| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 8.2% | 3.5% | 7.2% |
| 2025 |
|---|
| 7.2% |
The AMG GW&K Small Cap Core Fund returned 3.54% in Q4 2025 and 7.24% for the full year, underperforming the Russell 2000 Index which gained 12.81% annually. The challenging performance was primarily due to a market environment that overwhelmingly favored lower-quality, speculative stocks over the fund's focus on higher-quality companies with earnings support. The Russell 2000 experienced significant volatility, dropping 23% by April before recovering over 40% to finish at new highs. Key performance drivers included narrow market leadership, with the top 25 contributors delivering over 50% of benchmark returns, and sector rotation favoring materials and healthcare. The fund's technology holdings generally held up well relative to speculative quantum and bitcoin mining stocks, while materials underperformed due to lack of exposure to metals and mining. Looking forward, the managers see improving earnings growth in small caps, a broadening economy, and normalizing financial conditions as positive catalysts, maintaining their disciplined approach focused on sustainable earnings growth potential.
The fund maintains a disciplined investment approach focused on higher-quality small cap companies with sustainable earnings growth potential, avoiding speculative investments and commodity-oriented sectors despite near-term performance headwinds from a market environment favoring lower-quality stocks.
The managers believe outcomes can end well for those guided by a disciplined process balancing both risk and sustainable earnings growth potential. They see many potentially positive storylines for a broadening economy and therefore broadening market performance, though results may not end well for investors chasing market obsessions without regard for risk.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Feb 17 2026 | 2025 Q4 | AEIS, AGIO, CIFR, CSWI, CVLT, DAVA, DSGX, FLYW, GMED, HUT, INTA, ITT, MTSI, PAR, QBTS, RARE, RBC, SATS, SF, SKY, SLG, SPXC, STRL, SUPN, THR, VIAV, WULF | healthcare, industrials, materials, Quality, small caps, technology, Trade Policy, value | - | The Russell 2000 Index delivered 12.8% returns for 2025 despite significant volatility, with a 23% drop by April followed by a 40% recovery. The small… |
| Nov 11 2025 | 2025 Q3 | - | cash flow, earnings, fundamentals, small caps, volatility | - | The small-cap environment saw speculative sectors surge while fundamentals-driven stocks lagged, leading to benchmark divergence. The fund stresses its long-term focus on consistent earnings and… |
| Aug 21 2025 | 2025 Q2 | GPOR, SEI | Earnings Quality, market bifurcation, Speculation, Valuation discipline, volatility | SEI | The letter highlights extreme market bifurcation where speculative, AI-linked stocks vastly outperformed fundamentals-driven businesses. Management remains cautious, emphasizing sustainable earnings and valuation discipline amid speculative… |
| Mar 31 2025 | 2025 Q1 | - | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
QualityThe company emphasizes investing in businesses with excellent economics, durable competitive advantages, and high-integrity management. This quality focus is evident in concentrated equity holdings and operating business acquisitions. |
Durable Advantages Management Quality Economic Moats Competitive Position | |
Small CapsSmall caps getting strong start in 2026 supported by easing monetary conditions and constructive fiscal backdrop. Small caps more sensitive to economic cyclicality which is overdue for expansion. Expected to grow at better pace than large caps in 2026 after long period of underperformance. |
Value Growth Cyclical Monetary Policy Fiscal Policy | |
Trade PolicyRecent tariff policies continued to negatively impact U.S. consumers and companies throughout the year. However, international companies have been finding new trade arrangements and growth opportunities, benefiting from shifts in global trade patterns as the new U.S. administration alters terms of international cooperation. |
Tariffs International Growth Cooperation Impact | |
| 2025 Q3 |
Special SituationsPortfolio heavily focused on merger arbitrage, sales processes, and corporate actions including Golden Entertainment PropCo OpCo split, Sotherly Hotels buyout with preferred conversion arbitrage, and Mount Logan Capital tender offer. |
Merger Arbitrage Sales Process Tender Offer Corporate Actions Conversion |
| 2025 Q2 |
SpeculationMarkets are experiencing extreme speculation with vibe investing replacing fundamental analysis. Assets are priced on fantastical stories rather than cash flows, with leveraged ETFs, retail options trading, and story stocks reaching bubble-like levels. This madness can only end in disaster. |
