Navigating Market Currents: A Strategic Divestment in Healthcare
Fourth Quarter 2025 Market Performance and Fund Returns
In the final quarter of 2025, the U.S. stock market experienced a robust upturn, with the S&P 500 Index registering a 2.66% increase and the Bloomberg U.S. Aggregate Bond Index climbing by 1.10%. Within the Russell 1000 Growth Index, the healthcare, communication services, and financials sectors demonstrated strong performance, while utilities, real estate, and materials sectors lagged. Despite a resilient U.S. economy, a decline in consumer confidence towards the end of the year fueled concerns regarding future consumer spending and the labor market. Amidst these conditions, the Aristotle Growth Equity Fund (Class I-2) posted a return of 0.95%, slightly underperforming the Russell 1000 Growth Index's 1.12%. The fund's performance was negatively impacted by stock selection in the information technology and consumer discretionary sectors, although positive contributions from healthcare and industrials helped mitigate the underperformance.
UnitedHealth Group: A Shifting Investment Landscape
UnitedHealth Group Incorporated (NYSE:UNH), a prominent multinational healthcare benefits provider headquartered in Eden Prairie, Minnesota, became a subject of strategic review for the Aristotle Growth Equity Fund. As of February 25, 2026, UNH shares closed at $284.20, having experienced a one-month decline of 2.77% and a substantial 39.35% loss over the preceding 52 weeks, resulting in a market capitalization of $257.439 billion.
Aristotle Growth Equity Fund's Rationale for Divestment
The Aristotle Growth Equity Fund articulated its decision to sell its position in UnitedHealth Group Incorporated (NYSE:UNH) in its fourth-quarter 2025 investor letter. The primary reasons cited included repeated downward revisions of the company's financial guidance throughout the year, coupled with a notable increase in utilization and acuity across its insured business segments. These factors led to a higher-than-anticipated medical cost ratio, consequently impacting projected earnings. Furthermore, leadership changes, specifically the replacement of both the CEO and CFO, added to the investment uncertainty. Although UNH shares had seen a significant rebound, climbing over 50% from their early August lows, the fund expressed skepticism regarding the speed of earnings recovery. The fund's assessment indicated that a return to previous earnings levels could take several years, and despite this outlook, the stock was trading at a premium multiple, which the fund deemed unjustified given the challenges ahead.
UnitedHealth's Market Position and Future Outlook
UnitedHealth Group Incorporated (NYSE:UNH) currently ranks 18th among the most favored stocks held by hedge funds. Data from the end of the fourth quarter showed that 145 hedge fund portfolios held UNH, an increase from 140 in the previous quarter. While acknowledging UnitedHealth's inherent investment potential, the Aristotle Growth Equity Fund's analysis suggests that certain artificial intelligence (AI) stocks present more attractive upside opportunities with comparatively lower downside risks. For investors seeking such opportunities, particularly those benefiting from Trump-era tariffs and the ongoing trend of reshoring, specific AI stock recommendations are available in specialized reports.