Goldman Sachs High Yield Instl (GSHIX) N-CSRSCertified semi-annual shareholder report (management investment company)

Overall, U.S. equities rose during the Reporting Period. The Standard & Poor’s 500^® Index (the “S&P 500 Index”) ended the Reporting Period with a return of 1.26%. The Russell 3000^® Index generated a return of 1.51%.

The market posted muted returns during the Reporting Period amid a backdrop of ongoing Federal Reserve (“Fed”) interest rate hikes to combat inflation, persistent recession worries, supply-chain disruptions, geopolitical tensions given the Russia/Ukraine war, and elevated concerns around China’s zero-COVID policy.

As the Reporting Period began in September 2022, the S&P 500 Index decreased primarily based on the noticeable tightening of financial conditions guided by expectations for a more aggressive global interest rate hiking cycle. Indeed, the Fed increased its “raise and hold” messaging as the end of September approached, a policy that received support on the back of higher than consensus expected August core inflation data and a still-tight labor market that showed only moderate signs of cooling off.

During the fourth quarter of 2022, the S&P 500 Index solidly increased, breaking its streak of three consecutive quarterly losses, attributable primarily to gains in October and November.

Investors continued to witness a variety of contradictory macroeconomic developments, highlighted by a noticeably hawkish Fed, consumer resilience, and economic data supporting the themes of slowing economic growth. (Hawkish tends to suggest higher interest rates; opposite of dovish.)

There was a dovish tilt surrounding consensus expectations for a reduction in the pace of monetary policy tightening, which was realized when the Fed announced a 50 basis point interest rate hike in December, following four successive 75 basis point increases.

Positive inflation developments further supported market aspirations for a peak in the Fed tightening cycle, with October and November inflation data coming in lower than anticipated by most.

Despite the smaller interest rate hike, the Fed maintained its hawkish tone with its relentless higher-for-longer messaging that continued to be a headwind for the U.S. equities market.

Although the third quarter 2022 corporate earnings season provided disappointing results, companies emphasized a strong demand environment even against a backdrop of heightened macroeconomic uncertainty. Companies also focused on cost-cutting measures, as headlines of layoffs remained in the spotlight, especially within the information technology sector.

On the geopolitical front, the most constructive takeaways came from China’s zero-COVID pivot and pro-growth focus as well as Europe’s warmer than anticipated weather that helped settle concerns about an energy crisis there.

The S&P 500 Index rose in January 2023, rebounding from December 2022’s losses, gaining on a combination of heightened optimism around disinflationary signals, a cooling job market, positive reports about China’s economic reopening, better than consensus forecasted economic circumstances in Europe, improvements in supply-chain conditions and elevated hopes for the termination of the Fed’s tightening cycle. Collectively, these themes provided a strong case for the Fed’s soft landing scenario and the avoidance of a deep recession resulting from interest rate hikes. (A soft landing, in economics, is a cyclical downturn that avoids recession. It typically describes attempts by central banks to raise interest rates just enough to stop an economy from overheating and experiencing high inflation, without causing a significant increase in unemployment, or a hard landing.)

However, the S&P 500 Index then fell again in February 2023, giving back a portion of the prior month’s gains.

U.S. equities depreciated as the market’s modified Fed interest rate hike expectations and resilient economic data prompted a reduction in the progress of disinflation and heightened traction around several bearish themes. (Bearish refers to an expected downward movement in the prices of securities.)

Early in February, the Fed raised the targeted federal funds rate by another 25 basis points as expected, and its accompanying statement seemed dovish. (A basis point is 1/100^th of a percentage point.) Still, Fed Chair Powell’s subsequent statement that further rate hikes will be necessary if economic data continues to come in stronger than expected shifted the Fed narrative more hawkish.

During the Reporting Period overall, value stocks meaningfully outperformed growth stocks within the large-cap and small-cap segments of the U.S. equity market, though growth stocks outpaced value stocks within the mid-cap segment.

The best performing sectors within the S&P 500 Index during the Reporting Period were materials, industrials, energy and financials, while the weakest performing sectors were utilities, consumer discretionary, real estate and communication services.

The Fund posted negative absolute returns but outperformed its benchmark, the Russell 1000^® Growth Index, during the Reporting Period.

Stock selection overall contributed positively to the Fund’s performance during the Reporting Period, especially in the consumer discretionary sector. Effective stock selection and having an overweighted allocation to the health care sector, which significantly outperformed the Russell 1000^® Growth Index during the Reporting Period, also boosted relative results. Only partially offsetting these positive contributors was stock selection in the information technology sector, which detracted.

