By Peter Langerman, Chairman, President and Chief Executive Officer of Mutual Series

At Mutual Series, we remain focused on our bottom-up, fundamental analysis, but at the same time we closely follow world events. Although there may be existing "big picture" issues that could cause continued headwinds in the global economic recovery, including Greece's debt woes and concerns about other countries in that region, we look at events such as these through the prism of the companies in which we invest or may potentially invest.

Our team continues to look at specific companies, and we have been finding attractive possibilities for our suite of funds. In fact, we have been putting money to work recently, in the U.S. and globally, in what we believe to be undervalued equities and in some of the niche areas in which we participate, such as mergers and acquisitions (M&A) and distressed debt. We view our job as figuring out which are the value plays and which are the disasters, i.e., differentiating between companies that are trading cheaply for good reason and those that are not.

We believe that we are now in a less macro-driven type of market. In late 2008 and early 2009, prices of all assets moved very closely together, reflecting the all-encompassing nature of the financial crisis. That crisis has receded, and we feel the current market is a good market for our strategy at Mutual Series. For example, we think that many corporations are now moving out of "crisis management" and are making and executing longer-term plans. They are trying to determine what normal demand will be and what market opportunities exist, and they have resumed portfolio management by acquiring new businesses and selling or spinning off other businesses. We have seen a bit of a pickup in merger and acquisition activity lately, reflecting this trend. One reason for this is that the large amount of cash on corporate balance sheets and easily available credit for strong companies makes acquisitions a logical answer to the slow growth environment many companies face.

In line with previous market downturns, M&A activity declined in 2008 and 2009 as traditional sources of funding dried up and companies sought to preserve capital. In addition, tough economic conditions lead companies to focus inward on improving their operations and preserving value. The ongoing economic recovery has led management teams to start looking outward again, which we believe is likely to translate into an increase in both the number and value of M&A deals in 2010. From a geographic perspective, the majority of M&A deals typically occur in the U.S. However, in 2009 and so far in 2010, companies in both Asia and Europe have conducted a significant volume of sizable M&A transactions, and we expect global M&A to continue to grow.

Along with these developments, there has been-and may continue to be-some volatility as markets have been impacted by a number of issues. However, such issues typically lead to dramatic changes in valuation that enable our investment team to uncover attractive opportunities using our in-depth modeling and valuation techniques. We feel that this type of volatility, whether triggered by negative media reports or pending legislation challenges in the U.S., among other concerns, offers us the type of environment where we can put our tools to use and seek out value.

While there are no guarantees that the markets around the world will stabilize and continue to grow-and we will not make any predictions about market direction-we view the current environment as one that works well for us, and we will continue to do what we do best: engage in bottom-up, stock-by-stock analysis with a long-term perspective.