The SGA U.S. Large Cap Growth fund recorded a gross return of -11.1% during the first quarter of 2026, falling short of the Russell 1000 Growth Index's -9.8% and the S&P 500 Index's -4.3% return. This relative underperformance was particularly notable as market dynamics began to differentiate between companies directly benefiting from artificial intelligence advancements and those perceived as facing challenges due to these technological shifts.
During this period, strategic portfolio adjustments were made to optimize holdings. A new position was initiated in Mastercard, capitalizing on a favorable price point, while existing stakes in Gartner and UnitedHealth were divested. These exits were prompted by a reassessment of fundamental business outlooks and a recalibration of strategic alignment within the portfolio. Concurrently, Arm Holdings emerged as a significant contributor, driven by robust fiscal third-quarter results that surpassed expectations, largely propelled by accelerated adoption within the data center sector. Conversely, software companies faced headwinds, with declines of approximately 25% year-to-date, as new product releases from Anthropic in early 2026 ignited concerns about the sustainability of established business models.
Despite the challenging market conditions and sector-specific pressures, the portfolio remains focused on its long-term objectives. It continues to demonstrate consistent revenue and earnings growth in line with projections, with an anticipated 13% revenue growth and 19% earnings growth over the forthcoming three years. The management team is actively mitigating AI disruption risks by strategically reducing software exposure, reinforcing investment in durable growth models, and meticulously managing position sizes, while maintaining conviction in the ability of established industry leaders to leverage and benefit from AI innovations.
In a rapidly evolving technological landscape, strategic foresight and disciplined portfolio management are paramount. While short-term fluctuations are inherent in dynamic markets, the commitment to identifying and nurturing companies with strong long-term growth potential remains unwavering. The proactive adjustments and continuous evaluation of market trends ensure that the portfolio is well-positioned to navigate future challenges and capitalize on emerging opportunities, ultimately aiming for sustained value creation and superior returns for investors.
