In 2024, U.S. small cap growth was dominated by narrow performance drivers—crowded AI trades and interest rate-sensitive sectors like housing and biotech—with the top ten contributors accounting for nearly half of the Russell 2000 Growth Index (the “Index”) return. This created a challenging environment for most profitable, high-quality companies and highlighted the market’s increasingly short-term focus.
The U.S. Small Company Growth Composite Portfolio (the “Portfolio”) delivered 5.09% gross of fees and 4.73% net of fees for the quarter, outperforming the Index return of 1.70% amid a volatile market shaped by post-election gains and Federal Reserve policy shifts.
The top contributors to the Portfolio’s relative and absolute performance in the fourth quarter were Warby Parker, Revolve Group, and Dutch Bros. The most significant detractors from the Portfolio’s relative performance were Insight Enterprises, AMN Healthcare Services, and Option Care Health. The greatest absolute detractors were Insight Enterprises, Installed Building Products, and Option Health Care.
During the quarter, we initiated positions in Willscot Holdings, Trex, Fabrinet, and Belden. We also added to several existing positions. We eliminated our positions in Option Care Health, Euronet Worldwide, NV5 Holdings, and Alarm.com, and also trimmed several existing positions.
There are many examples of high beta, AI-adjacent growth companies outperforming the broader investable universe. While we did not own such stocks due to their low quality, which hurt our performance, we believe the Portfolio overall is well-positioned to benefit from the Gen AI-driven transformation—albeit in a more sustainable, long-term-oriented manner.
Seeks Growth & Capital Preservation (Performance (%) as of 12-31-2024)
Qtr
YTD
1 Yr
3 Yr
5 Yr
10 Yr
Inception
(3-9-2017)
U.S. Small Company Growth (Gross)
5.09
4.93
4.93
-9.22
6.78
–
10.14
U.S. Small Company Growth (Net)
4.73
3.82
3.82
-10.29
5.67
–
9.03
Russell 2000 Growth
1.70
15.15
15.15
0.21
6.85
–
8.69
The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Periods over one-year are annualized. Performance figures are presented gross and net of fees and have been calculated after the deduction of all transaction costs and commissions, and include the reinvestment of all income. Please reference the GIPS Report which accompanies this commentary.
The commentary is not intended as a guarantee of profitable outcomes. Any forward-looking statements are based on certain expectations and assumptions that are susceptible to changes in circumstances. Opinions and views expressed constitute the judgment of Polen Capital as of the date herein, may involve a number of assumptions and estimates which are not guaranteed, and are subject to change. Contribution to relative return is a measure of a securities contribution to the relative return of a portfolio versus its benchmark index. The calculation can be approximated by the below formula, taking into account purchases and sales of the security over the measurement period. Please note this calculation does not take into account transactional costs and dividends of the benchmark, as it does for the portfolio. Contribution to relative return of Stock A = (Stock A portfolio weight (%) – Stock A benchmark weight (%)) x (Stock A return (%) – Aggregate benchmark return (%)).
All company-specific information has been sourced from company financials as of the relevant period discussed.
Commentary
As measured by the Russell 2000 Growth Index, U.S. small cap growth stocks were up 1.7% in the fourth quarter and 15% for 2024. In another volatile quarter, small caps were up over 10% after November’s U.S. Presidential election but relinquished almost all those gains in December, with the U.S. Federal Reserve setting the tone for a slower-than-expected interest rate reduction in 2025. Despite the volatility, our U.S. Small Company Growth Composite Portfolio returned 5.09% gross of fees, and 4.73% net of fees, beating the Russell 2000 Growth Index. This marked an encouraging end to an overall disappointing year in which the Portfolio returned 4.9% gross of fees and 3.8% net of fees, underperforming the Russell 2000 Growth’s 15.2% return.
