In the first quarter of 2026, the AMG Veritas Global Real Return Fund (Class I) recorded a notable decline, registering a negative return of 8.68%. This performance significantly trailed its primary benchmark, the Bloomberg Barclays U.S. Treasury Inflation-Linked Bond Index, which posted a modest gain of 0.26%. Over the trailing twelve-month period ending March 31, 2026, the fund's returns remained in negative territory at -7.24%, contrasting sharply with the benchmark's 3.00% appreciation. The primary drivers behind this substantial drawdown were significant corrections in several key information technology and SaaS sector holdings within the fund's portfolio, indicating a challenging period for growth-oriented investments amidst broader market dynamics.
The downturn experienced by the fund during Q1 2026 was largely attributed to the underperformance of its information technology holdings. Specifically, major tech giants such as Microsoft saw a considerable dip, with its value decreasing by 24%. Concurrently, several Software-as-a-Service (SaaS) companies, including Salesforce and SAP SE, faced even steeper declines, each dropping by approximately 30%. Amadeus, another significant holding, also contributed to the negative returns with a 23% reduction in value. These pronounced losses underscore the fund's exposure to the technology sector and its susceptibility to market corrections within this volatile segment.
The broader economic landscape and market sentiment likely played a crucial role in amplifying these sector-specific declines. Factors such as shifts in inflation expectations, changes in interest rate policies, and geopolitical events can have a disproportionate impact on growth stocks, particularly those in the technology and SaaS domains. As investors reassess risk and reallocate capital, companies with high valuations and growth potential often experience sharper pullbacks. This environment necessitates a careful balance of diversification and risk management, especially for funds aiming for real returns in a dynamic global market.
Looking ahead, the fund's ability to recover and generate positive real returns will depend on various factors. These include the resilience of its remaining holdings, the strategic adjustments made to its portfolio, and the overall trajectory of the global economy. A rebound in technology and SaaS sectors, coupled with favorable macroeconomic conditions, could help mitigate previous losses. However, sustained volatility or further corrections in these sectors would continue to pose challenges for the fund's performance. Active management and a keen eye on evolving market trends will be critical for navigating these complexities and aiming to achieve long-term objectives.
