ARISTOTLE CAPITAL BOSTON, LLC

Markets Review

U.S. small cap equities demonstrated notable resilience during the first quarter of 2026, navigating a volatile macroeconomic and geopolitical backdrop more effectively than large cap stocks. While broader U.S. equity markets declined amid rising oil prices, renewed inflation concerns, and escalating conflict in the Middle East, small caps modestly outperformed, supported by improving earnings momentum, attractive relative valuations, and greater exposure to domestically focused areas of the economy. The Russell 2000 Index gained 0.98% for the quarter, contrasting with a -4.33% decline in the S&P 500 and marking a rare instance in which small caps posted gains during a down quarter for large caps. Performance leadership favored value oriented and domestically focused companies, while mega cap growth stocks experienced valuation pressure as investors rotated away from highly concentrated market leadership. The quarter was shaped by heightened macro uncertainty, though U.S. economic growth remained positive, with GDP advancing at an annualized pace near 2.4% and labor markets showing early signs of stabilization despite a modest rise in unemployment. Inflation remained slightly above the Federal Reserve’s 2% target and intensified late in the quarter following a surge in energy prices tied to the conflict in Iran and disruptions to oil flows through the Strait of Hormuz. Monetary policy remained unchanged with the federal funds rate holding steady at 3.50%-3.75% while continuing to signal the potential for a rate cut later in 2026; an environment that tends to benefit smaller companies with higher floating rate debt exposure as financial conditions ease.

Stylistically, value stocks outperformed their growth counterparts during the quarter as the Russell 2000 Value Index returned 4.96% compared to the -2.81% return of the Russell 2000 Growth index. Performance was highly concentrated, as Energy outperformed the Russell 2000 Index by over 37%, and the top five stocks contributed over 100% of the benchmark’s return. From a factor perspective, higher quality companies outperformed lower quality companies during the quarter. Factors that had the strongest payoffs were low leverage, low variability, low volatility, profitability, ROIC and ROE.

At the sector level, there was mixed performance between cyclical and defensive stocks. The best performing sectors were Energy (+38.15%), Materials (+5.94%), and Industrials (+4.89%) while the worst performing sectors were Information Technology (-4.89%), Consumer Discretionary (-4.71%), and Health Care (-4.44%).

Sources: CAPS Composite Hub, Russell Investments
Past performance is not indicative of future results. Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses. Please see important disclosures at the end of this document.

Performance Review

For the first quarter of 2026, the Aristotle Small Cap Equity Composite posted a total return of 1.60% net of fees (1.77% gross of fees), outperforming the 0.89% total return of the Russell 2000 Index. Both security selection and allocation effect positively contributed to performance. The largest contributors on a relative basis were security selection in the Information Technology (owning Advanced Energy, MACOM Technology and Littelfuse coupled with not owning quantum computing stocks and non-earning SaaS companies) and Financials sectors coupled with underweight allocations to Health Care and Industrials. This was partially offset by security selection in the Industrials (owning Huron Consulting, Verra Mobility and Casella Waste coupled with not owning Bloom Energy) and Health Care sectors coupled with an underweight allocation to Energy and an overweight position in Information Technology.

CONTRIBUTORS

Advanced Energy Industries (AEIS), is a provider of power electronics conversion products. The stock extended a strong multi-quarter rally fueled by earnings revisions, AI‑related infrastructure spending, and improving semiconductor capital expenditure trends. We maintain our position, as we believe the company’s exposure to AI‑driven semiconductor and data‑center demand should continue to drive shareholder value.

MACOM Technology Solutions (MTSI), is a designer and manufacturer of high-performance semiconductor products. The stock benefitted from strong earnings results that exceeded analyst expectations featuring record revenue and profitability, driven by accelerating demand across data‑center, industrial/defense, and telecom end markets. We maintain our position, as we believe the company’s meaningful exposure to growing demand from Data Center and 5G end market applications along with the integration of recent acquisitions and domestic manufacturing footprint should continue to drive shareholder value.

DETRACTORS

Huron Consulting Group (HURN), is a provider of technology, data, and analytics solutions to Healthcare, Education, and corporate clients. The company reported strong results and handily beat analyst expectations. Despite that, shares sold off amid market sentiment around AI potentially cannibalizing their business model which we believe is overly pessimistic. We maintain a position, as we believe the company may continue to benefit from durable demand, expanding margins, and secular growth tied to digital and regulatory complexity in their end markets over the long term.

Haemonetics (HAE), is a global provider of hematology and blood management products and solutions. The company’s shares weakened following its earnings release, despite results beating analyst expectations. Investor reaction was driven by a reported year‑over‑year revenue decline tied to planned portfolio transitions which overshadowed solid underlying demand and margin expansion. We believe that the company’s strong competitive position within the plasmapheresis market along with increased investment in research and development should create value for shareholders over a multi-year period.

Recent Portfolio Activity

BUYS/ACQUISITIONS

Envista Holdings (NVST), is a global manufacturer and marketer of dental consumables, equipment, diagnostics, orthodontic solutions, and treatment technologies, offering a comprehensive portfolio that includes implants, imaging systems, treatment software, and aligners. Dental care represents a structurally attractive, non‑discretionary end market, supported by aging demographics, increasing oral health awareness, and sustained demand for restorative and aesthetic procedures. Through its broad product portfolio and service capabilities, the company offers exposure to a growing, recurring‑revenue dental market, with meaningful margin recovery potential as management executes on operational initiatives, at an attractive valuation.

SELLS/LIQUIDATIONS

Alight (ALIT), is a provider of cloud-based integrated digital human capital and business solutions. The position was liquidated due to fundamentals deteriorating and an uncertain strategic outlook.

Outlook

We remain constructive on the long-term outlook for U.S. small cap equities. Valuations continue to appear attractive, with the Russell 2000 trading near multi-decade lows relative to large caps, while earnings have likely bottomed and are beginning to reaccelerate. Consensus estimates point to small cap earnings growth surpassing large cap growth by late 2026. Incremental increase in M&A activity, improving domestic manufacturing trends supported by reshoring and infrastructure investment, and a more favorable regulatory and tariff backdrop should provide longer term tailwinds for the asset class. Near term, we remain cautious as geopolitical risks, including the Iran conflict and related inflationary spillovers, may contribute to elevated volatility. Separately, mid-term election uncertainty has historically been associated with increased market volatility but has often given way to more durable small cap recoveries following the election cycle.

Positioning

Our current positioning is a function of our bottom-up security selection process and our ability to identify what we view as attractive investment candidates, regardless of economic sector definitions. Overweight allocations in Information Technology and Materials are mostly a function of our underlying company specific views rather than any top-down predictions for each sector. Conversely, we continue to be underweight in Health Care as we do not hold Biotechnology companies as that industry has significant binary risk. We are also underweight in Consumer Discretionary, as we have been unable to identify what we consider to be compelling long-term opportunities that fit our discipline given the rising risk profiles of many retail businesses and a potential deceleration in goods spending following a period of strength. Given our focus on long-term business fundamentals, our patient investment approach and low portfolio turnover, the strategy’s positioning generally does not change significantly from quarter to quarter. However, we may take advantage of periods of volatility by adding selectively to certain companies when appropriate.

ARISTOTLE CAPITAL BOSTON, LLC

Markets Review

U.S. small/mid cap equities demonstrated notable resilience during the first quarter of 2026, navigating a volatile macroeconomic and geopolitical backdrop more effectively than large cap stocks. While broader U.S. equity markets declined amid rising oil prices, renewed inflation concerns, and escalating conflict in the Middle East, small- and mid-caps modestly outperformed, supported by improving earnings momentum, attractive relative valuations, and greater exposure to domestically focused areas of the economy. The Russell 2500 Index gained 2.04% for the quarter, contrasting with a -4.33% decline in the S&P 500 and marking a rare instance in which small- and mid-caps posted gains during a down quarter for large caps. Performance leadership favored value oriented and domestically focused companies, while mega cap growth stocks experienced valuation pressure as investors rotated away from highly concentrated market leadership. The quarter was shaped by heightened macro uncertainty, though U.S. economic growth remained positive, with GDP advancing at an annualized pace near 2.4% and labor markets showing early signs of stabilization despite a modest rise in unemployment. Inflation remained slightly above the Federal Reserve’s 2% target and intensified late in the quarter following a surge in energy prices tied to the conflict in Iran and disruptions to oil flows through the Strait of Hormuz. Monetary policy remained unchanged with the federal funds rate holding steady at 3.50%-3.75% while continuing to signal the potential for a rate cut later in 2026; an environment that tends to benefit smaller companies with higher floating rate debt exposure as financial conditions ease.

Stylistically, value stocks outperformed their growth counterparts during the quarter as the Russell 2500 Value Index returned 4.77% compared to the -3.52% return of the Russell 2500 Growth index. Performance was highly concentrated, as Energy outperformed the Russell 2500 Index by over 36%, and the top five stocks contributed over 100% of the benchmark’s return. From a factor perspective, higher quality companies outperformed lower quality companies during the quarter. Factors that had the strongest payoffs were low variability, low leverage, low volatility, ROIC, ROE, and profitability.

At the sector level, there was mixed performance between cyclical and defensive stocks. The best performing sectors were Energy (+38.72%), Consumer Staples (+6.73%), and Industrials (+6.52%), while the worst performing sectors were Financials (-6.10%), Consumer Discretionary (-5.30%), and Health Care (-3.29%).

Sources: CAPS Composite Hub, Russell Investments
Past performance is not indicative of future results. Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses. Please see important disclosures at the end of this document.

