3Q 2026 5Perspectives Large Growth Commentary

The Polen 5Perspectives Large Growth Composite Portfolio (the “Portfolio”) returned 0.0% net of fees in the third quarter of 2026, compared to the 0.9% return of the Russell 1000 Growth Index (the “Index”). The quarter opened with a meaningful air pocket in AI-related equities, as a wave of hyperscaler earnings reports raised fresh questions about whether enormous AI-related capital expenditures would generate commensurate returns.

In our view, the quarter’s volatility largely reflected a resetting of elevated positioning and expectations that had built during the first half of the year, rather than a broad deterioration in fundamentals across AI infrastructure and its adjacent themes. While the volatility was at times significant, we believe the underlying demand drivers across much of the ecosystem remain supportive.

What Drove Large-Cap Growth Markets in Q3 2026?

The quarter opened with a meaningful air pocket in AI-related equities, as a wave of hyperscaler earnings reports raised fresh questions about whether enormous AI-related capital expenditures would generate commensurate returns. These fundamental concerns were quickly compounded by crowded positioning, elevated leverage, and forced selling, producing one of the sharpest, most concentrated selloffs the AI trade had experienced since the current cycle began in 2023, with semiconductor and AI infrastructure-related stocks bearing the brunt of the decline.

However, as July came to a close and it became more apparent just how much of the sell-off was mechanically driven, sentiment began to stabilize. Continued evidence of robust hyperscaler spending plans, resilient enterprise demand, and strong earnings results helped restore confidence in the AI investment cycle.

That strength proved short-lived, though, as attention pivoted sharply toward inflation and monetary policy. Hawkish commentary from new Fed Chair Kevin Warsh raised the odds of a 25bps rate hike, which ultimately came in mid-September.

Which Holdings Had the Largest Impact on the Portfolio's Relative Performance?

The top contributors to the Portfolio’s relative performance in the quarter were CrowdStrike, Cloudflare, and Micron Technology (underweight).

CrowdStrike is a provider of cloud-native cybersecurity software, with its Falcon platform protecting endpoints, cloud workloads, identity, and data. Shares outperformed during the quarter after the company reported record net new annual recurring revenue (ARR) of $333 million, up 51% year-over-year, and raised its full-year net new ARR growth outlook by 630 basis points.

Cloudflare operates a global cloud network that provides security, performance, and developer services, including its Workers platform and Zero Trust offerings. Shares outperformed during the quarter after the company reported strong second quarter results, with revenue growth accelerating and record additions of paying customers, large customers, and developers on its platform. Management also raised its full-year outlook.

Micron Technology is one of the world’s largest producers of DRAM and NAND memory, including the high-bandwidth memory used in AI accelerators. The Portfolio’s underweight position contributed to relative performance as shares underperformed during the quarter amid a sharp sell-off in memory stocks.

The most significant detractors from the Portfolio’s relative performance in the quarter were Microsoft (underweight), Meta Platforms (underweight), and Tesla.

Microsoft's underweight position detracted from relative performance as shares outperformed, gaining roughly 39% in the quarter, the stock’s best quarter since 1991, and recovering much of a first-half sell-off. The rally was sparked by fiscal fourth-quarter results when Azure and other cloud services revenue grew 43% year over year, Azure surpassed $100 billion in annual revenue for the first time and Microsoft 365 Copilot crossed 30 million paid seats.

Meta Platforms' underweight position detracted from relative performance as shares outperformed during the quarter, including following the September 8 debut of Muse, Meta’s personal AI agent app. The launch provided an early example of how Meta is seeking to translate its AI investments into consumer-facing products and contributed to increased investor optimism around the company’s AI strategy.

Tesla underperformed during the quarter following second quarter results, when record revenue was overshadowed by margin pressure and a sharp step-up in capital spending to fund the company’s AI and robotics ambitions. Tesla continued to report tangible progress on Robotaxi and Cybercab, while demand for its core vehicles and energy storage products generally remained healthy during the period.

How Is the Portfolio's Sector Exposure Shifting?

The salient changes to positioning this quarter included our increased exposure to Technology and decreased exposure to Industrials.

The reduced exposure to Industrials came as we pared back exposures within the Electrification and AI infrastructure-related themes. While we still see a meaningful opportunity for these picks and shovels “suppliers” to the AI build out, we have increasingly used these positions as a source of funds to add to a mix of Semis and Software-related businesses within Technology.

As a result of these shifts in positioning, Technology remains our largest sector exposure followed by Consumer Discretionary and Communication Services in roughly equal measure.

What Is Our Outlook for Large-Cap Growth?

We believe the large-cap growth universe in the US is home to some of the most innovative and dynamic companies and entrepreneurs in the world. The accelerating pace of change continues to create opportunity, but it also increases disruption risk when leadership shifts. AI is compressing the time it takes for winners and losers to separate, which is why our process seeks to blend competitive-advantage work with thematic and technical disciplines that we believe helps us navigate the dynamic landscape.

Past performance does not guarantee future results. The commentary is not intended as a guarantee of profitable outcomes. Please see Important Disclosures in the full commentary.