracted from performance. On the other hand, Aristotle Core Equity Fund outperformed its benchmark, which contributed to performance. Over the trailing 12-month period, value stocks detracted from performance, as the environment has been unfavorable for the financial sector.

Within the international equity group, the exposure to emerging markets detracted from performance over the trailing 12 months. Chinese stocks primarily detracted from performance, as the country struggles to recover from its economic woes. Additionally, Aristotle International Equity Fund underperformed the MSCI EAFE Index (net), which dragged performance.

Among the fixed income group, exposure to credit sectors such as bank loans and high yield bonds contributed to performance as they outperformed the Bloomberg U.S. Aggregate Bond Index over the trailing 12 months. Additionally, Aristotle Core Income Fund outperformed its benchmark and contributed to performance. Finally, the exposure to short-term bonds and the outperformance from Aristotle Short Duration Income Fund further contributed to performance.

Given the strength of the U.S. economy, the Federal Reserve (Fed) has yet to feel the immediate need to initiate a rate cut campaign – even though inflation has decelerated since peaking in 2022. In fact, core personal consumption expenditure (PCE) has dipped below 3%, as it slowly approaches the Fed’s target of 2%.

Fed officials have acknowledged that if they cut rates too early they risk reigniting inflation, and the Consumer Price Index surprised to the upside for March, though the main index and the core index were both below 4% versus a year ago. On the other hand, some Fed officials also realize constricting monetary policy too tightly and too long could stall economic activity. Given that the U.S. economy is mainly driven by consumption, the health of the labor market remains critical in supporting spending and economic activity more broadly.

Despite the announced layoffs within the tech sector over the past several quarters, the unemployment rate continues to remain below 4% and jobless claims have yet to show signs of weakness in the labor market. To no surprise, the hot labor market was one of the main contributors to the rise in inflation we saw in recent years. Coming out of the pandemic, many companies aggressively hired workers as stimulus checks were distributed and economic uncertainty started to abate. This ultimately created an environment that led to many dissatisfied workers who quit for various reasons, also referred to as the Great Resignation. Whether people quit to retire, relocate, and/ or find better opportunities, the competition among employers to fill vacancies led to higher wages. The combination of stimulus checks and higher wealth created by robust stock and real estate markets encouraged some of the older and experienced workers to leave the workforce. In turn, employers in industries that experienced high quit rates responded by raising wages to rebuild their staff.

Eventually, the stimulus savings shrank and economic activity slowed as the Fed aggressively raised interest rates. Now, conditions have changed; workers are embracing their jobs, and the quit rate has reversed to levels normally seen during recessionary periods.

This should mean that services inflation, which was the main driver of inflation, is likely to continue its downward path. While hiring activity has slowed over the past several quarters, the labor market appears to be stabilizing rather than deteriorating, as the unemployment rate remains low and job openings remain relatively high compared to past levels. These conditions should hold as long as business and consumer confidence remain healthy. The deceleration in inflation has boosted consumer sentiment, which tends to dictate future retail spending.

For the time being, it appears that the Fed may be close to achieving the elusive soft-landing scenario. Despite the aggressive rate hikes, the U.S. economy has yet to meaningfully slowdown. Still, the market expects the Fed to cut rates later this year. Even Fed Chairman Jerome Powell has hinted at cutting rates sometime this year. Nonetheless, this will all depend on how the economy evolves throughout the year.

Despite the solid economy, one reason the Fed may want to cut rates may be related to the coming debt maturity wall. This is when large amounts of debt mature, and borrowers will need to either pay back their loans or refinance their debt. This is particularly a concern within the commercial real estate (CRE) sector. A recent Fitch Ratings study showed that less than half of CRE borrowers would be able to refinance their debt due to mature this year (mainly because of higher interest rates). Unless interest rates fall, CRE default rates will likely continue climbing, which will force banks to take more losses.

Nevertheless, if the Fed starts to cut rates before debt maturities come due, then some of the pressures should dissipate. Lower rates should help keep debt delinquencies under control and prevent a systemic deterioration in the economy. If inflation continues to normalize to the Fed’s target rate, Powell and his fellow Federal Open Market Committee members may engineer a successful rotation in the economy and avoid a spiraling downturn.

For now, the probability of a recession has fallen to a point where we have begun to take on more equity risk in our portfolios. Instead of making aggressive moves at this point, we are taking calculated risks until we have more clarity. While conditions are steadily improving, we realize much will depend on how the Fed addresses the various risks on the horizon. As always, we will continue to monitor these risks and adjust our allocations accordingly.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Portfolio Optimization Growth (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class A Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.09%, 1.84%, and 0.84% for Class A, Class C and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented November 6, 2023.