Performance Review

For the first quarter of 2026, the Aristotle Small/Mid Cap Equity Composite generated a total return of 3.37% net of fees (3.51% gross of fees), outperforming the 2.04% total return of the Russell 2500 Index. Both security selection and allocation effect positively contributed to performance. The largest contributors to relative performance was security selection in Information Technology and Financials coupled with an overweight allocation to Information Technology and an underweight allocation to Consumer Discretionary. Security selection in Industrials and Health Care (a combination of stocks we owned alongside not owning biotechnology) coupled with underweight allocations to Utilities and Communication Services detracted from performance.

CONTRIBUTORS

Advanced Energy Industries (AEIS), is a provider of power electronics conversion products. The stock extended a strong multi-quarter rally fueled by earnings revisions, AI‑related infrastructure spending, and improving semiconductor capital expenditure trends. We maintain our position, as we believe the company’s exposure to AI‑driven semiconductor and data‑center demand should continue to drive shareholder value.

Ciena (CIEN), is an optical networking equipment manufacturer for telecommunications and web scale network operators. The stock benefited from expectations for an eventual optical networking recovery, driven by accelerating data consumption, AI‑related traffic growth, and the company’s leadership in high‑speed coherent optical solutions and software driven networking. We believe the company has benefitted from strong demand for bandwidth given its differentiated product portfolio and history of technological innovation, which has produced strong operating results and shareholder value creation.

DETRACTORS

SanDisk (SNDK), engages in the development, manufacture, and provision of storage devices and solutions based on NAND flash technology. Its products include solid state drives, memory cards, and USB flash drives. The stock rallied during the quarter and was up 168% on improving memory cycle sentiment and AI‑driven storage demand. The portfolio did not own the position which resulted in a drag on relative performance versus the benchmark.

Huron Consulting Group (HURN), is a provider of technology, data, and analytics solutions to Healthcare, Education, and corporate clients. The company reported strong results and handily beat analyst expectations. Despite that, shares sold off amid market sentiment around AI potentially cannibalizing their business model which we believe is overly pessimistic. We maintain a position, as we believe the company may continue to benefit from durable demand, expanding margins, and secular growth tied to digital and regulatory complexity in their end markets over the long term.

Recent Portfolio Activity

BUYS/ACQUISITIONS

Casella Waste Systems (CWST), is a provider of solid waste management and recycling services. The company offers exposure to a resilient, recurring revenue waste management business operating in capacity constrained Northeast markets, where owned landfill and transfer assets create high barriers to entry and support pricing power. The company’s vertically integrated footprint and disciplined tuck‑in acquisition strategy enhance route density and cost synergies, supporting steady margin improvement, while stable contracted volumes and favorable long‑term industry dynamics underpin a clear path to further margin expansion and long‑term capital appreciation.

Envista Holdings (NVST), is a global manufacturer and marketer of dental consumables, equipment, diagnostics, orthodontic solutions, and treatment technologies, offering a comprehensive portfolio that includes implants, imaging systems, treatment software, and aligners. Dental care represents a structurally attractive, non‑discretionary end market, supported by aging demographics, increasing oral health awareness, and sustained demand for restorative and aesthetic procedures. Through its broad product portfolio and service capabilities, the company offers exposure to a growing, recurring‑revenue dental market, with meaningful margin recovery potential as management executes on operational initiatives, at an attractive valuation.

SELLS/LIQUIDATIONS

Alight (ALIT), is a provider of cloud-based integrated digital human capital and business solutions. The position was liquidated due to fundamentals deteriorating and an uncertain strategic outlook.

Ciena (CIEN), is an optical networking equipment manufacturer for telecommunications and web scale network operators. The position appreciated since purchase, resulting in its sale to redeploy capital to new opportunities with better risk/reward potential.

Outlook

We remain constructive on the long-term outlook for the small/mid-cap segment of the U.S. market. Valuations remain compelling relative to large caps, with the Russell 2500 Index trading near the lower end of its historical range, while earnings are beginning to reaccelerate. Consensus estimates point to small cap earnings growth surpassing large cap growth by late 2026, which should be supportive of small/mid cap allocations. Incremental increase in M&A activity, improving domestic manufacturing trends supported by reshoring and infrastructure investment, and a more favorable regulatory and tariff backdrop should provide longer term tailwinds for the asset class. Near term, we remain cautious as geopolitical risks, including the Iran conflict and related inflationary spillovers, may contribute to elevated volatility. Separately, mid-term election uncertainty has historically been associated with increased market volatility but has often given way to more durable small cap recoveries following the election cycle.

Positioning

Our current positioning is a function of our bottom-up security selection process and our ability to identify what we view as attractive investment candidates, regardless of economic sector definitions. Overweights in Information Technology and Materials are mostly a function of our underlying company specific views rather than any top-down predictions for each sector. Conversely, we continue to be underweight in Consumer Discretionary, as we have been unable to identify what we consider to be compelling long-term opportunities that fit our discipline given the rising risk profiles of many retail businesses and a potential deceleration in goods spending following a period of strength. We are also underweight in Real Estate as the sector has elevated interest rate sensitivity, refinancing risk, and structural challenges in segments such as office and retail, combined with generally weaker balance sheets, leading us to seek what we consider to be more attractive reward to risk opportunities. Given our focus on long-term business fundamentals, our patient investment approach and low portfolio turnover, the strategy’s sector positioning generally does not change significantly from quarter to quarter. However, we may take advantage of periods of volatility by adding selectively to certain companies when appropriate.

(All MSCI index returns are shown net and in U.S. dollars unless otherwise noted.)

Markets Review

Sources: CAPS CompositeHub^TM, Bloomberg
Past performance is not indicative of future results. Aristotle Global Equity Composite returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are calculated by subtracting a model fee of 0.50% on an annual basis or 0.04167% on a monthly basis, which includes trading costs and the revinvestment of all income. Please see important disclosures at the end of this document.

Global equity markets pulled back in the first quarter, with the MSCI ACWI Index falling 3.20% during the period. Global fixed income markets also weakened, as the Bloomberg Global Aggregate Bond Index decreased 1.07%. From a style perspective, value stocks outperformed growth, with the MSCI ACWI Value Index exceeding the MSCI ACWI Growth Index by 8.85%.

Performance across global equity markets was mixed during the period, with gains in Latin America and Japan, while North America and Europe declined. On a sector basis, five out of the eleven sectors within the MSCI ACWI Index advanced, led by Energy, Utilities and Materials. Alternatively, Consumer Discretionary, Communication Services and Information Technology were the worst performers.

Geopolitical developments contributed to increased volatility during the quarter. Trade policy uncertainty persisted, as a Supreme Court ruling limited the U.S. government’s ability to impose certain tariffs, adding complexity for businesses navigating global supply chains. In addition, escalating conflict in the Middle East disrupted shipping activity through the Strait of Hormuz, a key route for global energy supply. The resulting supply uncertainty led to a significant increase in oil prices and heightened volatility across energy markets. In a March report, the OECD noted that the Middle East conflict was testing the resilience of the global economy but held its forecast for 2026 global growth at 2.9%.

In the U.S., macroeconomic conditions reflected a moderation in growth alongside continued inflationary pressures. The government reported a slowdown in real GDP growth, while inflation remained above the Federal Reserve’s 2% target. Against this backdrop, the Fed maintained its federal funds target range, citing elevated uncertainty surrounding the economic outlook.

Despite these headwinds, corporate earnings remained resilient, with S&P 500 companies reporting double-digit earnings growth for the fifth consecutive quarter. Information Technology led earnings growth, supported by continued investment in artificial intelligence. However, equity performance within the sector was mixed. Software was a notable area of weakness amid concerns regarding competitive dynamics and the potential impact of AI on traditional business models. More broadly, concerns around labor displacement, increased scrutiny of capital expenditures, resource constraints and private credit risk weighed on sentiment and tempered equity market performance during the period.

Performance and Attribution Summary

For the first quarter of 2026, Aristotle Capital’s Global Equity Composite posted a total return of -2.85% gross of fees (-2.98% net of fees), outperforming the MSCI ACWI Index, which returned -3.20%, and the MSCI World Index, which returned -3.57%. Please refer to the table below for detailed performance.

Source: FactSet
Past performance is not indicative of future results. Sector attribution shows how much of a portfolio’s overall return is directly attributable to stock selection and asset allocation decisions within the portfolio, highlighting which sectors contributed or detracted to the total return. Attribution includes the reinvestment of income. Attribution is presented gross of fees and does not include the deduction of all fees and expenses that a client or investor has paid or would have paid. Please refer to the gross and net composite returns included within to understand the overall impact of fees.

From a sector perspective, the portfolio’s outperformance relative to the MSCI ACWI Index can be attributed to allocation effects, while security selection detracted. Security selection in Health Care and Financials, as well as an overweight in Energy, contributed the most to the portfolio’s relative performance. Conversely, security selection in Industrials, Information Technology and Materials detracted from relative return.

Regionally, allocation effects were responsible for the portfolio’s outperformance relative to the MSCI ACWI Index, while security selection detracted. Security selection in Asia/Pacific ex-Japan contributed the most to relative performance, while security selection in Japan was the largest detractor.

Contributors and Detractors for 1Q 2026

Relative Contributors	Relative Detractors
TotalEnergies	MonotaRO
Cameco	Nemetschek
FirstCash	Capital One Financial
Otsuka Holdings	Adobe
Samsung Electronics	Qualcomm

Relative contributors and detractors are based on attribution total effect and exclude benchmark securities not held in the portfolio.