Despite the Portfolio’s muted 2024 results, we believe the fundamentals of our Portfolio businesses are strong and improving. For much of 2024, the Russell 2000 Growth performance was largely driven by crowded AI trades and companies that stood most to benefit from declining interest rates (housing, biotech, and unprofitable “moonshot” companies such as space exploration, quantum computing, etc.). As evidence of this narrowness, the top ten contributors to the year’s Russell 2000 Growth performance accounted for nearly half of its return. This is decidedly not a conducive environment for most profitable, high-quality companies to outperform, and for us, it represented a meaningful headwind to relative performance.
Among our Portfolio holdings, the market’s time horizon seemed to shrink significantly with a heightened focus on AI, excessively punishing businesses that did not meet expectations for the quarter well beyond what the underlying fundamentals would justify. Last quarter, we highlighted Goosehead Insurance (GSHD) as an illustration of this—down 40% at one point and later rebounding 60% as fundamentals proved stronger than expected. We witnessed a continuation of this trend when companies reported earnings in October and November, which worked to our benefit in the fourth quarter.
Many lower-quality companies did not meet our Flywheel framework for quality, weighing heavily on relative performance. The most notable example is Super Micro Computer (SMCI), up nearly 190% in the first half of the year, driving a notable headwind.
Particularly frustrating in this scenario—Super Micro was reconstituted out of the Index in late June and was down -62% in the second half of 2024. There are many other examples of this kind of high beta, AI-adjacent growth company outperforming the broader investable universe. While we did not own these stocks due to their low quality, which hurt our performance, we believe the Portfolio overall is well-positioned to benefit from Gen AI- driven transformation—albeit in a more sustainable, long-term manner.
While volatility and narrowly defined, crowded trades in the Index have presented challenges, we believe these dynamics create an excellent environment for stock pickers with a long-term business-owner mindset. We remain focused on our collaborative, rigorous research process to identify the best long-term compounders in the small cap asset class. We aim to generate returns by identifying attractive businesses that are underappreciated for the duration of their long-term compounding potential. In environments like this, many are doubly underappreciated due to the market’s short-term focus and inability to see past the next rate-cut decision. This has led to crowding in some securities and skittishness in others.
We use our five-point Flywheel investment criteria to see past the noise and rely on the research process to take multiple perspectives and leverage our team’s extensive collective experience. We are disciplined about paying the right price to reach our mid-teens return target and often utilize our library of vetted Flywheel companies to wait for the right opportunity to buy when volatility works in our favor. As a result, we are excited about the prospects for our Portfolio even as the economic environment remains uncertain. We focus on investing only in businesses that can self-fund their own growth and are positioned to advance their competitive advantages in any economic environment.
Portfolio Performance & Attribution
During the fourth quarter, the Portfolio returned 5.1% gross of fees and 4.73% net of fees, compared to the Index return of 1.7%.
The top contributors to the Portfolio’s relative and absolute performance during the quarter were Warby Parker (WRBY), Revolve Group (RVLV), and Dutch Bros. (BROS)
Warby Parker, a U.S.-based omnichannel retailer of eyewear products with a unique vertically integrated direct-to-consumer business model, reported encouraging quarterly results. The company experienced robust growth in its glasses business and continued momentum in contact lenses and optometry. The company’s substantial investment in optometrists is yielding results, driving improved gross margins through enhanced utilization. Warby Parker appears to be emerging from a challenging period that was adversely impacted by post-pandemic changes in consumer behavior. Management’s steps to reduce costs appear to be paying off. More recently we’ve seen fundamentals improve, with marketing spend recovering now that margins have settled. We believe the company can potentially enhance its profitability as demand recovers and it completes and capitalizes on heavy investments in areas such as optometry services, which previously weighed on margins.
Revolve Group, an online apparel retailer targeting primarily Millennial and Gen Z demographics, was another top performer, with the stock’s total return ending the year up over 100%. This strong performance followed a period of improving fundamentals after facing earlier challenges. While the consumer environment remains under pressure, we are encouraged by efforts to drive cost efficiencies, reduce return rates, expand product lines, and continue its international push. We believe Revolve is well- positioned to grow earnings at an accelerating rate over the near term while the long-term outlook remains intact.
