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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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

Back to Fund Profile (NCG SMID Cap Growth Strategy)

Primary Source Intelligence • Q3 2026 Letter Analysis

NCG SMID Cap Growth Strategy Quarterly Analysis

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

Fund Returns

QTD-17%

YTD+20.43%

Annualized+8.12%

Positioning StanceCONSTRUCTIVE

Market CapSMID Cap

GeographyUS

Digest Analysis

Quick Take

"Constructive on high-quality SMID growth compounders benefiting from AI infrastructure and reshoring, rotating proceeds from cyclical hardware into software and specialty insurance while managing higher rate headwinds."

Executive Summary

NCG SMID Cap Growth Composite returned -17.00% net of fees in the third quarter of 2026, underperforming the Russell 2500 Growth Index decline of -10.34%, but bringing year-to-date performance to 20.43% net of fees versus 7.27% for the benchmark. Cash was maintained at 3%, while relative allocations remained concentrated in active overweights across technology (29%), industrials (29%), and basic materials (6%), offset by deliberate underweights in consumer discretionary, financials, and healthcare. Macroeconomic headwinds escalated during the quarter as the collapse of the U.S.-Iran ceasefire drove Brent crude near $100 per barrel, reigniting inflationary pressures and pushing the 10-year Treasury yield above 5%. Sticky CPI readings prompted a 25 basis point Federal Reserve policy rate hike, disproportionately penalizing smaller-capitalization equities dependent on external financing. Despite macro volatility, underlying corporate fundamentals showed resilient earnings growth outpacing share prices, supporting multi-year secular cycles across AI infrastructure, data center buildouts, and manufacturing reshoring. Portfolio performance was driven by top contributors HTFL, GH, and WK, while ALHC, CRS, and UCTT served as the primary absolute detractors. The team maintained disciplined execution, initiating 15 new positions, including WK, U, BAND, and BLZE in technology, alongside healthcare and specialty insurance names, while liquidating 10 positions to zero, including MOD, AAON, ALHC, and UCTT, effectively redeploying capital into high-growth franchises with attractive relative 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%)

Portfolio conviction is demonstrated by aggressive sector overweights in technology and industrials (each at 29%) and decisive turnover involving 15 additions and 10 full exits. However, broad composite diversification across numerous small and mid-cap holdings without individual position concentration limits a higher rating.

Growth Outlook

60%

BearishBullish

Neutral (60%)

Constructive on underlying corporate earnings resilience and multi-year secular capital spending in AI and reshoring. This optimism is tempered by sticky inflation, rising oil prices, and the 10-year Treasury yield crossing above 5%.

Risk Appetite

65%

DefensiveAggressive

Balanced (65%)

Capital remains predominantly deployed with only 3% in cash, while overweights in high-beta growth sectors like technology and industrials are actively maintained. The strategy rotated into attractive valuations rather than de-risking into defensive assets.

Capital Deployment

65%

De-riskingDeploying

Net Neutral (65%)

Cash remains low at 3% as proceeds from 10 complete liquidations were rapidly recycled into 15 new long positions. Net exposure remains elevated without defensive cash accumulation.

Forward Guidance

70%

CautiousExpansionary

Expansionary (70%)

Management explicitly frames recent price weakness in small caps as a compelling buying opportunity to build positions in high-quality franchises. Capital allocation is skewed toward buying into software, healthcare services, and specialty insurance.

Language Signal

55%

BearishBullish

Balanced (55%)

The letter balances constructive descriptors such as 'healthy growth prospects,' 'attractive prices,' and 'resilient' against persistent cautionary language detailing 'hostilities,' 'energy shock,' and 'sticky inflation.'

Perceived Risk

70%

Low RiskElevated

Elevated Risk (70%)

Management highlights multiple substantive macro threats, including the breakdown of the U.S.-Iran ceasefire, Brent crude surging near $100, the 10-year yield breaching 5%, and growing debt reliance for AI investments.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

The investment team initiated 15 new positions across technology, healthcare, financials, industrials, energy, and consumer sectors during the quarter. This demonstrates an abundant pipeline of ideas emerging from the market pullback.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The investment framework explicitly views investments in AI infrastructure, grid development, and re-industrialization as multi-year structural investment cycles rather than short-term trades.