TotalEnergies, one of the world’s largest energy companies, was the top contributor for the quarter. While oil prices increased during the period, driven by geopolitical tensions in the Middle East and disruptions to supply through the Strait of Hormuz, our focus remains on the company’s underlying operational execution across its diversified energy platform. As the fourth-largest major energy player in the world, the company operates across upstream, downstream, liquefied natural gas (LNG), and integrated power and renewable energy businesses. Within its upstream segment, TotalEnergies continues to deliver accretive growth, with new projects generating higher cash flow per barrel than its legacy portfolio, supporting both production growth and improving profitability. In the LNG segment, the company has started production in Angola, which will supply Europe and Asia with roughly two million tons of LNG per year, and has also signed an agreement with Glenfarne, the lead developer of the Alaska LNG project, to offtake two million tons of LNG annually for the next 20 years. We view LNG as a key structural driver of long-term growth, particularly given increasing demand for energy security in Asia and Europe. Lastly, within renewables, TotalEnergies and Masdar, an Abu Dhabi clean energy leader, formed a joint venture to accelerate renewable energy growth through onshore solar, wind and battery storage projects across Asia. In the U.S., the company has signed a long-term Power Purchase Agreement to provide 1 GW of solar capacity to power Google’s data centers in Texas for 15 years. These initiatives reflect the company’s strategy to build a more diversified and resilient energy platform over time. Overall, we believe TotalEnergies’ combination of disciplined capital allocation, low-cost operations and integrated business model positions it to generate attractive FREE cash flow across commodity cycles, with recent operational progress reinforcing its long-term investment case.

Otsuka Holdings, a leading Japanese healthcare company, was also a top contributor to performance during the quarter. We have long admired the company’s robust and diversified product portfolio, which we believe is well-positioned to gain market share in various applications such as depression, schizophrenia and oncology. As awareness of major depressive disorders has continued to increase, Otsuka’s leading products, including Rexulti and Abilify Maintena, have exhibited strong prescription growth. In oncology, the heightened attention around colorectal cancer, which has spiked in adults under 55, has led to gains for the company’s leading cancer drug, Lonsurf. Furthermore, the company continues to invest in its “Next 8” pipeline, which complements its existing portfolio and supports its next phase of growth. Management has also continued to invest in external innovation, as demonstrated by its recently announced agreement to acquire Transcend Therapeutics, which strengthens its position in psychiatric and neurological disorders, including adding a late-stage candidate targeting PTSD. As the company continues to reinvest in innovation while simultaneously returning value to shareholders, as exemplified by its most recent ¥50 billion share buyback program, we remain confident that Otsuka will continue to deliver attractive long-term returns over time.

MonotaRO, the Japanese business-to-business (B2B) e-commerce platform, was the largest detractor during the quarter. While results remained strong, the stock price was pressured by softer order trends in the enterprise business and a moderation in new customer additions following a period of unusually strong growth. Sentiment was also pressured by the company’s exposure to small and medium-sized enterprises in manufacturing and construction, cyclical and cost-sensitive end markets, particularly amid elevated input costs. Despite these near-term headwinds, profitability remained stable, with margin expansion supported by procurement efficiencies, reduced promotional discounting and higher royalty income. Enterprise business also grew more than 20% through newly connected corporations, expanding to approximately one-third of sales, highlighting its increasing importance within the business and reinforcing a key catalyst we originally identified. Management also announced a ¥10 billion share repurchase program, supporting shareholder returns and reflecting continued discipline in capital allocation. Over the longer term, we believe MonotaRO remains well-positioned to continue gaining share in Japan’s fragmented and underpenetrated MRO market. The company’s broad assortment, operating scale and growing enterprise presence, in our view, support a business that is becoming more embedded in customer procurement workflows over time.

Qualcomm, a leading semiconductor and communications technology company, was one of the largest detractors for the quarter. Despite delivering record revenues during the period, the company guided to lower near-term results due to memory-related supply constraints. Results were impacted by higher memory prices, driven in part by strong demand for AI-related data center applications. This is constraining smartphone production despite otherwise healthy underlying demand and leading handset manufacturers to adopt more cautious production and inventory strategies, reducing near-term chip orders for Qualcomm. We view these headwinds as cyclical rather than structural. Qualcomm has retained its high market share in handsets, even as large clients (most notably Apple) continue to pursue insourcing initiatives, which we believe is a testament to its history of productive R&D spending and technological leadership. Qualcomm also continues to execute on its long-term strategy of evolving from a handset-centric company into a broader connected computing platform. Automotive, Internet of Things (IoT) and newer initiatives, such as AI-enabled PCs and edge inference processors, represent a growing portion of the company, with management targeting roughly half of chip revenue from non-handset applications by the end of the decade. We believe Qualcomm’s technologies will continue to benefit as connectivity expands across devices and as AI workloads increasingly shift from the cloud to on-device (the edge), supporting its ability to generate strong FREE cash flow over time.

Recent Portfolio Activity

During the quarter, we trimmed our position in Cameco for risk management purposes, sold our position in Sony Financial and purchased Chevron.

We received shares of Sony Financial Group following its spinoff from our long-term holding, Sony Group, in October 2025. Sony Financial is a Japan-based financial services company with operations in life insurance, banking and digital payments. While we view Sony Financial as an attractive, well-managed business, we already have meaningful exposure to the global insurance industry through holdings such as AIA Group and Munich Re. Given our existing positioning, we elected to sell the shares received in the spinoff.

Chevron Corporation

Headquartered in Houston, Texas, Chevron is one of the world’s largest integrated energy companies, with operations spanning upstream exploration and production, downstream refining and marketing, and chemicals. The company traces its roots back to the 1911 breakup of Standard Oil and today produces approximately four million barrels of oil equivalent per day.

While Chevron operates across the full value chain, roughly 85% of earnings are generated from upstream operations, reflecting its oil-leveraged portfolio. This upstream concentration is intentional and supported by a portfolio of low-cost, long-lived assets. The asset base includes deepwater production in the Gulf of America and Guyana, a large and advantaged Permian Basin position, long-lived conventional production in Kazakhstan, and liquefied natural gas projects in Australia. Chevron also maintains a presence in Venezuela, though it remains a relatively small part of the portfolio.

Under CEO Mike Wirth (appointed in 2018), Chevron has emphasized capital discipline, portfolio optimization and shareholder returns. This strategy has included both targeted acquisitions and meaningful divestitures to high-grade the portfolio. Consistent with this approach, Chevron completed the acquisition of Hess in 2025, increasing its exposure to the Stabroek block offshore Guyana—one of the lowest-cost and highest-return oil developments globally. This transaction enhances Chevron’s long-term production visibility and strengthens the quality of its upstream portfolio with a high-margin, long-duration asset base.

High-Quality Business 

Some of the quality characteristics we have identified for Chevron include:

• A low-cost, oil-leveraged upstream portfolio anchored by advantaged positions in the Permian Basin and Guyana;
• A royalty-advantaged Permian position, where approximately 75% of acreage carries low or no royalty burden, providing structural cost advantages and attractive returns; 
• A diversified downstream and chemicals portfolio, which provides cash flow resilience across commodity cycles; and
• Demonstrated capital discipline under current leadership, including measured acquisitions (Noble, PDC, Hess) and continued portfolio optimization.

Attractive Valuation 

At current levels, we believe shares reflect conservative commodity assumptions and do not fully capture the company’s normalized earnings power and strengthening FREE cash flow profile as major capital projects transition from investment to production and capital spending moderates. Combined with a competitive dividend yield and ongoing share repurchases, we believe Chevron offers attractive total return potential over our three- to five-year investment horizon.

Compelling Catalysts

Catalysts we have identified for Chevron, which we believe could drive appreciation over our three- to five-year investment horizon, include:

• Completion and ramp-up of the Tengiz expansion in Kazakhstan, materially increasing FREE cash flow following a multi-year capital investment phase;
• Successful integration of Hess, expanding Chevron’s ownership in the high-return Guyana Stabroek development and strengthening long-term production visibility;
• Permian Basin development transitioning toward a capital-efficient, cash-generative phase, supported by advantaged mineral ownership and reduced unit costs;
• Continued operating discipline under CEO Mike Wirth, including structural cost control and moderated capital intensity; and
• Ongoing capital returns to shareholders through dividend growth and share repurchases.

Conclusion

The current investment environment presents a wide range of competing narratives. In such periods, the temptation to react to near-term developments can be significant. At Aristotle Capital, we remain focused on what we believe to be more analyzable and enduring: the long-term fundamentals of individual businesses. When market returns are driven by momentum or shorter-term dynamics, it can be difficult for investors to remain disciplined. We believe such environments create opportunities for patient investors as the gap between price and intrinsic value widens. While political and geopolitical uncertainty remains elevated, our focus is unchanged. We continue to study businesses and invest with a long-term perspective, as we believe fundamentals ultimately determine share price outcomes.

Markets Review

The U.S. equity market declined during the first quarter, with the S&P 500 Index falling 4.33% during the period. Fixed income markets also weakened, as the Bloomberg U.S. Aggregate Bond Index decreased 0.05%.

On a sector basis, five of the eleven sectors within the S&P 500 Index posted negative returns in the first quarter of 2026. The weakest performing sectors were Financials and Consumer Discretionary. The best performing sectors were Energy and Materials.

Sources: CAPS CompositeHubTM, Bloomberg
Past performance is not indicative of future results. Aristotle Atlantic Core Equity Composite returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses. Please see important disclosures at the end of this document.

Macroeconomic conditions reflected a moderation in growth alongside continued inflationary pressures. The government reported a slowdown in real GDP growth, while inflation remained above the Federal Reserve’s 2% target. Against this backdrop, the Fed maintained its federal funds target range, citing elevated uncertainty surrounding the economic outlook.

Geopolitical developments contributed to increased volatility during the quarter. Escalating conflict in the Middle East disrupted energy markets, with reduced shipping activity through the Strait of Hormuz, a key route for global energy supply. The resulting supply uncertainty contributed to a significant increase in oil prices and heightened volatility in energy markets. Trade policy uncertainty also persisted, as a Supreme Court ruling limited the government’s ability to impose certain tariffs, adding complexity for businesses navigating global supply chains.