Dutch Bros, a drive-through coffee and beverage company with just under 1,000 locations, reported compelling quarterly results, raising its full-year revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) guidance. Robust same-store sales and steady unit growth have driven top-line growth of +28% year-over-year. Earnings growth appears poised to accelerate as the company ramps up unit growth in 2025, innovates its menu (into the untapped opportunity to drive food sales), and margins inflect higher with scale. We believe it’s still early days for Dutch Bros, which has a unique concept and is just starting to tap into proven value drivers like online ordering and food. We believe Dutch Bros has the potential to be a substantially long-duration EPS (earnings per share) growth business.
The most significant detractors from the Portfolio’s relative performance in the quarter were Insight Enterprises (NSIT), AMN Healthcare Services (AMN), and Option Care Health (OPCH). The most significant absolute detractors were Insight Enterprises, Installed Building Products (IBP), and Option Health Care.
Insight Enterprises, a global provider of IT solutions to small- and medium-sized businesses across various end markets, disappointed during the quarter. Despite establishing itself as a trusted technology partner enabling IT modernization and cloud migration over recent years, revenue, margins, and forward guidance were below previous estimates for the quarter. This was driven by challenging IT spending trends in Insight’s underlying client base. Our research suggests the company will benefit from a return to normal IT spending levels as companies prioritize hardware upgrades and continue to migrate workloads to the cloud.
AMN Healthcare Services, the nation’s largest healthcare staffing provider, saw fundamentals deteriorate over 2024 as the temp nurse staffing market endures a painful reset following a surge during COVID. Overall, the reset has been more severe than we initially expected and amplified by significant cost pressures as hospitals attempt to right-size their balance sheets. Ultimately, this contributed to an outsized negative stock reaction following earnings—a 30% decline—as investors questioned the timeline for a recovery in the temp nurse staffing market. While we believe the market will normalize and performance will improve, we currently have AMN under review, as dictated by our investment process.
Option Care Health is a healthcare company that provides home and center-based infusions. During the quarter, the company’s reported results raised red flags about its ability to sustain growth and margins, given drug pricing pressure from the Inflation Reduction Act (IRA) and increased biosimilar competition. Historically, Option Care has effectively navigated biosimilar competition and, in some cases, even benefited; however, we believe these dynamics are evolving, making future outcomes harder to predict. Since we believe biosimilars will continue to gain traction, this leaves the Flywheel in question for Option Care, which ultimately compelled us to eliminate the position in favor of better opportunities in new ideas and existing holdings.
Portfolio Activity
During the quarter, we initiated positions in four new investments: Willscot Holdings (WSC), TREX, Fabrinet (FN), and Belden (BDC). We also added to several existing positions.
Willscot Holdings provides turnkey space and storage solutions with leading market share in North America, serving customers through 250 branch locations. The company offers mobile offices, portable storage containers, climate-controlled storage, clear span structures, and associated services, including delivery and installation. The business model is highly predictable as assets are leased with an average duration of three years—this stability has enabled management to allocate capital effectively. Construction markets (industrial, non-residential, and residential) have been sluggish over the last few years, and we anticipate an improved volume backdrop ahead. We expect this, combined with continued pricing gains through higher attach rates of their Value-Added Services, to lead to mid-teens EPS growth over the next five years.
Trex is the market leader in composite decking, uniquely positioned to benefit from rising demand for sustainable building materials and outdoor living spaces. Trex’s operational discipline, pricing power, and environmental differentiation support strong market share gains from wood alternatives. Its long-term growth is underpinned by robust consumer trends and secular tailwinds. We already own Trex in our U.S. SMID Company Growth Portfolio and decided to initiate a new position here, as we believe the stock is attractively priced, with fundamentals appearing to have bottomed likely to inflect positively.
Fabrinet is a leader in advanced optical and precision electromechanical manufacturing, delivering high-value components for data centers, cloud computing, and high-speed networks. The company benefits from strong secular growth drivers in AI, digitization and network infrastructure, an asset- light model, and consistent free cash flow conversion, positioning it for a robust earnings trajectory over the cycle. We are excited about Fabrinet’s growth as NVIDIA, its largest customer, continues to scale, and the company’s telecom business also appears to be bottoming, which should provide added tailwind to growth.