Among individual holdings, overweight positions in semiconductor company NVIDIA, discount apparel and home accessories retailer Ross Stores and auto parts technology supplier Aptiv contributed most positively. Those individual holdings that detracted most included overweight positions in financial operations-focused cloud-based software provider BILL Holdings, communications and broadcast tower real estate investment trust American Tower and Australia-based software company Atlassian (Class A).

The Fund posted positive absolute returns that outperformed its benchmark, the S&P 500 Index, during the Reporting Period.

Stock selection overall contributed positively to the Fund’s performance during the Reporting Period, especially in the financials, consumer discretionary and industrials sectors. Only partially offsetting these positive contributors was stock selection in the energy sector, which detracted.

Among individual holdings, overweight positions in steel producer and metals recycler Steel Dynamics and semiconductor company NVIDIA and an underweight position in e-commerce retailing behemoth Amazon.com contributed most positively. Those individual holdings that detracted most included underweight positions in Facebook parent company Meta Platforms (Class A) and pharmaceuticals company Merck & Co. and an overweight position in financial technology solutions provider Fidelity National Information Services.

The Fund posted positive absolute returns that outperformed its benchmark, the Russell 1000^® Index, during the Reporting Period.

Stock selection overall contributed positively to the Fund’s performance during the Reporting Period, especially in the industrials and consumer discretionary sectors. Sector allocation decisions as a whole also added value, albeit more modestly. Only partially offsetting these positive contributors was stock selection in the information technology sector, which detracted.

Among individual holdings, an underweight position in electric vehicle maker Tesla and overweight positions in industrial automation and digital transformation solutions provider Rockwell Automation and mining company Freeport-McMoRan

The Fund posted negative absolute returns that underperformed its benchmark, the Russell 1000^® Growth Index, during the Reporting Period.

Stock selection overall detracted from the Fund’s performance during the Reporting Period, especially in the information technology and communication services sectors. Having an underweighted allocation to the industrials sector, which outperformed the Russell 1000^® Growth Index during the Reporting Period, also hurt. These detractors were only partially offset by stock selection in the materials and consumer staples sectors, which buoyed relative results. Having no exposure to the energy sector, which underperformed the Russell 1000^® Growth Index during the Reporting Period, also helped.

Among individual holdings, overweight positions in financial operations-focused cloud-based software provider BILL Holdings, Australia-based software company Atlassian (Class A) and e-commerce retailing behemoth Amazon.com detracted most. Those individual holdings that contributed most positively included overweight positions in semiconductor company NVIDIA, discount apparel and home accessories retailer Ross Stores and shipping carrier Old Dominion Freight Line.

The Fund posted negative absolute returns that underperformed its benchmark, the NASDAQ Composite Total Return Index, during the Reporting Period.

Stock selection overall detracted from the Fund’s performance during the Reporting Period, especially in the communication services sector. This was only partially offset by sector allocation decisions as a whole, which contributed positively, albeit modestly. Having an overweighted allocation to information technology and an underweighted allocation to consumer discretionary, each as relative to the NASDAQ Composite Total Return Index, buoyed results most.

Among individual holdings, overweight positions in Facebook parent company Meta Platforms (Class A), Australia-based software company Atlassian (Class A) and communications and broadcast tower real estate investment trust American Tower detracted most. We sold the Fund’s position in Meta Platforms (Class A) by the end of the Reporting Period. Those individual holdings that contributed most positively included overweight positions in semiconductor company NVIDIA, semiconductor manufacturing equipment producer ASML Holding and online e-commerce platform operator for the Latin American markets MercadoLibre.

The Fund posted positive absolute returns and outperformed its benchmark, the S&P 500 Index, during the Reporting Period.

Stock selection overall contributed positively to the Fund’s performance during the Reporting Period, especially in the consumer discretionary, industrials and financials sectors. Having an overweighted allocation to the industrials sector, which outperformed the S&P 500 Index during the Reporting Period, also helped. Only partially offsetting these positive contributors was stock selection in the information technology and real estate sectors, which detracted. Having an overweighted allocation to the utilities sector, which underperformed the S&P 500 Index during the Reporting Period, also hurt.

Among individual holdings, overweight positions in industrial conglomerate General Electric, diversified financials institution JPMorgan Chase and power management company Eaton contributed most positively. Those individual holdings that detracted most included overweight positions in communications and broadcast tower real estate investment trust American Tower, electric power and energy infrastructure company NextEra Energy and semiconductor manufacturer Wolfspeed.