| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 8.71% | 18.19% | 18.23% |
The AMG GW&K Small Cap Core Fund returned 18.19% in Q2 2026, trailing the Russell 2000 Index's 21.49% return as speculative, low-quality factors dominated the quarter. U.S. small caps extended their year-to-date outperformance over large caps to over 1200 basis points, driven by robust earnings, cooling Middle East tensions, and broadening market participation. The information technology sector led with a 56.1% return, more than double the index. The fund's underweight to low-quality factors and normalized cash position created headwinds during the quarter, with underperformance concentrated in healthcare, consumer discretionary, technology, and financials. However, industrials, energy, and utilities contributed positively, with strong results from Sterling Infrastructure, Ducommun, and Solaris Energy. As market conditions normalized in June, performance rebounded. The managers believe macro and micro fundamentals support continued broadening in the second half of 2026, positioning the fund's quality-focused, balanced approach to benefit as inflation and speculative excesses abate.
GW&K manages a quality-focused small cap core strategy that seeks to outperform over the long term through a balanced portfolio emphasizing both structural quality and opportunistic positioning, while avoiding excessive risk from low-quality, speculative factors.
The manager believes the macro and micro fundamentals support continued broadening beyond the market's anointed winners in the second half of 2026, as inflation and other noise abates. If this occurs, the fund's strategy is well positioned to benefit, as it was earlier in the year and in June. The manager maintains conviction in their balanced approach that aims to participate in up markets without taking excessive risk, despite near-term underperformance during speculative rallies.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 30 2026 | 2026 Q2 | AORT, DCO, DSGX, GMED, HLI, INTA, LOPE, PATK, PWP, SF, SHAK, SOI, STRL, SUPN, TNDM, USPH | healthcare, industrials, Quality, semiconductors, small caps, technology, value | - | GW&K's small cap core fund trailed the Russell 2000's 21.5% Q2 rally as speculative, low-quality stocks dominated. The fund's quality bias and cash position created headwinds, but June's normalization drove a rebound. With small caps up over 1200 bps versus large caps year-to-date on strong earnings and broadening participation, managers see continued opportunity as fundamentals trump speculation. |
| May 13 2026 | 2026 Q1 | AEIS, ALGM, ARQT, AVNT, FWRG, HLI, IDA, MTSI, RBC, SF, STRL, UTZ, VCYT, VIAV | energy, healthcare, industrials, small caps, technology, value | - | GW&K's small cap fund underperformed in Q1 due to energy underweight and biotech weakness, but AI-exposed technology holdings delivered strong results. Despite geopolitical uncertainty denting conviction, managers maintain their thesis for a cyclical small cap rebound, emphasizing quality companies with strong competitive positions and effective management teams. |
| 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 | - | GW&K's small cap fund underperformed in 2025 as markets favored speculative, low-quality stocks over their quality-focused approach. Despite challenging conditions with narrow market leadership and volatile sector rotation, the managers maintain conviction in their disciplined strategy, citing improving small cap earnings growth and broadening economic conditions as positive catalysts ahead. |
| Nov 11 2025 | 2025 Q3 | ABCB, CRDO, HLI, INTA, LOPE, MEDP, MTSI, PRIM, RBC, RGTI, RMBS, SPXC, STRL, SUPN | AI, Biotech, earnings, healthcare, small cap, technology | - | GW&K's small-cap fund gained 6.93% in Q3 but lagged the Russell 2000's 12.40% return as speculative themes in AI, mining, and meme stocks drove market gains. The fund's emphasis on consistent earnings over speculation hurt relative performance despite solid portfolio company fundamentals. Management added AI infrastructure exposure while maintaining focus on long-term cash flow growth. |
| Aug 21 2025 | 2025 Q2 | CHX, CRDO, DAVA, FN, GPOR, HLI, INSM, INTA, IONQ, MCOM, RBC, SEI, SLGN, SPXC, STAG, STRL, TXRH, VIAV | AI, energy, growth, industrials, Natural Gas, small cap, technology, value | SEI | Small cap fund lagged Russell 2000 in Q2 as markets favored AI and high-beta themes the portfolio lacked sufficient exposure to. Manager added energy names with AI data center ties and remains optimistic on small cap earnings growth potential at reasonable valuations, while acknowledging need for better positioning in secular growth themes. |
| Mar 31 2025 | 2025 Q1 | ADC, ARQT, BWIN, CBZ, CHX, COCO, FLYW, FNA, GBCI, GMED, HALO, HLI, HMN, ICFI, INSM, INTA, ITCI, LOPE, MGY, MTSI, NWE, PAR, PATK, PPBI, PRIM, RBC, SKY, SPXC, STAG, STRL, SWTX, TNDM, UMBF, UTZ | AI, Biotechnology, energy, financials, Quality, small caps, Trade Policy | - | GW&K's small cap fund outperformed in Q1 2025 despite a challenging environment marked by trade policy uncertainty. Strong biotech stock selection and quality focus drove outperformance, while financials and AI-related holdings lagged. The manager maintains a defensive posture amid policy fog, emphasizing high-quality businesses until clarity emerges. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
Small CapsU.S. small caps returned 21.5% in Q2 2026, widening their year-to-date lead over large caps to over 1200 basis points. This strong performance was driven by robust fundamental earnings, cooling Middle East hostilities, and broadening market participation as capital redeployed away from mega-cap stocks. Small Cap Growth outperformed Small Cap Value by 850 bps during the quarter. |