Finally, we started a new position in Belden as it is transforming into a solutions-driven leader in networking, connectivity, and security, focused on high-growth sectors like industrial automation, broadband services, and data centers. Its Solutions Transformation Strategy enables margin expansion, deeper customer relationships, and recurring revenue models, with a mid- single-digit annual revenue growth target and 10%-12% EPS growth through 2028. Belden’s strong balance sheet and disciplined management create additional upside opportunities.
By contrast, we eliminated four positions— Option Care Health, Euronet Worldwide (EEFT), NV5 Holdings (NVEE), and Alarm.com (ALRM) —and also trimmed several existing positions.
As noted earlier, we exited our position in Option Care Health after reported results raised red flags about their ability to sustain growth and margins with drug pricing pressure from the Inflation Reduction Act (IRA) and increased biosimilar competition. The price curve of expensive drugs exiting exclusivity has been far steeper than a year ago—we concede this will be more challenging to predict than we initially anticipated. Thus, Option Care is not a good fit for our strategy.
We exited Euronet Worldwide as we remain cautious about the existential challenges facing its ATM business due to the rapid shift toward a cashless society, which we believe limits the company’s appreciation potential even if the fundamentals remain strong. While we believe Euronet is still a very high-quality business, we identified better opportunities for our capital.
With NV5 Holdings, we have concerns about execution and management effectiveness. While we like NV5’s collection of unique engineering and infrastructure-related assets, our expectation of the company successfully streamlining its disparate operations to drive better consistency has not played out as expected. With the thesis proving incorrect and concerns arising about NV5’s ability to meet our criteria for effective management and value-creating reinvestment criteria, we determined it was time to move on to better opportunities.
We exited our position in Alarm.com, the cloud, SaaS-based (Software as a Service) software platform for residential and commercial security companies. While Alarm.com remains a high-quality business, the EPS growth and return profile no longer compared favorably to the new companies in our pipeline. We sold Alarm.com to make room for new ideas, as is consistent with our best ideas and opportunity cost-driven mindset.
During the quarter we added to and trimmed existing holdings, largely reflecting the above-mentioned opportunity cost mindset. We added to positions with what we believe are better risk- reward profiles and stronger Flywheels, and trimmed positions largely due to valuation to fund new positions and add to existing holdings. During the quarter, we added to positions in Paylocity (PCTY), Dutch Bros, SiteOne Landscape Supply (SITE), Rambus (RMBS), Applied Industrial Technologies (AIT), and Insight Enterprises. We trimmed positions in Goosehead Insurance, Warby Parker, Clearwater Analytics (CWAN), and Houlihan Lokey (HLI).
Outlook
As we look to 2025 and beyond, we are optimistic about our Portfolio companies’ EPS growth outlook and the relatively low valuations for small cap stocks. We also think business fundamentals are likely to improve due to growing evidence suggesting 2024 was the EPS bottom for small caps broadly, and the M&A market may continue to improve on early gains in 2024. Under the Trump Presidency, we anticipate that reduced regulatory burdens and a focus to prioritize domestic businesses could disproportionately benefit small cap companies, as they typically generate the majority of their revenue in the U.S.
We don’t expect persistent uncertainty will limit our ability to achieve our long-term return targets as the fundamentals of our Portfolio businesses and potential for superior earnings growth will ultimately drive the stocks. While we can’t predict what will happen in 2025, we are nonetheless prepared for continued volatility with economic uncertainty and shifting interest rate expectations. We have always aimed to invest in resilient businesses that can self-fund their own growth. This is a key tenet of our Flywheel investment criteria, which we consistently uphold in good times and in bad.
Thank you for your interest in Polen Capital and the U.S. Small Company Growth Portfolio. Please contact us with any questions.
