As is typically the case, our positioning on a sector basis is relatively neutral compared with the benchmark, relying on our stock selection capabilities to add value for clients. Some of the more significant trades in the portfolio during the quarter occurred in the utilities, information technology, and industrials and business services sectors.

Utilities

We are modestly overweight this sector. We have been able to identify select investments in the space that focus on geographically attractive areas which have favorable regulatory environments. Our largest allocations in the space are to the gas utilities and electric utilities segments.

Activity within the sector demonstrated the dichotomy of preelection and postelection sentiment. The implication that a Trump victory brings imminent tax reform and rising interest rates weighed on the sector and influenced certain trades, including NiSource and Great Plains.

• We initiated a position in regulated utility NiSource as we believe this company has one of the best durable growth stories within utilities and offers meaningful long-term growth potential. However, postelection, we opted to pare our position on concerns that lower corporate tax rates could hurt the tax shield from parent debt, which could lower earnings per share. While we retain a favorable long-term view on NiSource, we currently favor Atmos, which is largely immune to negative tax reform implications.

• Due to similar market environment risks, we elected to exit our position in Great Plains Energy, a vertically integrated utility holding company that owns regulated utilities Kansas City Power & Light and KCP&L Greater Missouri Operations.

• We also elected to exit our position in PNM Resources and take profits following a long period of strong performance.

Information Technology

Our information technology allocation is somewhat underweight relative to the benchmark, though we are sanguine on the sector as a whole. We have large allocations in the software, IT services, Internet software and services, and semiconductors segments. We have been able to find many niche software providers that we believe have attractive growth opportunities and barriers to ward off their competition.

• We found an attractive entry point in Ellie Mae, a software-as-a-service provider for the U.S. residential mortgage industry. Its platform is used to create, manage, and process loans. We believe this to be a durable business with a solid management team and substantial room for growth.

• We initiated a position in Splunk, a leading machine data analytics platform with a strong management team, consistent competitive leadership, and improving mix of recurring revenues. We believe there is a long-term runway for growth in the IT segment, while the cybersecurity business should sustain consistent revenue growth near term.

• We added to our position in CSRA, a pure-play provider of IT services to the U.S. government with low capital intensity. CSRA forms the security, process, and technology bridge between legacy infrastructure and near-cloud-ready environments. We believe the company is well positioned in secular growth areas, with a robust business development pipeline.

• XO Group is a consumer Internet and media company focused primarily on the wedding market. We trimmed our shares into strength following a bounceback from disappointing third-quarter results. The company is in the midst of a turnaround, with new management driving toward a more user-focused and profitable business model.

Industrials and Business Services

In the industrials and business services sector, the portfolio is somewhat underweight the benchmark allocation despite sizable positions in machinery and commercial services and supplies. The sector tends to be cyclical, with strong surges during economic recovery. We have exposure to cyclical holdings to take advantage of the economic recovery, but also hold positions in more stalwart areas that allow steady and measured returns to provide a more balanced risk exposure.

• We initiated a position in Alaska Air Group. We believe the airline to be a high-quality company capable of generating consistent earnings growth. The company recently completed its acquisition of Virgin America, which significantly expanded its West Coast access.

• John Bean Technologies operates in the food service machinery and air transportation support industries. Shares rose on solid quarterly results, raised forward guidance, and the announcement of the acquisition of Tipper Tie, a leader in processing and clip packaging systems for the meat and poultry industries. We trimmed our position into strength.

• We eliminated our position in parking facilities manager SP Plus on valuation following strong performance.

• Shares of engineering and scientific consulting firm Exponent rose on better-than-expected third-quarter results. We eliminated our position into strength.