Despite these headwinds, corporate earnings remained resilient, with S&P 500 companies reporting double-digit earnings growth for the fifth consecutive quarter. Information Technology led earnings growth, supported by continued investment in artificial intelligence. However, equity performance within the sector was mixed. Software was a notable area of weakness amid concerns regarding competitive dynamics and the potential impact of AI on traditional business models. More broadly, concerns around labor displacement, increased scrutiny of capital expenditures, resource constraints and private credit risk weighed on sentiment and tempered equity market performance during the period.

Performance and Attribution Summary

For the first quarter of 2026, Aristotle Atlantic’s Core Equity Composite posted a total return of -4.31% gross of fees (-4.41% net of fees), in-line with the S&P 500 Index, which recorded a total return of -4.33%.

Source: FactSet
Past performance is not indicative of future results. Sector attribution shows how much of a portfolio’s overall return is directly attributable to stock selection and asset allocation decisions within the portfolio, highlighting which sectors contributed or detracted to the total return. Attribution includes the reinvestment of income. Attribution is presented gross of fees and does not include the deduction of all fees and expenses that a client or investor has paid or would have paid. Please refer to the gross and net composite returns included within to understand the overall impact of fees. Please see important disclosures at the end of this document.

During the first quarter, the portfolio’s in-line performance relative to the S&P 500 was positively impacted by security selection and offset by allocation effects. Security selection in Consumer Staples and Consumer Discretionary contributed the most to relative performance. Conversely, security selection in Health Care and Energy detracted from relative performance.

Contributors and Detractors for 1Q 2026

Relative contributors and detractors are based on attribution total effect and exclude benchmark securities not held in the portfolio.

Contributors

Darling Ingredients

Darling Ingredients contributed to performance in the first quarter, as the stock continued to show momentum ahead of the finalization of the Environmental Protection Agency’s Renewable Volume Obligation (RVO), which came in the final days of March. The RVO was ahead of expectations and bodes well for continued improvement in renewable diesel margins for Darling’s joint-venture Diamond Green Diesel.

Antero Resources

Antero Resources contributed to performance in the first quarter due to higher price levels for U.S. natural gas caused by cold winter weather temperatures, as well as increasing demand from AI data center power needs. Late in the quarter, Antero also benefited from a geopolitically driven natural gas price spike as Middle East supply disruptions pushed global LNG buyers toward U.S. LNG cargoes. The company continues to demonstrate strong fundamentals, with strong FCF generation and a de-levered balance sheet.

Detractors

Boston Scientific

Boston Scientific detracted from performance in the first quarter as investors debated the durability of the outsized growth the company has reported in electrophysiology (EP) and the Watchman left atrial appendage closure device. Boston reported positive results toward the end of the quarter on the Champion-AF trial comparing the Watchman device to standard blood-thinner treatment in stroke prevention; however, the results still fell short of market expectations. Boston will need to show a rebound in EP results when it reports first quarter earnings to quell market concerns.

Microsoft

Microsoft detracted from performance in the first quarter, as investors continue to question the ROI of the company’s surging AI capex plans. In addition, the most recent Azure results showed a slight quarterly deceleration in growth, disappointing investor demands for an acceleration in top-line AI-driven growth and improving monetization trends from AI-related spend.

Recent Portfolio Activity

The table below shows all buys and sells completed during the quarter, followed by a brief rationale.

Buys

Coherent

Coherent Corp. is a vertically integrated manufacturing company that develops, manufactures and markets lasers, transceivers, and other optical and optoelectronic devices, modules and systems, as well as engineered materials, for use in the communications, industrial, instrumentation and electronics markets. The company has broad technical expertise and a deep technology stack in areas of importance to its products, including materials growth and fabrication of specialty materials, semiconductor lasers and passive optics including isolators, transceivers, transport equipment and high-power lasers for semiconductor capital equipment, display manufacturing, precision manufacturing and scientific research. Many of Coherent’s products include custom integrated software that it develops internally, leveraging the company’s deep domain expertise.

We initiated a position in Coherent based on our view that the company sits at the nexus of a key secular growth theme in technology infrastructure, AI-driven data center buildout, with a uniquely defensible position spanning every layer of the photonics stack. Our investment thesis centers on its leadership in photonics, a sector undergoing a multi-year, structural shift from copper to optical networking driven by AI data center demands. The company stands out with unmatched vertical integration, expanding Indium Phosphide capacity and a broad global footprint that leverages geopolitical tailwinds. Additional growth is fueled by underappreciated data center interconnect demand, a massive and expanding serviceable addressable market (SAM) projected to exceed $70 billion by 2030, and strategic partnerships—most notably with NVIDIA—validating its technology leadership. Robust recurring revenues from its industrial business and proactive portfolio streamlining further support margin expansion and long-term value creation. We believe a premium valuation is justified by the company’s leverage to the AI infrastructure buildout and the resulting growth acceleration and margin expansion. 

Immunome

Immunome Inc. is a biotechnology company focused on developing innovative therapies by combining unique or underexplored biological targets with advanced technology platforms. The organization is guided by President and Chief Executive Officer Clay Siegall, Ph.D., who previously founded and led SeaGen and is recognized for his experience in growing oncology businesses and securing significant acquisitions. The leadership team is composed of experts with backgrounds in designing, developing and commercializing cancer treatments. Immunome’s portfolio includes three clinical-stage drug candidates. The company is also advancing several preclinical programs.

We believe Immunome presents a compelling investment opportunity, driven by its focus on personalized medicine and the promising product story of Varegacestat for desmoid tumors. The company has reported positive phase 3 data and is preparing to file for FDA approval, with potential commercial launch anticipated in late 2026 or early 2027. The desmoid tumor market is expected to reach a peak size of $500 million to $700 million. Immunome benefits from experienced leadership, notably its founder’s successful track record at SeaGen, and maintains a strong financial position following a recent capital raise, resulting in pro forma cash exceeding $600 million.

Tempus AI

Tempus AI, Inc. is a healthcare technology company specializing in AI-enabled precision medicine solutions. By leveraging AI and machine learning, Tempus connects laboratory test results with clinical data to improve patient care across multiple diseases. The company operates through three main business units: Genomics (Diagnostics), which offers advanced genetic testing and diagnostics; Data and Services, which commercializes de-identified healthcare data and supports clinical trials; and AI Applications, which develops algorithmic diagnostics and clinical decision support tools. Tempus collaborates with leading pharmaceutical and biotechnology firms, positioning itself as a key innovator in both oncology and broader healthcare markets.

In our opinion, Tempus stands out as a compelling investment opportunity due to its alignment with key secular trends such as AI, Data Analysis and Monetization, and Personalized Medicine. Since going public in mid-2024, Tempus has demonstrated impressive growth, driven by both organic expansion and strategic acquisitions like Ambry. The company’s robust portfolio in genomics and diagnostics—spanning oncology, hereditary risk assessment and advanced testing—along with its rapidly growing data and applications segment, positions Tempus at the forefront of personalized medicine. The company’s expanding database of over 45 million patient records enhances its value proposition to research partners, and ongoing innovations are expected to drive both revenue and average selling price growth, making Tempus well-situated to capitalize on the evolving healthcare landscape.

Sells

There were no sales in the quarter.

Outlook

The equity markets in the first quarter declined mid-single digits, reflecting the Iranian conflict and the corresponding rise in commodity prices. Interest rates rose slightly during the quarter due to the rise in inflation expectations. There was a pronounced shift in sector returns, with Energy by far the strongest-performing sector due to the sharp rise in crude oil prices. Equity valuations moderated on the pullback, and we have yet to see any material downward adjustment in earnings growth rates due to higher commodity prices. The economic data puts the Fed in a difficult position with inflation staying above the targeted 2% level and employment numbers weakening. The conflict in Iran introduces a supply shock on top of an already challenging environment. The duration of the conflict, along with the damage to the energy infrastructure in the region, will dictate the timeline of a global economic recovery. Our focus will continue to be at the company level, with an emphasis on seeking to invest in companies with secular tailwinds or strong product-driven cycles.

Markets Review

The U.S. equity market declined during the first quarter, with the S&P 500 Index falling 4.33% during the period. Fixed income markets also weakened, as the Bloomberg U.S. Aggregate Bond Index decreased 0.05%.

On a sector basis, four out of the eleven sectors within the Russell 1000 Growth Index posted positive returns. The best-performing sectors were Energy, Consumer Staples and Industrials, while Financials, Information Technology and Consumer Discretionary were the worst.

Macroeconomic conditions reflected a moderation in growth alongside continued inflationary pressures. The government reported a slowdown in real GDP growth, while inflation remained above the Federal Reserve’s 2% target. Against this backdrop, the Fed maintained its federal funds target range, citing elevated uncertainty surrounding the economic outlook.

Sources: CAPS CompositeHub^TM, Bloomberg
Past performance is not indicative of future results. Aristotle Atlantic Large Cap Growth Composite returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are presented net of actual investment advisory fees and after the deduction of all trading expenses. Please see important disclosures at the end of this document.

Geopolitical developments contributed to increased volatility during the quarter. Escalating conflict in the Middle East disrupted energy markets, with reduced shipping activity through the Strait of Hormuz, a key route for global energy supply. The resulting supply uncertainty contributed to a significant increase in oil prices and heightened volatility in energy markets. Trade policy uncertainty also persisted, as a Supreme Court ruling limited the government’s ability to impose certain tariffs, adding complexity for businesses navigating global supply chains.

Despite these headwinds, corporate earnings remained resilient, with S&P 500 companies reporting double-digit earnings growth for the fifth consecutive quarter. Information Technology led earnings growth, supported by continued investment in artificial intelligence. However, equity performance within the sector was mixed. Software was a notable area of weakness amid concerns regarding competitive dynamics and the potential impact of AI on traditional business models. More broadly, concerns around labor displacement, increased scrutiny of capital expenditures, resource constraints and private credit risk weighed on sentiment and tempered equity market performance during the period.

