Finance

The initial quarter of 2026 marked a notable change in market dynamics, diverging from the previous year's dominance by large-cap growth and artificial intelligence sectors. The Victory RS Partners Fund, during this period, exhibited a minor lag in performance compared to its designated benchmark, the Russell 2000® Value Index. This shift underscored a repositioning of investor interest and capital allocation within the broader market landscape, favoring different segments and investment strategies.

During the first three months of 2026, the S&P 500® achieved an unprecedented peak, signaling a generally optimistic outlook for domestic equities, despite underlying uncertainties. The energy sector emerged as the leading performer, boasting an impressive return of 43.37%. In stark contrast, the consumer discretionary sector experienced the weakest performance, recording a decline of 3.83%. This disparity highlights a clear rotation in market leadership, moving away from sectors that previously enjoyed significant momentum.

Methanex Corporation is strategically positioned for enhanced Return on Invested Capital (ROIC), primarily due to anticipated reductions in capital expenditures to more manageable levels over the coming years. This operational efficiency, coupled with tightening methanol markets and initiatives to expand profit margins, is expected to drive substantial improvements in its financial health. These factors suggest a positive trajectory for shareholder returns, supported by measures like debt reduction and share repurchases, making Methanex a compelling case for investors looking for value in a shifting market.

Commvault Systems recently faced a setback with a decline in share value, following a miss in its quarterly Annual Recurring Revenue (ARR) projections. This shortfall was largely attributed to a more rapid transition to Software-as-a-Service (SaaS) sales than initially anticipated. Despite the short-term impact, this shift towards a SaaS model is strategically beneficial, promising a high-margin, recurring revenue stream. As the platform matures and scales, this transition is expected to lead to sustainable improvements in ROIC, reinforcing the company's long-term value proposition amidst evolving industry trends.

In summary, the first quarter of 2026 reflected a significant reorientation in market preferences, moving away from previous high-growth sectors. The Victory RS Partners Fund's performance, while slightly trailing its benchmark, navigated a period of notable sectorial shifts. The outstanding performance of the energy sector alongside the challenges faced by consumer discretionary highlights a dynamic market. Companies like Methanex and Commvault are actively adapting their strategies to capitalize on these changes, with Methanex focusing on capital efficiency and Commvault on a strategic pivot to SaaS for long-term value creation.

In the initial quarter of 2026, global stock markets experienced considerable turbulence, primarily due to a notable pivot in American monetary policy and divergent strategies adopted by central banks worldwide, all set against a backdrop of persistent geopolitical tensions. These factors collectively shaped a challenging environment for international equities, underscoring the interconnectedness of global financial systems and the impact of macroeconomic shifts.

During this period, the Thornburg Better World International Fund (I share class) recorded a return of -3.56%, trailing the MSCI ACWI ex-U.S. Index by 285 basis points. Positive contributions stemmed from judicious allocation and careful stock picking within the Utilities, Financials, and Consumer Staples sectors. Conversely, the fund's performance was hampered by stock selection in the Industrials sector and its complete lack of exposure to the Energy sector, highlighting the critical role of sector positioning and individual security choices in volatile markets. Thornburg's investment philosophy integrates ESG principles as a crucial lens for evaluating businesses, aiming to uncover mispriced assets and identify overlooked sources of sustainable earnings power.

Amidst a complex global landscape, embracing a forward-looking and responsible investment approach is more vital than ever. By integrating environmental, social, and governance factors into investment decisions, we can not only identify companies with robust fundamentals and resilience but also contribute to a more sustainable and equitable global economy. This commitment to 'better world' investing ensures that capital is channeled towards enterprises that demonstrate operational excellence, ethical governance, and a proactive stance on societal challenges, ultimately fostering long-term value creation and positive impact.