The Victory Sycamore Small Company Opportunity Fund experienced a notable decline in its performance during the initial quarter of 2026, failing to match the gains of the Russell 2000® Value Index. This underperformance was largely attributable to specific stock selection decisions made by the fund's management. A significant contributing factor was the deliberate choice to maintain a lower exposure to the Energy sector, which saw substantial benefits from a sharp increase in oil prices. This strategic underweighting led to a 245 basis point shortfall when compared to the benchmark index.
Sycamore Capital's investment philosophy, characterized by rigorous process discipline, guided its decision to minimize holdings in Energy. A substantial 37% of the Energy companies within the Russell 2000® Value Index did not meet the team's stringent profitability criteria, leading to their exclusion from the fund's portfolio. Concurrently, a shift in market dynamics has been observed, with factors such as Quality and Value now taking precedence over risk-oriented factors like Beta and Volatility, which have recently demonstrated weaker performance.
Victory Capital, a prominent global asset management firm, utilizes a methodical, bottom-up investment strategy for its Small Cap Value team. This approach focuses on identifying superior businesses that are trading below their intrinsic value estimates. This diligent investment philosophy underpins their operational framework, serving a diverse client base through specialized investment franchises and a comprehensive solutions platform. The firm is committed to delivering competitive long-term performance by combining investment autonomy with robust operational and distribution support, ensuring clients access top-tier talent and resources.