Performance and Attribution Summary

For the first quarter of 2026, Aristotle Atlantic’s Large Cap Growth Composite posted a total return of -8.04% gross of fees (-8.16% net of fees), outperforming the -9.78% return of the Russell 1000 Growth Index.

Sources: FactSet
Past performance is not indicative of future results. Sector attribution shows how much of a portfolio’s overall return is directly attributable to stock selection and asset allocation decisions within the portfolio, highlighting which sectors contributed or detracted to the total return. Attribution includes the reinvestment of income. Attribution is presented gross of fees and does not include the deduction of all fees and expenses that a client or investor has paid or would have paid. Please refer to the gross and net composite returns included within to understand the overall impact of fees. Please see important disclosures at the end of this document.

During the first quarter, the portfolio’s outperformance relative to the Russell 1000 Growth Index was due to security selection and allocation effects. Security selection in Consumer Staples and Industrials contributed the most to relative performance. Conversely, security selection in Health Care and Communication Services detracted from relative performance.

Contributors and Detractors for 1Q 2026

Relative contributors and detractors are based on attribution total effect and exclude benchmark securities not held in the portfolio.

Contributors

Darling Ingredients

Darling Ingredients contributed to performance in the first quarter, as the stock continued to show momentum ahead of the finalization of the Environmental Protection Agency’s Renewable Volume Obligation (RVO), which came in the final days of March. The RVO was ahead of expectations and bodes well for continued improvement in renewable diesel margins for Darling’s joint venture Diamond Green Diesel.

Quanta Services

Quanta Services contributed to performance in the first quarter of 2026. In mid-February, the company reported better-than-expected results for the fourth quarter of 2025. The company is seeing broad-based strength in project demand from end markets, including data centers, grid infrastructure and renewable power. In late March, the company hosted an investor day where long-term guidance of mid-teens to 20% EPS growth was given through 2030.

Detractors

HubSpot

HubSpot detracted from performance in the first quarter, as the stock continued to decline amid intensifying fears that AI-native tools and LLMs, such as Anthropic’s Claude, will erode demand for traditional SaaS+ product offerings. The stock’s multiple continued to compress despite the most recent quarterly results showing a reacceleration in revenue growth, reflecting the poor investor sentiment toward software stocks.

Shopify

Shopify detracted from performance in the first quarter, as the stock’s premium valuation came under pressure due to overall negative sentiment toward software stocks amid concerns about business pressures from AI-native tools and LLMs, such as Anthropic’s Claude.

Recent Portfolio Activity

The table below shows all buys and sells completed during the quarter, followed by a brief rationale.

Buys

Amphenol

Amphenol Corporation is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors and interconnect systems; antennas; sensors and sensor-based products; and coaxial, high-speed and specialty cable. Based on recent reports of industry analysts, the company estimates that worldwide sales of interconnect and sensor-related products were approximately $250 billion in 2024, reflecting continued growth driven by data communications, electrification, and aerospace and defense demand. The company aligns its businesses into three reportable business segments: (i) Harsh Environment Solutions, (ii) Communications Solutions and (iii) Interconnect and Sensor Systems.

Additionally, Amphenol serves a diverse range of end markets with its high-performance interconnect systems, sensors, antennas and related products. These markets include defense and aerospace, where Amphenol supports major programs from inception to production; commercial aerospace, providing reliable products for harsh environments; industrial applications such as automation, alternative energy, transportation and electrification; automotive, offering advanced solutions for hybrid and electric vehicles in partnership with global OEMs; communications networks, supplying components for current and next-generation wireless standards like 5G; mobile devices, including smartphones, tablets and laptops; and information technology and data communications, delivering interconnect solutions for servers, networking equipment, cloud infrastructure and AI systems. The company’s sales distribution in 2025 reflected strong representation across these sectors, with the largest share in IT and data communications, followed by industrial, automotive, defense, communications networks, mobile devices and commercial aerospace.

We see Amphenol’s investment case as anchored by its diversified end-market exposure, which provides resilience and participation in secular growth trends across automotive, aerospace/defense, IT and data communications, and industrial sectors. The company’s proven M&A strategy continues to drive growth and market consolidation, while operational excellence delivers industry-leading margins and robust free cash flow. Amphenol is well-positioned to benefit from the AI data center boom, the global shift toward electrification, and ongoing industrial and defense modernization. Disciplined capital allocation further supports sustained growth and shareholder value creation. We believe a premium to the share price is justified, as Amphenol should benefit from the accelerated growth rates and increasing TAM of its AI-related data center interconnect business, which should see secular tailwinds for a multi-year period. We also expect management to continue executing on operational excellence, driving margin expansion.

Immunome

Immunome, Inc. is a biotechnology company focused on developing innovative therapies by combining unique or underexplored biological targets with advanced technology platforms. The organization is guided by President and Chief Executive Officer Clay Siegall, Ph.D., who previously founded and led Seagen and is recognized for his experience in growing oncology businesses and securing significant acquisitions. The leadership team is composed of experts with backgrounds in designing, developing and commercializing cancer treatments. Immunome’s portfolio includes three clinical-stage drug candidates. The company is also advancing several preclinical programs.

We believe Immunome presents a compelling investment opportunity, driven by its focus on personalized medicine and the promising product story of Varegacestat for desmoid tumors. The company has reported positive phase 3 data and is preparing to file for FDA approval, with potential commercial launch anticipated in late 2026 or early 2027. The desmoid tumor market is expected to reach a peak size of $500 million to $700 million. Immunome benefits from experienced leadership, notably its founder’s successful track record at Seagen, and maintains a strong financial position following a recent capital raise, resulting in pro forma cash exceeding $600 million.

Olema Pharmaceuticals

Olema Pharmaceuticals, Inc. (also known as Olema Oncology) is a clinical-stage biopharmaceutical company dedicated to the discovery, development and commercialization of next-generation targeted therapies for breast cancer and other endocrine-driven cancers. The company leverages its expertise in nuclear receptors and mechanisms of acquired resistance to transform the treatment paradigm for metastatic breast cancer (MBC). Headquartered in San Francisco with operations in Cambridge, Massachusetts, Olema is focused on developing therapies that can serve as best-in-class backbone treatments for ER+/HER2- breast cancer, which represents approximately 70% of all breast cancer cases. Olema is currently advancing two primary clinical programs.

We believe Olema Pharmaceuticals is well-positioned to capitalize on the trend toward personalized medicine, driven by promising clinical data for its lead candidate Palazestrant in MBC and early-stage antibody-drug conjugates (ADC) platform molecules. The company’s phase 2 results for Palazestrant have shown favorable progression-free survival compared to peer therapies, suggesting potential best-in-class status if confirmed in future studies. With products targeting a market exceeding $20 billion annually, Olema intends to commercialize its drug in the U.S. and seek partnerships internationally. Following a successful capital raise in late 2025, Olema is well-funded, with pro forma cash over $500 million, supporting continued development and commercialization efforts.

Tempus AI

Tempus AI, Inc. is a healthcare technology company specializing in AI-enabled precision medicine solutions. By leveraging AI and machine learning, Tempus connects laboratory test results with clinical data to improve patient care across multiple diseases. The company operates through three main business units: Genomics (Diagnostics), which offers advanced genetic testing and diagnostics; Data and Services, which commercializes de-identified healthcare data and supports clinical trials; and AI Applications, which develops algorithmic diagnostics and clinical decision support tools. Tempus collaborates with leading pharmaceutical and biotechnology firms, positioning itself as a key innovator in both oncology and broader healthcare markets.

In our opinion, Tempus stands out as a compelling investment opportunity due to its alignment with key secular trends such as AI, data analysis and monetization, and personalized medicine. Since going public in mid-2024, Tempus has demonstrated impressive growth, driven by both organic expansion and strategic acquisitions like Ambry. The company’s robust portfolio in genomics and diagnostics—spanning oncology, hereditary risk assessment and advanced testing—along with its rapidly growing data and applications segment, positions Tempus at the forefront of personalized medicine. The company’s expanding database of over 45 million patient records enhances its value proposition to research partners, and ongoing innovations are expected to drive both revenue and average selling price growth, making Tempus well-situated to capitalize on the evolving healthcare landscape.

Sells

ServiceNow

We sold the position in ServiceNow, Inc., as we see further downside risk to the implied long-term growth rate and view the current valuation as full. Software continues to see headwinds from both AI competitive dynamics and top-line pricing pressures, and we believe that the company’s recent M&A announcements of over $12 billion are shifting to inorganic growth versus ServiceNow’s historical organic 20%+ growth rates.

Outlook

The equity markets in the first quarter declined mid-single digits, reflecting the Iranian conflict and the corresponding rise in commodity prices. Interest rates rose slightly during the quarter due to the rise in inflation expectations. There was a pronounced shift in sector returns, with Energy by far the strongest-performing sector due to the sharp rise in crude oil prices. Equity valuations moderated on the pullback, and we have yet to see any material downward adjustment in earnings growth rates due to higher commodity prices. The economic data puts the Fed in a difficult position with inflation staying above the targeted 2% level and employment numbers weakening. The conflict in Iran introduces a supply shock on top of an already challenging environment. The duration of the conflict, along with the damage to the energy infrastructure in the region, will dictate the timeline of a global economic recovery. Our focus will continue to be at the company level, with an emphasis on seeking to invest in companies with secular tailwinds or strong product-driven cycles.

(All MSCI index returns are shown net and in U.S. dollars unless otherwise noted.)

Markets Review

Sources: CAPS CompositeHub^TM, Bloomberg
Past performance is not indicative of future results. Aristotle International Equity Composite returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are calculated by subtracting a model fee of 0.50% on an annual basis or 0.04167% on a monthly basis, which includes trading costs and the revinvestment of all income. Please see important disclosures at the end of this document.

