NZS Capital Q1 2026 Shareholder Letter
NZS Capital's Growth Equity strategy posted a gross return of -8.75% and net return of -8.91% in Q1 2026, underperforming the Morningstar Global Target Market Exposure Index, which declined by -3.30%, amid broad weakness in growth and software stocks driven by AI disruption fears and rising interest rate concerns. The portfolio saw strong contributions from semiconductor firms like TSMC, ASML, and Lam Research, while software names such as Workday and Gartner were major detractors. Managers responded to market declines by rotating into more attractively valued growth opportunities, particularly in software and healthcare. Valuations in certain growth sectors are now seen as among the most compelling in years.
- ▪The NZS Growth Equity strategy returned -8.75% gross and -8.91% net in Q1 2026, underperforming the benchmark index which fell by -3.30%.
- ▪Semiconductor companies including TSMC, ASML, and Lam Research were top contributors due to strong AI-driven demand.
- ▪Software stocks declined sharply on AI disruption concerns, leading NZS to add positions in Tyler Technologies and reassess holdings based on 'non-zero sumness' (NZS) of value creation.
- ▪Healthcare exposure increased with new positions in Stryker and WuXi XDC, while Intuitive Surgical was promoted to resilient status.
- ▪The firm exited several positions including ServiceNow, Gartner, Procore, and Lemonade amid elevated portfolio turnover and valuation-driven rebalancing.
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