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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_Mid Cap Equity. This analysis is provided for institutional research purposes only and is not investment advice.
"The fund underperformed in Q2 2026 as it missed the sharp rally in speculative technology names and quantum computing stocks, while overweights to materials and energy detracted. Semiconductor and defense holdings performed well."
The Aristotle Small/Mid Cap Equity Fund returned 9.89% in Q2 2026, underperforming the Russell 2500 Index's 20.26% return as the small/mid-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 but did not own high-flying names like SanDisk or quantum computing and non-earning SaaS companies that rallied sharply. Overweight allocations to materials and energy also detracted. Contributors included MACOM Technology Solutions and Mercury Systems, both benefiting from strong demand in data center, defense, and 5G end markets. The fund added three new positions during the quarter: Jones Lang LaSalle in commercial real estate services, and regional banks UMB Financial and WesBanco. The manager remains constructive on the long-term outlook for small/mid-caps, citing attractive valuations near multi-decade lows relative to large caps and expectations for earnings growth to surpass large caps by late 2026/early 2027. Near-term caution is warranted given geopolitical risks and election uncertainty, though longer-term tailwinds include increasing M&A activity, reshoring, infrastructure investment, and favorable regulatory changes.
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