Global equity markets pulled back in the first quarter, with the MSCI ACWI Index falling 3.20% during the period. Global fixed income markets also weakened, as the Bloomberg Global Aggregate Bond Index decreased 1.07%. From a style perspective, value stocks outperformed growth, with the MSCI ACWI Value Index exceeding the MSCI ACWI Growth Index by 8.85%.

The MSCI EAFE Index fell 1.24% during the period, while the MSCI ACWI ex USA Index declined 0.71%. Within the MSCI EAFE Index, the U.K. and Asia were the strongest performers, while the United States and Europe & Middle East lagged. On a sector basis, eight out of the eleven sectors within the MSCI EAFE Index posted negative returns, with Consumer Discretionary, Financials and Communication Services performing the worst. Conversely, Energy, Utilities and Materials were the only sectors with positive returns.

Geopolitical developments contributed to increased volatility during the quarter. Trade policy uncertainty persisted, as a Supreme Court ruling limited the U.S. government’s ability to impose certain tariffs, adding complexity for businesses navigating global supply chains. In addition, escalating conflict in the Middle East disrupted shipping activity through the Strait of Hormuz, a key route for global energy supply. The resulting supply uncertainty led to a significant increase in oil prices and heightened volatility across energy markets. In a March report, the OECD noted that the Middle East conflict was testing the resilience of the global economy but held its forecast for 2026 global growth at 2.9%.

Given these dynamics, central banks maintained a cautious stance, with the Federal Reserve, Bank of England, European Central Bank and Bank of Japan holding policy rates steady amid elevated uncertainty.

Performance and Attribution Summary

For the first quarter of 2026, Aristotle Capital’s International Equity Composite posted a total return of -4.48% gross of fees (-4.60% net of fees), underperforming the MSCI EAFE Index, which returned -1.24%, and the MSCI ACWI ex USA Index, which returned -0.71%. Please refer to the table below for detailed performance.

Source: FactSet
Past performance is not indicative of future results. Sector attribution shows how much of a portfolio’s overall return is directly attributable to stock selection and asset allocation decisions within the portfolio, highlighting which sectors contributed or detracted to the total return. Attribution includes the reinvestment of income. Attribution is presented gross of fees and does not include the deduction of all fees and expenses that a client or investor has paid or would have paid. Please refer to the gross and net composite returns included within to understand the overall impact of fees.

From a sector perspective, the portfolio’s underperformance relative to the MSCI EAFE Index can be attributed to both security selection and allocation effects. Security selection in Industrials and Energy, as well as an overweight in Consumer Discretionary, detracted most from the portfolio’s relative performance. Conversely, security selection in Consumer Discretionary and Health Care, as well as an overweight in Energy, contributed to relative returns.

Regionally, both security selection and allocation effects were responsible for the portfolio’s underperformance. Security selection in Europe & Middle East and Asia detracted most from relative performance, while exposure to Emerging Markets and an underweight in Europe & Middle East contributed.

Contributors and Detractors for 1Q 2026

Relative Contributors	Relative Detractors
Samsung Electronics	MonotaRO
Cameco	Nemetschek
Credicorp	Accenture
TotalEnergies	Brookfield
Otsuka Holdings	Aristocrat Leisure

Relative contributors and detractors are based on attribution total effect and exclude benchmark securities not held in the portfolio.

MonotaRO, the Japanese business-to-business (B2B) e-commerce platform, was the largest detractor during the quarter. While results remained strong, the stock price was pressured by softer order trends in the enterprise business and a moderation in new customer additions following a period of unusually strong growth. Sentiment was also pressured by the company’s exposure to small and medium-sized enterprises in manufacturing and construction, cyclical and cost-sensitive end markets, particularly amid elevated input costs. Despite these near-term headwinds, profitability remained stable, with margin expansion supported by procurement efficiencies, reduced promotional discounting and higher royalty income. Enterprise business also grew more than 20% through newly connected corporations, expanding to approximately one-third of sales, highlighting its increasing importance within the business and reinforcing a key catalyst we originally identified. Management also announced a ¥10 billion share repurchase program, supporting shareholder returns and reflecting continued discipline in capital allocation. Over the longer term, we believe MonotaRO remains well-positioned to continue gaining share in Japan’s fragmented and underpenetrated MRO market. The company’s broad assortment, operating scale and growing enterprise presence, in our view, support a business that is becoming more embedded in customer procurement workflows over time.

Brookfield, one of the world’s largest and most diversified real asset investors and alternative asset managers, was a detractor for the quarter. Shares of alternative asset managers came under pressure during the period, driven in part by investor concerns around private credit and less-liquid strategies. We believe these concerns are less applicable to Brookfield given the breadth of its platform and its focus on real assets, including infrastructure, renewable power and real estate, rather than any concentrated exposure to a single strategy. The company continues to execute on several key initiatives, including scaling its insurance platform, which provides a growing source of permanent capital to support its investment activities. It is also seeing improving performance in its real estate portfolio, where underlying fundamentals remain strong, with high occupancy levels and positive leasing spreads across its portfolio of large-scale, well-located properties. In addition, Brookfield is building a pipeline of asset sales supported by ongoing development and repositioning of assets, with monetization activity expected to increase as capital markets continue to normalize. Looking at Brookfield from a long-term perspective, the company benefits from its scale, access to capital and disciplined investment approach, which we believe will allow it to continue to deploy capital opportunistically and generate attractive returns across cycles.

TotalEnergies, one of the world’s largest energy companies, was a primary contributor for the quarter. While oil prices increased during the period, driven by geopolitical tensions in the Middle East and disruptions to supply through the Strait of Hormuz, our focus remains on the company’s underlying operational execution across its diversified energy platform. As the fourth-largest major energy player in the world, the company operates across upstream, downstream, liquefied natural gas (LNG), and integrated power and renewable energy businesses. Within its upstream segment, TotalEnergies continues to deliver accretive growth, with new projects generating higher cash flow per barrel than its legacy portfolio, supporting both production growth and improving profitability. In the LNG segment, the company has started production in Angola, which will supply Europe and Asia with roughly two million tons of LNG per year, and has also signed an agreement with Glenfarne, the lead developer of the Alaska LNG project, to offtake two million tons of LNG annually for the next 20 years. We view LNG as a key structural driver of long-term growth, particularly given increasing demand for energy security in Asia and Europe. Lastly, within renewables, TotalEnergies and Masdar, an Abu Dhabi clean energy leader, formed a joint venture to accelerate renewable energy growth through onshore solar, wind and battery storage projects across Asia. In the U.S., the company has signed a long-term Power Purchase Agreement to provide 1 GW of solar capacity to power Google’s data centers in Texas for 15 years. These initiatives reflect the company’s strategy to build a more diversified and resilient energy platform over time. Overall, we believe TotalEnergies’ combination of disciplined capital allocation, low-cost operations and integrated business model positions it to generate attractive FREE cash flow across commodity cycles, with recent operational progress reinforcing its long-term investment case.

Otsuka Holdings, a leading Japanese healthcare company, was also a top contributor to performance during the quarter. We have long admired the company’s robust and diversified product portfolio, which we believe is well-positioned to gain market share in various applications such as depression, schizophrenia and oncology. As awareness of major depressive disorders has continued to increase, Otsuka’s leading products, including Rexulti and Abilify Maintena, have exhibited strong prescription growth. In oncology, the heightened attention around colorectal cancer, which has spiked in adults under 55, has led to gains for the company’s leading cancer drug, Lonsurf. Furthermore, the company continues to invest in its “Next 8” pipeline, which complements its existing portfolio and supports its next phase of growth. Management has also continued to invest in external innovation, as demonstrated by its recently announced agreement to acquire Transcend Therapeutics, which strengthens its position in psychiatric and neurological disorders, including adding a late-stage candidate targeting PTSD. As the company continues to reinvest in innovation while simultaneously returning value to shareholders, as exemplified by its most recent ¥50 billion share buyback program, we remain confident that Otsuka will continue to deliver attractive long-term returns over time.

Recent Portfolio Activity

During the quarter, we sold our position in Amundi and invested in Techtronic Industries.

We first invested in Amundi, one of Europe’s leading asset managers, in the third quarter of 2018. At the time, our investment thesis was supported by the leadership of Yves Perrier, whose vision and execution were central to building a scaled and diversified franchise with a broad global footprint, multi-channel distribution and strong cost discipline that supported above-peer profitability. We also saw opportunity for value creation through the integration of Pioneer Investments, acquired from UniCredit in 2016, as well as continued expansion outside of France through third-party partnerships. During our holding period, these catalysts were largely realized. At the same time, the outlook for sustained margin expansion and the economics of certain distribution partnerships became less predictable amid intensifying competition, with incremental profitability increasingly dependent on external factors. Given reduced visibility into future catalysts and a less compelling risk-reward profile, we exited the position.

Techtronic Industries Co. Ltd.

Headquartered in Hong Kong, Techtronic Industries (“TTI”) is a global manufacturer of power tools, outdoor power equipment and related accessories. The company operates primarily through two flagship brands: Milwaukee, which serves professional tradespeople, and Ryobi, which targets the DIY and light professional market (including handymen and maintenance professionals whose needs fall between homeowners and full-time trades). Over the past decade, TTI has transformed itself into one of the leading players in the global power tool industry, driven by sustained innovation and disciplined brand investment.

Milwaukee has been the primary growth engine, expanding from approximately $450 million in sales in the early 2000s to roughly $10 billion today. The brand has gained meaningful share in professional trades through a focus on productivity, safety and battery-powered innovation. Ryobi remains a leading DIY platform, supported by a long-standing distribution relationship with Home Depot, TTI’s largest retail partner.

TTI continues to benefit from the long-term industry transition from corded, gas-powered and pneumatic tools toward battery-powered platforms. The company’s strategy of maintaining backward compatibility across battery generations has reinforced customer loyalty and created a durable installed base across both Milwaukee and Ryobi ecosystems.

