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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Elevated bond yields, tighter monetary policy, and acute power infrastructure constraints are exposing speculative leverage across the AI ecosystem, driving capital rotation toward durable quality compounders with mission-critical backlogs, pricing power."
The SGA U.S. Large Cap Growth portfolio returned 5.7% net of fees in the third quarter of 2026, substantially outperforming the Russell 1000 Growth Index return of 0.9% and the S&P 500 Index return of 2.3%, bringing year-to-date net returns to 0.0%. Outperformance was driven by decisive capital preservation during July's violent momentum unwind, where the strategy beat the benchmark by over 8% as speculative leverage unwound across semiconductor and AI-adjacent trades, before participating effectively in the subsequent broad-market rebound. The macroeconomic environment was marked by elevated inflation, volatile crude oil markets, and rising 10-year Treasury yields, which spurred renewed Federal Reserve monetary tightening. Concurrently, the AI infrastructure buildout encountered intensifying physical and structural headwinds, notably power grid constraints, permitting bottlenecks, and skilled labor shortages. These frictions, compounded by elevated debt financing costs among hyperscalers, reinforced a market-wide rotation toward companies possessing self-funded growth profiles, recurring revenues, and demonstrable pricing power. Portfolio activity centered on capitalizing on market volatility to establish new positions in Eaton, Quanta Services, Taiwan Semiconductor Manufacturing Company, and The TJX Companies, while completely liquidating Nike due to protracted turnaround risks. Top quarterly contributors included Microsoft, Nvidia, and Salesforce, while Yum! Brands, Waste Management, and Cooper Companies detracted from relative performance.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
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