1Q2023 – U.S. SMID Company Growth Commentary

During market volatility, our disciplined framework allows us to deploy capital opportunistically

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  • In the first quarter, Polen U.S. SMID Company Growth Composite Portfolio (the “Portfolio”) returned 11.81% gross and 11.49% net of fees, respectively, compared to the 6.54% return of the Russell 2500 Growth Index (the “Index”).
  • The start to 2023 has proven no less volatile than the unprecedented, macro-driven environment we experienced in 2022. Markets initially embraced the growing possibility of a soft landing before stronger-than-expected economic data prompted concerns the Fed would continue to raise rates. Then, the collapse of Silicon Valley Bank and ensuing concerns over potential contagion introduced a new reality for the markets to contend with.
  • The top contributors to the Portfolio’s relative performance in the first quarter included Goosehead Insurance, Duck Creek Technologies and The Trade Desk. These were also the top contributors on an absolute basis. By contrast, the most significant detractors from the Portfolio’s relative performance included Etsy, Warby Parker, and Endava. The top absolute detractors also included Warby Parker and Endava, but RH was a more material absolute detractor than Etsy.
  • We initiated two new positions in high quality businesses, funded by two eliminated positions and some trims to existing holdings.
  • While we can’t predict when markets will recover, we believe that maintaining our focus on high-quality growth companies that are well positioned to drive cash flow and earnings growth over the next five years will generate superior long-term performance.

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