High-Quality Business

Some of the quality characteristics we have identified for TTI include:

• Leading positions in professional and DIY power tools through the Milwaukee and Ryobi brands, supported by strong brand equity, deep engagement with professional tradespeople and a track record of consistent product innovation;
• A powerful battery ecosystem strategy, with over 110 million M18 and 65 million M12 batteries in circulation and backward and forward compatibility across generations, creating switching costs and repeat purchases across hundreds of compatible tools;
• Ongoing investment in research and development, enabling consistent product innovation, market share gains and expansion into adjacent product categories; and
• Deep retail partnerships, particularly with Home Depot, reinforced by dedicated in-store sales representation and merchandising support.

Attractive Valuation

We believe shares are attractively valued relative to our estimate of intrinsic value. Our analysis reflects the growing contribution of the Milwaukee franchise, which now represents the majority of operating profit, and the benefits of continued mix shift toward professional products, as well as stabilization of underperforming segments. In addition, as recent investment spending normalizes, we expect FREE cash flow to increase to levels that we believe are not fully reflected in the current share price.

Compelling Catalysts   

Catalysts we have identified for TTI, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

• Continued mix shift toward the higher-margin Milwaukee brand, which has grown from 18% of total sales in 2010 to approximately two-thirds today;
• Geographic expansion of the Milwaukee brand outside the United States, where market share remains below North American levels, and introduction of the Ryobi platform into additional markets such as Latin America and Australia;
• Expansion into adjacent professional categories, including personal protective equipment and modular tool storage systems, thereby increasing wallet share within the professional customer base; and
• Improvement in operating profitability through turnaround of underperforming segments and greater cost discipline.

Conclusion

The current investment environment presents a wide range of competing narratives. In such periods, the temptation to react to near-term developments can be significant. At Aristotle Capital, we remain focused on what we believe to be more analyzable and enduring: the long-term fundamentals of individual businesses. When market returns are driven by momentum or shorter-term dynamics, it can be difficult for investors to remain disciplined. We believe such environments create opportunities for patient investors as the gap between price and intrinsic value widens. While political and geopolitical uncertainty remains elevated, our focus is unchanged. We continue to study businesses and invest with a long-term perspective, as we believe fundamentals ultimately determine share price outcomes.

Long-run productivity has historically moved in waves, and the current one may be inflecting.

Labor productivity (output per hour) is the headline measure, while utilization-adjusted total factor productivity (TFP) clarifies underlying efficiency, to distinguish true efficiency gains from temporary effects.

The 1995–2004 Internet and IT boom delivered broad based gains, with labor productivity ~3.0% CAGR and utilization-adjusted TFP CAGR ~2.0%.

Since 1990, productivity has moved in multi-year waves, peaking in the early-2000s and bottoming in the mid-2010s post-GFC trough.

Since 2020, labor productivity has reaccelerated above its long-term average; TFP has improved but remains well below prior highs, suggesting sustained TFP strength is needed for a durable AI-led shift.

Labor Productivity vs. TFP (7-year trailing CAGR): 1990-2025

Note: Lines show 7-year trailing CAGR. Shaded figures show period CAGR of the underlying level series.
Source: U.S. Bureau of Labor Statistics (BLS), Labor Productivity and Costs (Nonfarm Business Sector output per hour); Fernald, Federal Reserve Bank of San Francisco
(utilization-adjusted TFP); Aristotle Capital Management, author calculations. As of 2025Q4.

After one of the strongest bull markets in U.S. history, it may be tempting to conclude that passive index investing is all an investor needs. The S&P 500—lifted by a narrow group of mega-cap technology companies—has delivered impressive headline results. Yet beneath the surface, significant risks are building— risks that passive investing, by design, struggles to address. These include extreme concentration in a few stocks, the ever-changing nature of market leadership, unsustainable valuation gaps, and structural inefficiencies emerging in an index-centric market. Disciplined active management offers the flexibility to mitigate these risks and capture opportunities that broad indexes often overlook. We assert that in today’s environment, high-conviction, valuation-disciplined active management is more vital than ever for U.S. large-cap equity investors.

For institutional investors charged with fiduciary oversight, the rising concentration of market returns poses unique portfolio and governance risks that passive structures cannot mitigate.

To read the full thought piece, please use the link below. 

(All MSCI index returns are shown net and in U.S. dollars unless otherwise noted.)

Markets Review

Sources: CAPS CompositeHub^TM, Bloomberg
Past performance is not indicative of future results. Aristotle International Equity ADR WM Composite returns are presented pure gross and net of the maximum wrap fee and include the reinvestment of all income. Pure gross returns do not reflect the deduction of any trading costs or other fees and are supplemental to the net returns. Net returns are calculated by subtracting the highest applicable wrap/SMA fee, which includes trading costs and custodial fees, from the pure gross composite return. (From inception to 12/31/2015, the highest applicable wrap/SMA fee is 3.00% on an annual basis, or 0.75% quarterly. From 1/1/2016 to 12/31/2023, the highest applicable wrap/SMA fee is 2.00% on an annual basis, or 0.50% quarterly and 0.17% monthly from 1/1/2024 to present.) Aristotle Capital Composite returns are preliminary pending final account reconciliation. Please see important disclosures at the end of this document.

Global equity markets posted strong gains in the fourth quarter. The MSCI ACWI Index returned 3.29%, while bonds advanced in tandem (the Bloomberg Global Aggregate Bond Index increased 0.24%). Value stocks outperformed growth during the quarter, with the MSCI ACWI Value Index exceeding the MSCI ACWI Growth Index by 0.82%.

Outside the U.S., international equities delivered solid gains relative to their U.S. counterparts. The MSCI EAFE Index gained 4.86% for the quarter, while the MSCI ACWI ex USA Index returned 5.05%. Within the MSCI EAFE Index, the U.K. and Europe & Middle East were the strongest-performing markets, while Asia posted the weakest returns. From a sector perspective, ten out of the eleven sectors within the MSCI EAFE Index delivered positive returns, led by Utilities, Health Care and Financials. Conversely, Communication Services, Real Estate and Consumer Discretionary were the worst-performing sectors. In contrast to the U.S., where value stocks outperformed growth stocks for the quarter but lagged for the year, international value stocks led in both periods.

On the whole, the macroeconomic outlook continued to gradually improve in late 2025. The IMF modestly upgraded its 2025 forecast for global GDP growth to 3.2%, citing resilience in many economies. However, growth is expected to decelerate in 2026 as the world economy adjusts to the cumulative impact of new policies (such as higher tariffs and industrial policies) and as one-off boosts fade. Temporary factors that propped up activity in 2025—for example, the front-loading of imports to get ahead of tariff changes and the reconfiguration of supply chains—are likely to wane. The IMF also warned that near-term risks are tilted to the downside. Key concerns include the sustainability of the AI-driven boom (fears of a potential bubble or abrupt repricing), persistent economic struggles in China, and increased fiscal vulnerabilities in many countries (which could pressure central banks). Policymakers have been urged to shore up confidence with credible, transparent strategies, such as rebuilding fiscal buffers and preserving central bank independence.

Global inflation rates were mixed across regions but generally showed signs of easing. In the U.K., inflation unexpectedly eased to an eight-month low of 3.2%, but the unemployment rate rose to a four-year high and private-sector wage growth fell to a five-year low. As U.K. macro indicators weakened, the Bank of England cut its policy rate by 0.25% to 3.75%. In contrast, the European Central Bank left policy rates unchanged for the fourth consecutive meeting, as inflation remained near its 2% target and underlying growth proved resilient. Specifically, Germany finally showed signs of stabilization, with industrial production rising for two consecutive months (September and October), following GDP growth of 0.3% year-over-year in the third quarter. Even politically embattled France, whose Prime Minister Lecornu briefly resigned during the quarter, exceeded expectations and reported 0.9% annual growth.

In Asia, the quarter’s news cycle was dominated by the U.S.-China trade saga and evolving security postures. While tensions escalated early in the quarter, the two countries reached a one-year trade truce following a meeting between Presidents Trump and Xi at the Asia-Pacific Economic Cooperation (APEC) summit in South Korea. Under the agreement, China’s effective tariff rate declined to 47%, and export controls on critical rare earth materials were deferred. The timing may prove important, as China continues to contend with persistent deflationary pressures, declining fixed-asset investment and weak retail sales ahead of the implementation of its next Five-Year Plan in 2026. However, while relations with the U.S. improved, China’s relationship with Japan became strained after Japan’s first female prime minister, Sanae Takaichi, stated that Japan would militarily intervene if Beijing used force against Taiwan. Chinese officials warned that the comments had “severely damaged” trade cooperation, raising the risk of economic repercussions. These tensions emerged just as Japan reported its first economic contraction in six quarters. In response, Japan finalized a ¥21.3 trillion stimulus package; meanwhile, the Bank of Japan raised its policy rate to 0.75%, the highest level in three decades.

Beyond U.S.-China and Japan-China tensions, other geopolitical issues were in focus. In Europe, hopes rose for a resolution in Ukraine as diplomatic efforts intensified (with direct U.S. involvement in talks). In the Middle East, the Israel-Hamas ceasefire brokered by the U.S. in October largely held, allowing the release of all surviving Israeli hostages, an increase in humanitarian aid into Gaza and a lull in hostilities. Yet new flashpoints emerged in the Western Hemisphere: the U.S.-Venezuela confrontation escalated when the U.S. conducted a drone strike on a Venezuelan port used by cartels. While this action raised concerns about a broader conflict, analysts noted it could also embolden China in its territorial posturing (citing that U.S. actions set precedents, even though an analog in Taiwan is still seen as unlikely in the near term). In summary, by the end of 2025, many geopolitical conflicts that had unsettled markets earlier in the year showed tentative progress or containment, while new uncertainties arose that will carry into 2026.

