Navigating Growth: Strategies for Dynamic Markets

Quarterly Review: Economic Shifts and Fund Performance

During the second quarter of 2026, the global economic landscape showed indicators of steady improvement. Unemployment rates experienced a downward trend, while consumer sentiment, although still recovering from previous downturns, began to stabilize. Against this backdrop, U.S. equity markets achieved robust gains, with the Russell Midcap Growth Index increasing by 14.55%. In this climate, the Nomura Mid Cap Growth Fund's institutional shares yielded a return of 13.01%, which was 154 basis points below the Russell Midcap Growth Index.

Factors Impacting Relative Performance

The fund's underperformance relative to its benchmark was primarily due to specific investment choices, particularly within the healthcare and real estate sectors. These selections negatively affected the fund's overall returns. However, strategic allocation across different market sectors provided a modest positive contribution to the fund's performance, partially mitigating the impact of less favorable stock picks.

Strategic Focus on Generative AI Trends

In response to evolving market dynamics and technological advancements, the fund has strategically aligned its portfolio to capitalize on the burgeoning field of generative artificial intelligence. It emphasizes investments in companies that are foundational to AI infrastructure, including those in the semiconductor, semiconductor capital equipment, and electronic equipment industries. Conversely, the fund maintains a reduced exposure to traditional software companies that face potential disruption from AI innovations, thereby positioning itself to benefit from this transformative technology.

Key Investment Themes Moving Forward

Looking ahead, the fund's investment strategy is centered around several critical themes. It continues to prioritize companies involved in generative AI infrastructure, anticipating sustained growth in this area. Furthermore, the fund is focusing on businesses participating in re-industrialization and reshoring initiatives, which are expected to gain momentum. A strong emphasis is also placed on selecting companies with robust balance sheets and healthy free cash flow, as these characteristics are deemed essential for navigating ongoing macroeconomic uncertainties and potential market fluctuations.

Outlook: Balancing Growth and Uncertainty

As the market progresses, we anticipate that it will continue to be shaped by a delicate interplay between promising secular growth opportunities and persistent macroeconomic volatility. The fund is prepared to adapt to these conditions by maintaining a disciplined investment approach, focusing on high-quality companies that are well-positioned for long-term success amidst both innovation and economic shifts.