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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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NCG Small Cap Growth Strategy 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (NCG Small Cap Growth Strategy)

Primary Source Intelligence • Q3 2026 Letter Analysis

NCG Small Cap Growth Strategy Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, NCG Small Cap Growth Strategy. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-16.41%

YTD+18.99%

Annualized+11.18%

Positioning StanceCONSTRUCTIVE

Market CapSmallCap

GeographyUS

Digest Analysis

Quick Take

"Constructive on secular small-cap growers benefiting from re-industrialization and software adoption, actively redeploying capital into mispriced enterprise software and specialty financials following third-quarter rate-driven multiple compression."

Executive Summary

Next Century Growth Investors Small Cap Growth Composite returned -16.41% net of fees in the third quarter of 2026, trailing the Russell 2000 Growth Index benchmark return of -9.38%. Despite the quarterly consolidation, the strategy maintains a substantial year-to-date net gain of 18.99% net of fees versus 10.70% for the benchmark, and an annualized return of 11.18% net of fees since inception. Portfolio positioning remains anchored in high-conviction growth opportunities, with cash representing 4% of assets, while sector exposures are tilted heavily overweight in industrials at 27% and technology at 29% against benchmark weightings of 18% and 17% respectively. Macroeconomic crosscurrents reasserted volatility across financial markets during the quarter. The breakdown of the U.S.-Iran ceasefire in July disrupted energy transit corridors, driving Brent crude toward $100 per barrel and re-accelerating headline inflation to 3.4%. Consequently, the Federal Reserve raised its policy rate by 25 basis points in September, while the 10-year Treasury yield surpassed 5%. This tighter monetary backdrop pressured rate-sensitive smaller-capitalization equities and prompted rotation toward cash-rich mega-cap technology leaders. Portfolio activity was marked by active rotation to capitalize on valuation dispersion. The manager added 15 new positions, including software entries such as Workiva ($WK), Unity Software ($U), and Bandwidth ($BAND), specialty insurers including Kinsale Capital ($KNSL) and Ryan Specialty ($RYAN), and healthcare holdings like Repligen ($RGEN). Concurrently, the team exited 10 positions to zero, including Modine Manufacturing ($MOD), AAON ($AAON), and Alignment Healthcare ($ALHC), trimming cyclical AI infrastructure exposure in favor of resilient business models.

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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%)

NCG demonstrated disciplined active execution by adding 15 new names and completely selling 10 positions to zero. However, position-level portfolio weights are not explicitly itemized, keeping the conviction rating calibrated to moderate levels.

Growth Outlook

68%

BearishBullish

Bullish (68%)

Management maintains a constructive medium-term view on secular growth equities, arguing that upward earnings revisions and valuation compression present attractive buying opportunities despite geopolitical disruptions and elevated interest rates.

Risk Appetite

70%

DefensiveAggressive

Balanced (70%)

Capital remains overwhelmingly deployed in high-beta growth equities, with cash at a modest 4% and heavy overweights sustained in technology (29%) and industrials (27%) relative to index benchmarks.

Capital Deployment

68%

De-riskingDeploying

Net Neutral (68%)

The fund maintained active redeployment of capital, fully recycling capital from 10 closed industrial and semiconductor positions into 15 newly initiated growth holdings while keeping cash balanced at 4%.

Forward Guidance

72%

CautiousExpansionary

Expansionary (72%)

Management explicitly framed the third-quarter pullback as an attractive opportunity to add high-quality growth businesses at favorable multiples, directing fresh capital into enterprise software, specialty insurance, and life sciences tools.

Language Signal

62%

BearishBullish

Balanced (62%)

Directional language balances structural growth terms like 'robust capital spending', 'attractive prices', and 'earnings power' with clear acknowledgments of 'sticky inflation', 'geopolitical risk', and 'higher borrowing costs'.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

The manager detailed significant macro risks including oil climbing near $100 per barrel, 10-year Treasury yields eclipsing 5%, the Fed pushing its 2% inflation target to 2029, and upcoming midterm election volatility.

Opportunity Density

75%

ScarceAbundant

Abundant (75%)

The team identified numerous actionable entry points across enterprise software, life sciences tools, and specialty insurance, actively establishing 15 new positions following the broad valuation pullback.

Time Horizon

78%

Short-TermLong-Term

Decade+ (78%)

The letter emphasizes multi-year structural investment cycles in AI infrastructure and re-industrialization, viewing quarterly pullbacks as normal givebacks along a long-term compounding trajectory.