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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Aristotle Small Cap Equity Fund. This analysis is provided for institutional research purposes only and is not investment advice.
"The fund underperformed the Russell 2000's exceptional 21.49% Q2 return, missing the quarter's momentum-driven rally in AI, quantum computing and non-earning growth stocks. Top holdings MACOM and Mercury Systems delivered strong results driven by data center and defense demand."
The Aristotle Small Cap Equity Fund returned 13.69% in Q2 2026, underperforming the Russell 2000 Index's 21.49% return as the small cap market delivered its strongest quarterly performance since 2020. The fund's underperformance was driven primarily by security selection in information technology, where the fund owned Everforth and missed gains in non-owned names like Credo Technology and quantum computing stocks, as well as underweight positioning in the high-flying growth and AI-related segments that led the quarter. Contributors included MACOM Technology Solutions and Mercury Systems, both benefiting from strong demand in data center, defense and telecom end markets. The manager remains constructive on small caps long-term, citing attractive valuations near multi-decade lows relative to large caps, reaccelerating earnings, and structural tailwinds from M&A activity, reshoring, infrastructure investment and favorable regulatory backdrop. Near-term caution persists around geopolitical risks including the Iran conflict and mid-term election uncertainty. The fund maintains its disciplined, low-turnover approach focused on quality businesses with strong fundamentals trading at attractive valuations.
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