Sincerely,
Rayna Lesser Hannaway, CFA
Whitney Young Crawford
Important Disclosures & Definitions:
Disclosure: This commentary is very limited in scope and is meant to provide comprehensive descriptions or discussions of the topics mentioned herein. Moreover, this commentary has been prepared without taking into account individual objectives, financial situations or needs. As such, this commentary is for informational discussion purposes only and is not to be relied on as legal, tax, business, investment, accounting or any other advice. Recipients of this commentary should seek their own independent financial advice. Investing involves inherent risks, and any particular investment is not suitable for all investors; there is always a risk of losing part or all of your invested capital.
No statement herein should be interpreted as an offer to sell or the solicitation of an offer to buy any security (including, but not limited to, any investment vehicle or separate account managed by Polen Capital). Recipients acknowledge and agree that the information contained in this commentary is not a recommendation to invest in any particular investment, and Polen Capital is not hereby undertaking to provide any investment advice to any person. This commentary is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Unless otherwise stated in this commentary, the statements herein are made as of the date of this commentary and the delivery of this commentary at any time thereafter will not create any implication that the statements are made as of any subsequent date. Certain information contained herein is derived from third parties beyond Polen Capital’s control or verification and involves significant elements of subjective judgment and analysis. While efforts have been made to ensure the quality and reliability of the information herein, there may be limitations, inaccuracies, or new developments that could impact the accuracy of such information. Therefore, this commentary is not guaranteed to be accurate or timely and does not claim to be complete. Polen Capital reserves the right to supplement or amend these slides at any time, but has no obligation to provide the recipient with any supplemental, amended, replacement or additional information.
Any statements made by Polen Capital regarding future events or expectations are forward-looking statements and are based on current assumptions and expectations. Such statements involve inherent risks and uncertainties and are not a reliable indicator of future performance. Actual results may differ materially from those expressed or implied.
The Russell 2000® Growth Index is a market capitalization weighted index that measures the performance of the small-cap growth segment of the U.S. equity universe. It includes Russell 2000® Index companies with higher price/book ratios and higher forecasted growth values. The index is maintained by the FTSE Russell, a subsidiary of the London Stock Exchange Group.
It is impossible to invest directly in an index. The performance of an index does not reflect any transaction costs, management fees, or taxes.
Past performance is not indicative of future results.
Source: All data is sourced from Bloomberg unless otherwise noted. All company-specific information has been sourced from company financials as of the relevant period discussed.
Definitions:
Headwind: a factor or condition that can impede the performance or growth of investments, sectors, or entire economies. These obstacles could be economic, political, or market-related and can affect investment returns negatively.
Flywheel: Polen Capital’s Flywheel framework is how we assess a company’s quality aimed at supporting sustainable growth. It is comprised of five self-reinforcing elements: 1) unique positioning,
2) repeatable sales process, 3) robust business model, 4) effective management, and 5) value-creating reinvestment.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): a metric that can be used to determine a company’s financial performance and gauge its profitability before non-core expenses and charges. It is calculated by taking net income and adding interest, taxes, depreciation, and amortization back to it.
Biosimilar: a nearly identical, lower-cost version of an approved biologic drug, with no meaningful differences in safety, efficacy, or quality.
EPS growth: the percentage increase in a company’s earnings per share (EPS) over a specified period, indicating its profitability growth on a per-share basis.
Tailwinds: favorable conditions or factors that can propel asset prices or financial markets upwards. These can include economic growth, technological advancements, regulatory changes, or other external influences that enhance the performance of investments.
Contribution to relative return: a measure of a security’s contribution to the relative return of a portfolio versus its benchmark index. The calculation can be approximated by the below formula, taking into account purchases and sales of the security over the measurement period. Please note this calculation does not take into account transactional costs and dividends of the benchmark, as it does for the portfolio. Contribution to relative return of Stock A = (Stock A portfolio weight (%) – Stock A benchmark weight (%)) x (Stock A return (%) – Aggregate benchmark return (%)). All company-specific information has been sourced from company financials as of the relevant period discussed.
