2Q 2026 5Perspectives Small Growth Commentary
The Polen 5Perspectives Small Growth Composite Portfolio returned +32.83% (net of fees) in the second quarter of 2026, outperforming the Russell 2000 Growth Index (+25.71%) by over 700 basis points. Small cap growth stocks produced one of their strongest quarterly returns in 25 years as investor confidence recovered from early-quarter anxiety about trade policy and AI spending durability. Companies tied to AI infrastructure, electrification, and aerospace led the advance.
The quarter also marked a significant inflection in portfolio construction: Technology exposure nearly doubled, driven primarily by neocloud providers — specialized cloud infrastructure companies purpose-built for AI workloads — alongside positions in agentic AI, semiconductors, and networking equipment.
What Fueled the Small Cap Growth Rally in Q2 2026?
Fears about moderating AI capital spending faded rapidly during the quarter as hyperscaler and enterprise customer announcements confirmed that infrastructure investment is accelerating. Market focus shifted to power availability as a primary bottleneck on future AI growth, with rising electricity demand forecasts drawing investor attention to companies in generation capacity, grid infrastructure, and distributed power solutions. While geopolitical and trade policy headlines remained sources of volatility, leadership broadened as confidence improved, with companies exposed to secular growth themes performing best.
Which Holdings Contributed Most to the Portfolio's +700bps Outperformance?
Bloom Energy was the portfolio's top contributor as investors focused on its expanding opportunity in on-site power generation for data centers and utilities amid rising AI-driven electricity demand. DigitalOcean advanced on improving cloud infrastructure demand and confidence in its positioning for AI-related workloads among developers and small businesses. Vicor rose on growing recognition of the need for more efficient power delivery solutions in AI infrastructure and hyperscale data center deployments.
Among detractors, Fastly declined on content delivery growth concerns and was sold during the quarter. Not owning Credo Technology Group — which rallied nearly 200% on AI connectivity demand — was the portfolio's largest relative headwind. GeneDx was volatile after a material guidance cut and was exited as the team redeployed capital toward opportunities with more compelling thematic tailwinds.
How Is the Portfolio Evolving Its Sector Exposure?
Industrials remains the largest sector allocation, reflecting ongoing conviction in electrification and aerospace. However, the quarter's defining move was a near doubling of Technology weight, with neocloud providers as the primary catalyst alongside agentic AI, semiconductors, and networking equipment. This expansion was funded by reduced exposure to Health Care — where the team moved on from several genomics-related positions — and a modest trim in Industrials, where next-generation military technology and space theme allocations were reduced.
Key Takeaways
Over 700 basis points of outperformance in one of the best quarters for small caps in 25 years.
The portfolio returned +32.83% (net), significantly ahead of the Russell 2000 Growth Index's +25.71%.
AI infrastructure spending is accelerating, and power availability is the emerging bottleneck.
Holdings tied to distributed energy, cloud infrastructure, and efficient power delivery drove the strongest contributions.
Technology exposure nearly doubled through neocloud providers and agentic AI.
The team is building conviction in specialized AI cloud infrastructure companies as a distinct and growing opportunity within small cap growth.
Frequently Asked Questions
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.