Russell 2000 Outperformance Broadening Earnings |
AIAI investment spend and its impact on businesses and society were noted as concerns during the quarter. The manager describes AI investment as the dominant theme in the stock market storyline for the year, alongside a healthy fundamental backdrop. However, no specific AI positions or bullish thesis on AI is articulated. |
Investment Theme Technology | |
QualityThe fund maintains an underweight positioning in low-quality factors, which presented a meaningful headwind during the quarter. Highest beta, lowest ROE, and non-earners were the most prolific factor groups in the index, greatly exceeding the benchmark. The manager states their balanced portfolio relying on both structure and opportunism aims to participate in up markets without taking excessive risk. |
Factor Beta ROE Risk Management | |
SemiconductorsThe information technology sector stood apart with a 56.1% return, more than double the Russell 2000 Index. The fund holds multiple semiconductor-related positions in its top ten holdings including MACOM Technology Solutions, Advanced Energy Industries, Semtech, and Viavi Solutions, representing meaningful portfolio weight. |
Technology Components Equipment | |
EnergyEnergy dropped 10.1% during the quarter due to commodity headwinds. However, strength in Solaris Energy allowed the fund to finish ahead of the index in the energy sector despite the impact of commodity headwinds on other positions. Lower sequential oil prices during the quarter were viewed as a positive by investors. |
Commodities Oil Infrastructure | |
Capital MarketsThe financials sector saw negative impact within capital markets holdings, as Stifel, Houlihan Lokey, and Perella Weinberg Partners either failed to overcome high expectations or expressed caution about future conditions. This was one of the sectors contributing to the fund's underperformance versus the benchmark. |
Investment Banks Advisory Financials | |
| 2026 Q1 |
AIThe market continued to favor stocks with exposure to artificial intelligence capital expenditure build-out. Several fund holdings including Viavi Solutions, Advanced Energy Industries, MACOM Technology, and Allegro MicroSystems were standouts with strong earnings and bookings from AI CapEx exposure. |
AI CapEx Semiconductors Technology |
EnergyThe energy sector returned 38.2% and was an obvious standout as oil prices surged during the quarter. However, the fund had a modest underweight to energy which contributed to underperformance. |
Energy Oil Sector | |
Small CapsThe fund maintains conviction that pieces are in place for a normal cyclical rebound that would benefit U.S. small caps, though this conviction has been dented by geopolitical conflicts. Small cap stocks did outperform large caps in Q1 and second half of 2025, reflecting improving earnings results. |
Small Caps Cyclical Earnings | |
BiotechnologyHealth care had many challenges starting with relative weakness of two biotechnology holdings. Veracyte and Arcutis Biotherapeutics underperformed compared to five benchmark biotech stocks that were up triple digits in the quarter. |
Biotechnology Healthcare | |
| 2025 Q4 |
Behavioral BiasesManager discusses psychological biases in investing, comparing rational Morning Investor mode versus impulsive Nighttime Investor behavior. Emphasizes the importance of overcoming biases like avoiding action that could cause regret, and building habits to make better decisions. |
Psychology Decision Making Bias Discipline |
ValueMature (Value) businesses led performance in Q4 and were the strongest contributors for the full year, reflecting durable execution in companies generating healthy free cash flow and returning capital. |
Free Cash Flow Capital Return Mature | |
GrowthEmerging (Growth) businesses reversed substantial gains in Q4 but delivered strong year overall with significant alpha relative to benchmark. Manager maintains commitment to diversified approach across business life cycles. |
Alpha Emerging Life Cycle | |
| 2025 Q3 |
AIThe market saw impressive gains driven by artificial intelligence stocks, though the fund missed these speculative rallies due to its focus on consistent earnings. The team added two technology stocks to increase exposure to AI infrastructure during the quarter. |
Infrastructure Technology Speculation |
EarningsThe fund emphasizes consistent earnings and cash flow growth over speculative themes. Portfolio companies generally performed well on second-quarter results and forward guidance, though current earnings were not the main market focus during the quarter. |
Cash Flow Growth Guidance Results | |
Small CapsMost small caps lagged the Russell 2000 benchmark despite the index reaching new highs. The fund focuses on small-cap companies with strong market positions and management, prioritizing long-term earnings growth while remaining cautious about short-term trends. |
Russell 2000 Benchmark Underperformance | |
| 2025 Q2 |
AIThe fund discusses AI buildout as a secular theme driving market performance, with investors pushing all-in on AI-related investments. The manager believes the AI investment case is most likely to have durability and generate positive, estimable earnings for companies addressing hyperscaler needs. The fund added two new holdings with AI exposure in the energy sector. |
Data Centers Hyperscalers Infrastructure Buildout Technology |