Annual Markets Review

Global equity markets continued their upward trajectory in 2025, with the MSCI ACWI delivering a full-year return of 22.34%. Growth stocks outperformed value during the year, as the MSCI ACWI Growth Index exceeded the MSCI ACWI Value Index by 0.46%. Meanwhile, fixed income markets rallied, as the Bloomberg Global Aggregate Bond Index advanced 8.17%.

As markets digested new trade agreements, economic data and policy decisions by central banks, 2025 proved to be a resilient year for risk assets. However, even strong markets presented their own set of challenges. Factors such as momentum and volatility outperformed quality, and while economic indicators and corporate earnings were broadly supportive, central banks and corporate management teams struck a more cautious tone heading into 2026.

Given the risks and uncertainties surrounding macroeconomic conditions and market narratives, we believe it remains prudent to focus on individual businesses and their long-term fundamentals. By concentrating on what is analyzable, we believe our approach is well suited to navigating a range of market environments while remaining disciplined through full market cycles.

Performance and Attribution Summary

For the fourth quarter of 2025, Aristotle Capital’s International Equity ADR WM Composite posted a total return of 5.81% pure gross of fees (5.30% net of fees), outperforming the MSCI EAFE Index, which returned 4.86%, and the MSCI ACWI ex USA Index, which returned 5.05%. Please refer to the table below for detailed performance.

Source: FactSet
Past performance is not indicative of future results. Sector attribution shows how much of a portfolio’s overall return is directly attributable to stock selection and asset allocation decisions within the portfolio, highlighting which sectors contributed or detracted to the total return. Attribution includes the reinvestment of income. Attribution is presented gross of fees and does not include the deduction of all fees and expenses that a client or investor has paid or would have paid. Please refer to the gross and net composite returns included within to understand the overall impact of fees.

From a sector perspective, the portfolio’s outperformance relative to the MSCI EAFE Index can be attributed to both security selection and allocation effects. A lack of exposure to Communication Services, as well as security selection in Industrials and Health Care, contributed most to the portfolio’s relative performance. Conversely, security selection in Materials, Consumer Discretionary and Consumer Staples detracted from relative returns.

Regionally, both security selection and allocation effects were responsible for the portfolio’s outperformance. Security selection and an underweight to Asia contributed the most to relative performance, while an underweight to Europe & Middle East and security selection in the UK detracted.

Contributors and Detractors for 4Q 2025

Relative Contributors	Relative Detractors
Erste Group Bank	Pan Pacific International
FANUC	Sony
Fast Retailing	Experian
Roche	Safran
DBS Group	Michelin

Erste Group Bank, a leading retail and commercial bank in Central and Eastern Europe, was the top contributor during the quarter. The company reported strong operating performance, driven by healthy loan growth across core markets, resilient net interest income and solid fee income, with contributions from securities, asset management and payments. Its diversified, retail-oriented banking model, leading market positions across core geographies and strong deposit franchise anchored in household customers continue to support the business. During the quarter, Erste cleared key milestones related to its previously announced acquisition of a 49% stake in Santander Bank Polska. With regulatory conditions satisfied late in the quarter, the transaction is expected to close in early 2026. We view this transaction as strategically attractive, expanding Erste’s footprint into Poland, one of the region’s largest and most dynamic banking markets, while enhancing scale and diversification. More broadly, Erste’s exposure to underbanked Central and Eastern European economies positions the company to benefit as incomes rise and demand for credit, savings and financial services continues to grow. Ongoing investment in technology and digital capabilities supports efficiency, customer engagement and long-term profitability.

FANUC, the Japanese leader in factory automation and industrial robotics, was a top contributor during the quarter. The company operates across factory automation systems, industrial robots and precision machining centers, serving automotive, electronics and general industrial end markets. Results through the first half of fiscal year 2025 marked a clear inflection, with operating margin expanding to 21% as factory utilization and pricing discipline held firm. Performance was further supported by a sharp rebound in China, where robot sales grew over 80% year-over-year, more than offsetting softer demand in Europe and Japan. Beyond the cyclical recovery, FANUC continues to deepen its competitive advantages. Its dominant position in computer numerical control (CNC) systems, the “brains” of machine tools, underpins a large and highly sticky installed base. During the quarter, the company highlighted an increasingly open software strategy that allows third parties to develop applications directly on FANUC’s platform while maintaining safety and reliability at the controller level. This approach is reinforced by FANUC’s collaboration with NVIDIA, announced during the quarter and linking FANUC’s robot simulation tools with NVIDIA’s Omniverse software to enable highly accurate digital twins and accelerate deployment of AI-driven robotics. This leadership extends across its Robot and Robomachine segments, supported by an integrated hardware, software and service ecosystem that is difficult to replicate and highly valued in mission-critical applications. As global automation adoption accelerates amid labor shortages, rising wages and increasing manufacturing complexity, we believe FANUC is well-positioned to grow alongside its customers while sustaining attractive margins, supported by disciplined capital allocation and a growing mix of higher-margin service and software revenues.

Sony, the global leader in video games, image sensors, music and movies, was a primary detractor for the period. Shares declined following the recognition of a one-time, non-cash charge of approximately ¥50 billion in the Game & Network Services segment related to an impairment and accounting correction of previously capitalized development costs. Importantly, this charge was not recurring and did not reflect a deterioration in underlying operating performance. Excluding this item, operating income would have increased approximately 23% year-over-year, supported by healthy gaming engagement, continued growth in network services and software sales, and strong results in the Music segment driven by streaming growth and recent theatrical releases. The company’s image sensor business also benefited from a favorable product mix and steady end-market demand. Looking ahead, we continue to see opportunity for Sony to capitalize on its unique position as both a content creator and platform owner. The company’s ability to integrate gaming, music, anime and film—and to leverage IP across its ecosystem—supports sustained engagement and recurring revenue. In addition, the recent spinoff of Sony’s Financial Services segment further sharpens management’s focus on its core content, technology and entertainment operations. We believe Sony’s industry leadership and continued focus on operational execution position the company well for long-term value creation.

Experian, one of the world’s largest credit bureau companies, was a primary detractor during the quarter. Shares declined despite continued solid execution in the core business. Results in North America remained strong, with broad-based growth across financial services, consumer, automotive and health verticals, but performance in certain international markets, particularly Latin America, was constrained by high interest rates and elevated consumer indebtedness, which tempered near-term revenue growth expectations. We continue to view Experian as a uniquely advantaged big data and analytics business with a durable competitive position. The company maintains credit and identity data on approximately 1.5 billion consumers and about 200 million businesses globally, a depth and breadth that would be extremely difficult to replicate. This scale underpins powerful network effects, high switching costs and limited competition in its core markets. Importantly, the cost of Experian’s data is negligible relative to the financial risk it helps clients manage, supporting strong pricing power and resilient margins across credit cycles. Over our more than 15-year ownership period, Experian has consistently expanded beyond its traditional bureau roots by monetizing its proprietary datasets through software, analytics, fraud prevention and direct-to-consumer offerings. We believe the company will continue to benefit from rising penetration of its higher-value decisioning and analytics platforms, expanding consumer engagement, new monetization of “positive” data in markets such as Brazil, and the continued rollout of data-driven solutions into adjacent verticals, including healthcare, automotive and marketing services.

Recent Portfolio Activity

During the quarter, we sold our positions in Kubota, Nidec and Sony Financial.

We first invested in Kubota, the maker of tractors and construction machinery, during the second quarter of 2015. During our holding period, the company gained share in small tractors and construction machinery in North America, expanded in Southeast Asia, and restructured its water and environment segment. While Kubota maintains strong market positions in Japan, the U.S. and Thailand, share gains in these markets appear to be maturing. More recently, the industry has become increasingly promotional, requiring greater use of customer financing, which has raised capital intensity and pressured margins as interest rates have increased. Meanwhile, India remains an attractive long-term tractor market, but Kubota has yet to demonstrate an ability to take meaningful share. We exited the position in favor of what we considered to be a more compelling opportunity but continue to view Kubota as a high-quality company.

We invested in Nidec more than a decade ago, initially attracted by the company’s position as a global leader in precision motors, its strong market share across hard disk drive, its growing presence in industrial and automotive applications, and its ability to consolidate a fragmented industry while generating attractive margins and returns on invested capital. Over our holding period, Nidec maintained leadership in several core motor categories and benefited from long-term demand for energy-efficient solutions across industrial, appliance and data center markets. However, several anticipated catalysts were slower to materialize. The company’s expansion into electric vehicle traction motors proved more competitive and less profitable than expected, while frequent leadership changes, strategic shifts and, more recently, manufacturing and accounting issues introduced persistent uncertainty. Despite efforts to improve discipline and profitability, ongoing investigations and questions around business quality and controls reduced the clarity and predictability of the business. Given these unresolved issues, we concluded that Nidec no longer offered an attractive risk-adjusted return and exited the position.

We received shares of Sony Financial Group following its spin-off from our long-term holding, Sony Group, in October 2025. Sony Financial is a Japan-based financial services company with operations in life insurance, banking and digital payments. While we view Sony Financial as an attractive, well-managed business, we already have meaningful exposure to the global insurance industry through holdings such as AIA Group and Munich Re. Given our existing positioning, we elected to sell the shares received in the spinoff.

Conclusion

Markets and economic conditions will continue to evolve, often in ways that are difficult to anticipate. While we remain attentive to these developments, our work is ultimately centered on understanding individual businesses—how they compete, how they allocate capital and how their economics change over time. We recognize that progress in business fundamentals and investment outcomes do not always align over shorter periods. Thus, we approach our investment process with patience and a willingness to reassess our views as circumstances change. Rather than react impulsively to every macro headline or try to time short-term market moves, we focus on what is analyzable and enduring: the long-term fundamentals of the companies we own. We believe this careful, fundamental approach remains the most reliable way to add value for our clients over the long run, across a wide range of market environments.