Bloomberg US Aggregate Bond Index measures the performance of the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, which includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Results include the reinvestment of all distributions.

S&P 500^® Index is a capitalization-weighted index of 500 stocks. The Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Results include the reinvestment of all distributions.

Aristotle Portfolio Optimization Composite Benchmarks: The composite benchmarks for the Portfolio Optimization Funds show the performance of a combination of three or more broad-based market indices that represent fixed income, domestic equity, international equity and cash asset class categories in weights that are fixed and specific to each Fund. The composition of each Fund’s composite benchmark is shown below. Results include the reinvestment of all distributions. Aristotle Portfolio Optimization Growth Composite Benchmark is 58% S&P 500, 23% Bloomberg US Aggregate Bond, and 19% MSCI EAFE Indices.

Volatility was a recurring theme for most of 2023 and leading into 2024. For the year ended March 31, 2024, global equity markets, as represented by the MSCI ACWI Index (net), posted a full-year return of 23.22%. The MSCI ACWI Growth Index (net), which represents the performance of growth companies within the Index, returned 28.21% over the period, outperforming the 18.01% return of its value counterpart, the MSCI ACWI Value Index (net). Domestically, the large-cap U.S. equity market, as represented by the S&P 500 Index, posted a full-year return of 29.88%. The increase was primarily driven by the performance of the seven largest companies in the Index, which were responsible for more than half of the S&P 500’s gains. Additionally, after underperforming value in 2022 by the largest amount since 2000, growth continued to recover, as the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 18.73% over the 12-month period ended March 31, 2024. The U.S. small-cap equity market rallied in 2023 and finished the year ending March 31, 2024 on a strong note with the Russell 2000 Index posting a full-year return of 19.71%. Over the past 12 months, the Russell 2000 Growth Index led, gaining 20.35% versus 18.75% for the Russell 2000 Value Index. Meanwhile, fixed income markets also rose, as the Bloomberg Global Aggregate Bond Index and the Bloomberg U.S Aggregate Bond Index increased 0.49% and 1.70%, respectively.

Though global markets trended in a positive direction throughout the year, the world still had its share of twists and turns in the form of a banking crisis and geopolitical conflicts in Europe, the Middle East and Asia. Furthermore, inflation, corresponding central bank policies and economic recovery in areas like Europe and Asia generated significant headlines and proved to be key macroeconomic factors.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Portfolio Optimization Growth Fund – Class A posted a return of 16.81%, underperforming the 20.20% return of the Aristotle Portfolio Optimization Growth Composite Benchmark, which is comprised of 58% S&P 500 Index, 23% Bloomberg U.S. Aggregate Bond Index and 19% MSCI EAFE Index (net). The Fund outperformed the Bloomberg U.S. Aggregate Bond Index, which posted a return of 1.70%, but underperformed the S&P 500 Index, which recorded a return of 29.88%.

Among the domestic equity group, our exposure to large-cap growth predominantly contributed to performance over the trailing 12 months. Continued enthusiasm over artificial intelligence significantly benefited a handful of large tech companies over the past few quarters. However, Aristotle Growth Equity Fund underperformed its benchmark, which detracted from performance. On the other hand, Aristotle Core Equity Fund outperformed its benchmark, which contributed to performance. Over the trailing 12-month period, value stocks detracted from performance, as the environment has been unfavorable for the financial sector. Exposure to commercial real estate also held back performance.

Within the international equity group, exposure to emerging markets detracted from performance over the trailing 12 months. Chinese stocks primarily detracted from performance, as the country struggles to recover from its economic woes. Additionally, Aristotle International Equity Fund underperformed the MSCI EAFE Index (net), which dragged performance for the trailing 12-month period.

Among the fixed income group, exposure to credit sectors such as high yield bonds contributed to performance as they outperformed the Bloomberg U.S. Aggregate Bond Index over the trailing 12 months. Additionally, Aristotle Core Income Fund outperformed its benchmark and contributed to performance. Finally, the exposure to short-term bonds and the outperformance from Aristotle Short Duration Income Fund further contributed to performance.

Given the strength of the U.S. economy, the Federal Reserve (Fed) has yet to feel the immediate need to initiate a rate cut campaign – even though inflation has decelerated since peaking in 2022. In fact, core personal consumption expenditure (PCE) has dipped below 3%, as it slowly approaches the Fed’s target of 2%.

