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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Artisan Small Cap Fund returned 26.11% in Q2 2026, modestly outperforming despite market leadership favoring low-quality companies. Health care and AI infrastructure holdings drove performance, with biotechnology and semiconductor positions delivering strong results."
The Artisan Small Cap Fund delivered strong absolute returns of 26.11% in Q2 2026, modestly outpacing the Russell 2000 Growth Index's 25.71% return despite challenging market conditions that favored lower-quality, unprofitable companies. The portfolio benefited from continued profit-cycle execution across holdings, with health care contributing approximately 260bps to relative performance through strong results from biotechnology and life sciences tools companies including Twist Bioscience, Rhythm Pharmaceuticals, and Guardant Health. AI infrastructure remained a powerful driver, supporting semiconductor holdings like MACOM Technology Solutions, Lattice Semiconductor, and SiTime. Software holdings detracted approximately 283bps as investors questioned long-term growth profiles in an AI-driven environment, leading managers to reduce exposure to an underweight position for the first time since 2005. The managers initiated new positions in Virtu Financial, Murphy USA, and USA Rare Earth while maintaining discipline around market-cap parameters by exiting or trimming positions that grew beyond small-cap mandates. Key risks include persistent inflation, elevated AI valuations, and evolving software competitive dynamics. The managers remain focused on identifying durable profit cycles within franchise companies, expecting market volatility to create attractive entry points in AI infrastructure, biotechnology, and other high-conviction areas.
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