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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Parnassus Mid Cap Growth Fund 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Parnassus Mid Cap Growth Fund)

Primary Source Intelligence • Q3 2026 Letter Analysis

Parnassus Mid Cap Growth Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Parnassus Mid Cap Growth Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-5.21%

YTD+5.8%

Annualized+8.83%

Positioning StanceCONSTRUCTIVE

Market CapMid Cap

GeographyUS

Digest Analysis

Quick Take

"Outperforming the Russell Midcap Growth Index by 63 basis points driven by resilient Health Care holdings, while divesting housing-sensitive cyclicals to fund entries in Liberty Media and Ares Management."

Executive Summary

Parnassus Mid Cap Growth Fund (Investor Shares) returned -5.21% net of fees in the third quarter of 2026, outperforming its benchmark, the Russell Midcap Growth Index, which returned -5.84%. Year-to-date, the strategy delivered a net return of 5.80% compared to 1.01% for the benchmark. Relative quarterly performance was anchored by strength in Health Care holdings, which benefited from idiosyncratic catalysts, whereas positioning in Information Technology and an underweight stance in Energy detracted as oil prices surged. The strategy maintained a concentrated structure of 35 to 45 high-quality holdings, holding 0.7% in cash and other assets at quarter-end. The investment environment was characterized by sharp macroeconomic crosscurrents. Intensifying conflict between the U.S. and Iran alongside disruptions in the Strait of Hormuz drove energy prices higher and reignited inflationary anxieties. Concurrently, the Federal Reserve reaffirmed restrictive monetary policy, pushing the 10-year Treasury yield to 5.29%, its highest level since 2007. This yield spike compressed equity valuation multiples and induced volatility across momentum-driven artificial intelligence beneficiaries, while housing affordability pressures intensified under higher borrowing costs. Portfolio activity reflected a proactive rotation away from interest-rate-sensitive and cyclical consumer exposures toward durable compounders with visible cash flows. The fund completely liquidated its stakes in Builders FirstSource, Somnigroup International, and O'Reilly Automotive. Proceeds were redeployed into newly initiated positions in Liberty Media Formula One Group and Ares Management, capitalizing on multi-year contract lockups, structural pricing power, and attractive entry valuations.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

65%

CautiousHigh

Moderate (65%)

The portfolio is relatively concentrated with 35 to 45 high-quality holdings, and the top ten investments account for roughly 34% of total net assets. Management demonstrates decisive capital reallocation by eliminating housing-related cyclicals such as Builders FirstSource and Somnigroup to fund targeted new entries in Liberty Media and Ares Management. However, the score is balanced by management's acknowledgment of heightened macro crosscurrents and the need to prepare for a wide distribution of market outcomes.

Growth Outlook

45%

BearishBullish

Neutral (45%)

The manager maintains cautious optimism but is heavily tempered by multi-faceted macro headwinds, including 10-year Treasury yields at 5.29%, sticky inflation, and Middle East geopolitical tensions. Commentary emphasizes that recent market direction has been guided by sentiment narratives rather than corporate fundamentals. Nonetheless, management notes that potential resolutions to these macro overhangs offer asymmetric upside for high-quality businesses.

Risk Appetite

55%

DefensiveAggressive

Balanced (55%)

Capital remains near fully deployed with cash and equivalents standing at just 0.7% of total net assets. Management has engaged in risk mitigation by exiting rate-sensitive housing holdings and trimming consumer discretionary exposure, while reallocating proceeds into fee-stable alternative asset managers and high-barrier sports media assets. Overall exposure remains net long without speculative leverage.

Capital Deployment

55%

De-riskingDeploying

Net Neutral (55%)

Cash reserves remain low at 0.7%, reflecting disciplined ongoing capital recycling rather than wholesale cash raising or net liquidity expansion. Capital released from selling housing-exposed positions and lower-growth businesses was directly absorbed by new investments in Liberty Media and Ares Management, keeping net portfolio exposure steady.

Forward Guidance

60%

CautiousExpansionary

Neutral (60%)

The manager conveys an active bias toward deploying capital into select mid-cap businesses that are gaining market share through proprietary innovation or trading near multi-year valuation troughs. Management indicates plans to maintain discipline, looking past short-term momentum to accumulate secular growers capable of maturing into large-cap market leaders. Portfolio adjustments will focus on idiosyncratic opportunities rather than broad macro beta bets.

Language Signal

52%

BearishBullish

Balanced (52%)

Language across the letter reflects a nearly even distribution between cautionary macro terms and optimistic bottoms-up vocabulary. Headwind descriptions highlighting inflation, high interest rates, valuation compression, and geopolitical conflict are balanced by constructive terms emphasizing durability, scarce assets, attractive valuations, and expanding addressable markets. The overall linguistic tone is prudent and analytically grounded.

Perceived Risk

72%

Low RiskElevated

Elevated Risk (72%)

Management outlines a detailed and serious matrix of external economic and geopolitical risks. Explicit focus is placed on 10-year Treasury yields reaching 5.29%, military confrontations between the U.S. and Iran in the Strait of Hormuz, persistent inflation pressures, potential tariff policy shifts, and downstream demand compression across housing and consumer sectors.

Opportunity Density

65%

ScarceAbundant

Abundant (65%)

Management sees an attractive opportunity set within mid-cap equities, particularly among innovators poised to capture expanding market share. While broad market leadership has been narrowly concentrated in commodity energy and momentum AI hardware, the fund identifies compelling idiosyncratic entry points across life sciences, cloud software modernization, and private credit managers trading near five-year valuation lows.

Time Horizon

78%

Short-TermLong-Term

Decade+ (78%)

The investment strategy is fundamentally anchored in multi-year compounding, explicitly seeking resilient mid-cap franchises that have the runway to develop into large-cap industry leaders. Management explicitly looks beyond transient quarterly headwinds, such as temporary European river droughts impacting cruise operations or elevated fuel prices dampening aircraft maintenance sentiment.