Fed officials have acknowledged that if they cut rates too early they risk reigniting inflation and the Consumer Price Index surprised to the upside for March, though the main index and the core index were both below 4% versus a year ago. On the other hand, some Fed officials also realize constricting monetary policy too tightly and too long could stall economic activity. Given that the U.S. economy is mainly driven by consumption, the health of the labor market remains critical in supporting spending and economic activity more broadly.

Despite the announced layoffs within the tech sector over the past several quarters, the unemployment rate continues to remain below 4% and jobless claims have yet to show signs of weakness in the labor market. To no surprise, the hot labor market was one of the main contributors to the rise in inflation

we saw in recent years. Coming out of the pandemic, many companies aggressively hired workers as stimulus checks were distributed and economic uncertainty started to abate. This ultimately created an environment that led to many dissatisfied workers who quit for various reasons, also referred to as the Great Resignation. Whether people quit to retire, relocate, and/ or find better opportunities, the competition among employers to fill vacancies led to higher wages. The combination of stimulus checks and higher wealth created by robust stock and real estate markets encouraged some of the older and experienced workers to leave the workforce. In turn, employers in industries that experienced high quit rates responded by raising wages to rebuild their staff.

Eventually, the stimulus savings shrank and economic activity slowed as the Fed aggressively raised interest rates. Now, conditions have changed; workers are embracing their jobs, and the quit rate has reversed to levels normally seen during recessionary periods.

This should mean that services inflation, which was the main driver of inflation, is likely to continue its downward path. While hiring activity has slowed over the past several quarters, the labor market appears to be stabilizing rather than deteriorating, as the unemployment rate remains low and job openings remain relatively high compared to past levels. These conditions should hold as long as business and consumer confidence remain healthy. The deceleration in inflation has boosted consumer sentiment, which tends to dictate future retail spending.

For the time being, it appears that the Fed may be close to achieving the elusive soft-landing scenario. Despite the aggressive rate hikes, the U.S. economy has yet to meaningfully slowdown. Still, the market expects the Fed to cut rates later this year. Even Fed Chairman Jerome Powell has hinted at cutting rates sometime this year. Nonetheless, this will all depend on how the economy evolves throughout the year.

Despite the solid economy, one reason the Fed may want to cut rates may be related to the coming debt maturity wall. This is when large amounts of debt mature, and borrowers will need to either pay back their loans or refinance their debt. This is particularly a concern within the commercial real estate (CRE) sector. A recent Fitch Ratings study showed that less than half of CRE borrowers would be able to refinance their debt due to mature this year (mainly because of higher interest rates). Unless interest rates fall, CRE default rates will likely continue climbing, which will force banks to take more losses.

Nevertheless, if the Fed starts to cut rates before debt maturities come due, then some of the pressures should dissipate. Lower rates should help keep debt delinquencies under control and prevent a systemic deterioration in the economy. If inflation continues to normalize to the Fed’s target rate, Powell and his fellow Federal Open Market Committee members may engineer a successful rotation in the economy and avoid a spiraling downturn.

For now, the probability of a recession has fallen to a point where we have begun to take on more equity risk in our portfolios. Instead of making aggressive moves at this point, we are taking calculated risks until we have more clarity. While conditions are steadily improving, we realize much will depend on how the Fed addresses the various risks on the horizon. As always, we will continue to monitor these risks and adjust our allocations accordingly.

 

The Fund performance shown in the chart above includes the performance of Pacific Funds Portfolio Optimization Moderate Conservative (the “Predecessor Fund”), a series of Pacific Funds Series Trust, as a result of a reorganization of the Predecessor Fund into the Fund on April 17, 2023. The Predecessor Fund was managed by the same portfolio management team using investment policies, objectives, guidelines and restrictions that were substantially similar to those of the Fund. The chart above assumes an initial gross investment of $10,000 made on March 31, 2014 into Class A Shares of the Predecessor Fund. The Fund’s performance figures in table below are for the periods ended March 31, 2024.

The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained by calling 844-274-7885. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Performance figures for periods greater than one year are annualized.

The Fund’s gross expense ratios are 1.14%, 1.89%, and 0.89% for Class A, Class C and I-2 as of the most recent prospectus dated October 19, 2023, as supplemented November 6, 2023.

Bloomberg US Aggregate Bond Index measures the performance of the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, which includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Results include the reinvestment of all distributions.

S&P 500^® Index is a capitalization-weighted index of 500 stocks. The Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Results include the reinvestment of all distributions.