Small CapsThe manager expresses optimism for earnings growth potential in small cap holdings and notes reasonable valuations available in the small cap space. The fund operates in the Russell 2000 small cap universe, focusing on companies with sustainable earnings growth potential. |
Russell 2000 Valuations Earnings Growth Undervalued Opportunity | |
Natural GasThe fund added Gulfport Energy Corporation, a natural gas E&P company, as power demand and LNG capacity in the US continue to grow above trend. Natural gas is viewed as benefiting from increased power demand including from AI data centers. |
LNG Power Demand Energy Production Infrastructure | |
| 2025 Q1 |
Trade PolicyThe fund discusses navigating uncertainty from tariff announcements and trade policy changes by the current U.S. Administration. The manager analyzes potential impacts on manufacturing, consumers, and trading partners, while monitoring for signs of policy moderation or negotiation. |
Tariffs Manufacturing Negotiation Trading Partners Policy |
QualityThe fund emphasizes higher-quality exposures as a key driver of outperformance during the quarter. The manager notes that stocks with negative earnings, lowest ROE, and highest beta suffered most, demonstrating quality leadership in the market. |
ROE Earnings Beta Leadership Outperformance | |
BiotechnologyThe healthcare sector, particularly biotech stock selection, was extremely strong for the fund. Key contributors included Halozyme, SpringWorks, Insmed, and Arcutis, with two companies receiving takeout offers. |
Healthcare M&A Takeouts Selection Performance | |
AIThe fund notes that artificial intelligence investment became less certain during the quarter with the unveiling of DeepSeek and rumblings of spending adjustments. Several holdings sold off due to fears of slowing AI investment. |
DeepSeek Spending Investment Uncertainty Technology |
| 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 |
|---|---|
| DCO | For industrials, Sterling Infrastructure, Legence, Ducommun, and CECO/Thermon all produced very strong results and guidance, helping the sector overcome the meaningful headwind of not owning Bloom Energy. |
| SOI | In energy, strength in Solaris Energy allowed the Strategy to finish ahead of the index despite the impact of commodity headwinds on our other positions. |
| AORT | In health care, five stocks had negative returns, comparing unfavorably with strong index performers. These include Artivion, Tandem Diabetes, Supernus Pharmaceuticals, Globus Medical, and US Physical Therapy. |
| TNDM | In health care, five stocks had negative returns, comparing unfavorably with strong index performers. These include Artivion, Tandem Diabetes, Supernus Pharmaceuticals, Globus Medical, and US Physical Therapy. |
| SUPN | In health care, five stocks had negative returns, comparing unfavorably with strong index performers. These include Artivion, Tandem Diabetes, Supernus Pharmaceuticals, Globus Medical, and US Physical Therapy. |
| GMED | In health care, five stocks had negative returns, comparing unfavorably with strong index performers. These include Artivion, Tandem Diabetes, Supernus Pharmaceuticals, Globus Medical, and US Physical Therapy. |
| USPH | In health care, five stocks had negative returns, comparing unfavorably with strong index performers. These include Artivion, Tandem Diabetes, Supernus Pharmaceuticals, Globus Medical, and US Physical Therapy. |
| SHAK | In consumer discretionary, Shake Shack and Patrick Industries both struggled with challenging demand conditions relative to expectations, while Grand Canyon Education experienced multiple contraction. |
| PATK | In consumer discretionary, Shake Shack and Patrick Industries both struggled with challenging demand conditions relative to expectations, while Grand Canyon Education experienced multiple contraction. |
| LOPE | In consumer discretionary, Shake Shack and Patrick Industries both struggled with challenging demand conditions relative to expectations, while Grand Canyon Education experienced multiple contraction. |
| INTA | For information technology, the Fund had many strong performers, with the problem more about lack of exposure to speculative areas such as bitcoin miners and quantum computing stocks. Intapp and Descartes in the software industry also underperformed. |
| DSGX | For information technology, the Fund had many strong performers, with the problem more about lack of exposure to speculative areas such as bitcoin miners and quantum computing stocks. Intapp and Descartes in the software industry also underperformed. |
| SF | Finally, the financials sector saw negative impact within our capital markets holdings, as Stifel, Houlihan Lokey, and Perella Weinberg Partners either failed to overcome high expectations or expressed caution about future conditions. |
| HLI | Finally, the financials sector saw negative impact within our capital markets holdings, as Stifel, Houlihan Lokey, and Perella Weinberg Partners either failed to overcome high expectations or expressed caution about future conditions. |
| PWP | Finally, the financials sector saw negative impact within our capital markets holdings, as Stifel, Houlihan Lokey, and Perella Weinberg Partners either failed to overcome high expectations or expressed caution about future conditions. |
| STRL | For industrials, Sterling Infrastructure, Legence, Ducommun, and CECO/Thermon all produced very strong results and guidance, helping the sector overcome the meaningful headwind of not owning Bloom Energy. |
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