Bubble Options Leverage Stories Excess |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Aug 21, 2025 | Fund Letters | Daniel L. Miller | SEI | Solaris Energy | Energy | Oil & Gas Equipment & Services | Bull | NYSE | AI, Demand, energy, infrastructure, Margins, services | Login |
| TICKER | COMMENTARY |
|---|---|
| AEIS | Advanced Energy Industries, Inc. (AEIS) was a top contributor in the Small Cap strategy during the quarter. AEIS provides highly engineered power conversion and control solutions for semiconductor equipment and data centers. Shares performed well after the company delivered a strong third-quarter report, exceeding the high end of guidance on the back of record Data Center Computing revenue that more than doubled year-over-year. Total revenue increased 24% year-over-year and Adjusted EPS rose 78%, reflecting both growth and operating leverage. Looking ahead, we spent time with management and others in and around the space during the quarter, and management reiterated that AI-driven demand remains robust and expects Data Center Computing to grow 25–30% in 2026 on secured design wins, supported by incremental capacity in the Philippines and Mexico and a Thailand facility that is ready to ramp quickly. In Semiconductor, customer validation of the eVerest and eVoS platforms underpins our expectation for growth as leading-edge logic and memory spending is expected to strengthen into 2026–2027. The balance sheet remains strong with a $192M net cash position. |
| AGIO | two of our holdings, Ultragenyx Pharmaceutical and Agios Pharmaceuticals, were both lower on regulatory setbacks. |
| CIFR | D-Wave Quantum , Cipher Mining Inc., TeraWulf Inc., and Hut 8 Corp were up an average of 164%. |
| CSWI | CSW Industrials was mentioned as one of the largest contributors in Q4 alongside YETI and Watches of Switzerland Group. |
| CVLT | Commvault provides cyber resilience solutions. During the quarter, management reported softer-than-expected bookings and lost its chief financial officer to another company. |
| DAVA | I also added to the existing DAVA position during the quarter, while taking some tax losses on previously purchased shares. I continue to believe that DAVA is undervalued relative to peers who face similar AI threats as DAVA, such as EPAM. It has become clearer that "vibe coding" solutions are less likely to immediately displace solutions that require high levels of security and interconnectedness between users. With that in mind, there are still many applications that DAVA can help develop. I still believe DAVA's share price performance relative to peers is mostly company-specific, and believe there is a significant chance of mean reversion if DAVA can demonstrate inflecting organic revenue growth. It however remains difficult to see the market disagree with my assessment, and this position is among my most fluid. |
| DSGX | In terms of full year performance effects, stock selection was most challenging in Technology, where fears of the AI eating Software theme gripped the market and caused significant multiple contraction across the group, with SPS Commerce, Inc. (SPSC), Vertex, Inc. (VERX), and Descartes Systems Group, Inc. (DSGX) experiencing the largest negative effects in our portfolio. |
| FLYW | Our largest position remains Flywire (FLYW). Operating at the intersection of payments and software, FLYW targets high-value, complex verticals—such as healthcare, education, and travel—where payments are deeply entangled with core workflows, receivables, reconciliation, and compliance. The company has dredged a formidable moat by building global payment capabilities through localized banking relationships and rails in practically every country. Because FLYW is so deeply embedded into hospital billing systems, university ERPs, and travel back-office tools, the switching costs are immense. Over 80% of FLYW's revenue comes from processing fees (FX spreads and cross-border fees) rather than software. Despite this deep entrenchment and rapid scaling, a massive valuation disconnect exists. Competitors with a fraction of FLYW's growth are being acquired at mid-to-high teens EBITDA multiples, whereas FLYW trades at just a 6x multiple on 2027 consensus EBITDA estimates. |
| GMED | Globus Medical, Inc. is a medical technology company focused on spine implants and motion preservation solutions. The stock outperformed during the quarter, driven by management's report of a re-acceleration in the core spine business to double-digit growth and evidence of renewed market share gains. Integration and profitability metrics from prior acquisitions are tracking ahead of expectations, and with most integration initiatives substantially complete, the company appears well-positioned to benefit from improved operating leverage in 2026. |