Aristotle Portfolio Optimization Composite Benchmarks: The composite benchmarks for the Portfolio Optimization Funds show the performance of a combination of three or more broad-based market indices that represent fixed income, domestic equity, international equity and cash asset class categories in weights that are fixed and specific to each Fund. The composition of each Fund’s composite benchmark is shown below. Results include the reinvestment of all distributions. Aristotle Portfolio Optimization Moderate Conservative Composite Benchmark is 55% Bloomberg US Aggregate Bond, 30% S&P 500, 10% MSCI EAFE, and 5% ICE BofA U.S. 3-Month T-Bill Indices.

Volatility was a recurring theme for most of 2023 and leading into 2024. For the year ended March 31, 2024, global equity markets, as represented by the MSCI ACWI Index (net), posted a full-year return of 23.22%. The MSCI ACWI Growth Index (net), which represents the performance of growth companies within the Index, returned 28.21% over the period, outperforming the 18.01% return of its value counterpart, the MSCI ACWI Value Index (net). Domestically, the large-cap U.S. equity market, as represented by the S&P 500 Index, posted a full-year return of 29.88%. The increase was primarily driven by the performance of the seven largest companies in the Index, which were responsible for more than half of the S&P 500’s gains. Additionally, after underperforming value in 2022 by the largest amount since 2000, growth continued to recover, as the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 18.73% over the 12-month period ended March 31, 2024. The U.S. small-cap equity market rallied in 2023 and finished the year ending March 31, 2024 on a strong note with the Russell 2000 Index posting a full-year return of 19.71%. Over the past 12 months, the Russell 2000 Growth Index led, gaining 20.35% versus 18.75% for the Russell 2000 Value Index. Meanwhile, fixed income markets also rose, as the Bloomberg Global Aggregate Bond Index and the Bloomberg U.S Aggregate Bond Index increased 0.49% and 1.70%, respectively.

Though global markets trended in a positive direction throughout the year, the world still had its share of twists and turns in the form of a banking crisis and geopolitical conflicts in Europe, the Middle East and Asia. Furthermore, inflation, corresponding central bank policies and economic recovery in areas like Europe and Asia generated significant headlines and proved to be key macroeconomic factors.

Past Performance is not a guarantee of future results. Fund investing involves risk. Principal loss is possible. Diversification does not assure a profit or protect against loss in a declining market. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor’s shares in the Fund, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

For the year ended March 31, 2024, Aristotle Portfolio Optimization Moderate Conservative Fund – Class A posted a return of 10.58%, underperforming the 11.21% return of the Aristotle Portfolio Optimization Moderate Conservative Composite Benchmark, which is comprised of 55% Bloomberg U.S. Aggregate Bond Index, 30% S&P 500 Index, 10% MSCI EAFE Index (net) and 5% ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index. The Fund outperformed the Bloomberg U.S. Aggregate Bond Index, which posted a return of 1.70%, but underperformed the S&P 500 Index, which recorded a return of 29.88%.

Among the domestic equity group, our exposure to large-cap growth predominantly contributed to performance over the trailing 12 months. Continued enthusiasm over artificial intelligence significantly benefited a handful of large tech companies over the past few quarters. However, Aristotle Growth Equity Fund underperformed its benchmark, which detracted from performance. On the other hand, Aristotle Core Equity Fund outperformed its benchmark, which contributed to performance. Over the trailing 12-month period, value stocks detracted from performance, as the environment has been unfavorable for the financial sector. Exposure to commercial real estate also held back performance.

Within the international equity group, exposure to emerging markets detracted from performance over the trailing 12 months. Chinese stocks primarily detracted from performance, as the country struggles to recover from its economic woes. Additionally, Aristotle International Equity Fund underperformed the MSCI EAFE Index (net), which dragged performance.

Among the fixed income group, exposure to credit sectors such as bank loans and high yield bonds contributed to performance as they outperformed the Bloomberg U.S. Aggregate Bond Index over the trailing 12 months. Additionally, Aristotle Core Income Fund outperformed its benchmark and contributed to performance. Finally, exposure to short-term bonds and outperformance from Aristotle Short Duration Income Fund further contributed to performance.

Given the strength of the U.S. economy, the Federal Reserve (Fed) has yet to feel the immediate need to initiate a rate cut campaign – even though inflation has decelerated since peaking in 2022. In fact, core personal consumption expenditure (PCE) has dipped below 3%, as it slowly approaches the Fed’s target of 2%.

Fed officials have acknowledged that if they cut rates too early they risk reigniting inflation and the Consumer Price Index surprised to the upside for March, though the main index and the core index were both below 4% versus a year ago. On the other hand, some Fed officials also realize constricting monetary policy too tightly and too long could stall economic activity. Given that the U.S. economy is mainly driven by consumption, the health of the labor market remains critical in supporting spending and economic activity more broadly.