| HUT | We also initiated a position in Hut 8 during the quarter. On December 17, Hut 8 announced a 15-year, 245 MW data centre lease to Anthropic at their River Bend campus in Louisiana, backstopped by Google (AA+ credit), with a total contract value of US$7 billion. We bought the stock that day. At mid-point build cost estimates and before capitalised interest, the project yields ~15% unlevered in year one, rising with 3% annual escalators over the lease term. |
| INTA | Commvault® Systems , PAR Technology, Descartes Systems Group Inc., and Intapp were off more than 30% on average |
| MTSI | Semiconductor holding MACOM Technology Solutions rose nearly +40%, as the company experienced broad-based demand, similar to many semiconductor companies in 2025. |
| PAR | Software has always been a hyper-competitive industry teeming with well-funded start-ups. Consider PAR Technology's niche in restaurant point-of-sale (POS). Despite facing over 6,000 global competitors—including countless "free" alternatives requiring no subscription—PAR consistently wins mandates from Tier-1 restaurant chains. A prime example is their newly announced deal with Papa John's, which abandoned its in-house software to migrate to PAR. This dynamic runs 180° counter to the prevailing market narrative. AI will undoubtedly turn up the heat on this already intense global competition, but it will also accelerate PAR's product velocity, broaden its capabilities, and vastly expand its TAM. Ultimately, the endgame for incumbents is unlikely to be the race to zero gross margins that so many software skeptics are predicting. |
| QBTS | D-Wave Quantum , Cipher Mining Inc., TeraWulf Inc., and Hut 8 Corp were up an average of 164%. |
| RARE | two of our holdings, Ultragenyx Pharmaceutical and Agios Pharmaceuticals, were both lower on regulatory setbacks. |
| RBC | RBC Bearings, Inc. (RBC) manufactures engineered precision bearings and related products for customers in the aerospace, defense, and industrial markets. It is a market leader with a strong reputation for technical capabilities, product quality, and on-time delivery. RBC outperformed in 4Q as its quarterly results beat consensus estimates on both revenue and EPS. Its Aerospace and Defense business (A&D, 44% of total revenue) was particularly strong, essentially 'firing on all cylinders.' Management expects strong growth in its A&D backlog and is in the process of adding capacity to meet demand. Growth in its Industrial business (56% of total revenue) remains sluggish, but management has significantly improved the profit margins of this business and is now in the process of implementing growth initiatives. We continue to like RBC's leadership team, well-established strategic playbook, as well as its opportunities for growth and capital deployment. |
| SATS | December saw the GA-Courtenay Special Situations fund (USD I) appreciate by +6.3%, resulting in a return for 2025 of +6.5%. The positive result was primarily driven by price appreciation in Echostar and Filtronic, the fund's largest two positions, and both publically listed proxies for SpaceX. |
| SKY | We began acquiring shares of Champion Homes, Inc. during the quarter. Champion Homes is one of America's largest manufacturers of factory-built housing, having sold over 26,000 homes during its most recent fiscal year. Factory-built homes are potentially a key solution to housing affordability issues. The average home built by Champion Homes costs $93,000 compared to approximately $400,000 for the average site-built home in America. |
| SLG | The challenges in the materials sector were mostly related to our lack of exposure in metals and mining, with an assist from Silgan Holdings Inc., which failed to bounce back from a challenging Q2 report. |
| SPXC | CSW Industries, RBC Bearings, and SPX Technologies, Inc. were all standouts relative to peers in the benchmark. |
| STRL | I was short what I think are low quality names that have benefited from a huge Capex run up in datacenters but offer services that will get commoditized and are trading on very high earnings multiples on top of really above historical margins (TSSI STRL CLS ORCL VRT TGEN). |
| SUPN | Supernus Pharmaceuticals is a specialty pharmaceutical company focused on the treatment of diseases in the central nervous system. We believe the company could benefit from its differentiated products in attention-deficit/hyperactivity disorder and Parkinson's disease. |
| THR | Thermon was especially strong, moving 39% after publishing stellar quarterly results and forward guidance. |
| VIAV | Viavi Solutions' shares rose after the company reported strong third-quarter results and successfully completed the acquisition of a high-speed Ethernet testing business, expanding its exposure to data-centre end markets. |
| WULF | TeraWulf Inc. represents 1.8% of the strategy in the Information Technology sector. |
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