GIPS Report
Polen Capital Management U.S. Small Company Growth Composite—GIPS Composite Report
UMA
Firm
CompositeAssets
Annual PerformanceResults
3 YearStandard Deviation2
Year End
Total ($Millions)
Assets ($Millions)
Assets ($Millions)
U.S.Dollars ($Millions)
Numberof Accounts
Composite Gross(%)
Composite Net (%)
Russell 2000G (%)
Composite Dispersion (%)
Polen Gross(%)
Russell 2000G (%)
2023
58,910
22,269
36,641
12.16
34
23.13
21.69
18.66
0.1
24.59
21.79
2022
48,143
18,053
30,090
87.89
36
-42.10
-42.86
-26.36
0.1
29.29
26.20
2021
82,789
28,884
53,905
83.77
155
18.67
17.69
2.83
0.6
23.54
23.08
2020
59,161
20,662
38,499
48.06
68
56.41
55.08
34.63
1.7
25.52
25.10
2019
34,784
12,681
22,104
8.28
8
22.73
21.62
28.50
0.1
N/A
N/A
2018
20,591
7,862
12,729
3.82
6
3.30
2.31
-9.29
0.0
N/A
N/A
2017 1
17,422
6,957
10,466
5.65
4
20.74
19.82
18.22
N/A
N/A
N/A
Performance % as of 12-31-2024:
(Annualized returns are presented for periods greater than one year)
1 Yr
5 Yr
10 Yr
Inception
U.S. Small Company Growth (Gross)
4.93
6.78
–
10.14
U.S. Small Company Growth (NET)
3.82
5.67
–
9.03
Russell 2000 Growth
15.15
6.85
–
8.69
1 Performance represents partial period (March 9, 2017 through December 31, 2017), assets and accounts are as of December 31, 2017.
2 A 3 Year Standard Deviation is not available for 2017, 2018 and 2019 due to 36 monthly returns are not available. Some versions of this GIPS Report previously included assets of the Firm’s wholly-owned subsidiary in the 2022 Firm Assets figure, in error. The figure above has been corrected to no longer count assets at the subsidiary level. Total assets and UMA assets are supplemental information to the GIPS Composite Report. N/A – There are five or fewer accounts in the composite the entireyear. While pitch books are updated quarterly to include composite performance through the most recent quarter, we use the GIPS Report that includes annual returns only. To minimize the risk of error we update the GIPS Report annually. This is typically updated by the end of the first quarter.
GIPS Report
The U.S. Small Company Growth Composite created on July 3, 2017 with inception date March 9, 2017 contains fully discretionary small company equity accounts that are not managed within a wrap fee structure and for comparison purposes is measured against Russell 2000 Growth. Effective January 2022, fully discretionary small company equity accounts managed as part of our U.S. Small Company Growth strategy that adhere to the rules and regulations applicable to registered investment companies subject to the U.S. Investment Company Act of 1940 were included into the U.S. Small Company Growth Composite. The accounts comprising the portfolios are highly concentrated and are not constrained by EU diversification regulations.
Polen Capital Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Polen Capital Management has been independently verified for the periods April 1, 1992 through December 31, 2023. The verification reports are available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards.
Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm- wide basis. Verification does not provide assurance on the accuracy of any specific performance report.
Polen Capital Management is an independent registered investment adviser. Polen Capital Management maintains related entities which together invest exclusively in equity portfolios consisting of high-quality companies. A list of all composite and pooled fund investment strategies offered by the firm, with a description of each strategy, is available upon request. In July 2007, the firm was reorganized from an S-corporation into an LLC and changed names from Polen Capital Management, Inc. to Polen Capital Management, LLC.
A material error in the 2017 annual performance for the Russell 2000 Growth was corrected as of April 17, 2020. Results are based on fully discretionary accounts under management, including those accounts no longer with the firm.
Effective January 1, 2022, composite policy requires the temporary removal of any portfolio incurring a client initiated significant net cash inflow or outflow of 10% or greater of portfolio assets, provided, however, if invoking this policy would result in all accounts being removed for a month, this policy shall not apply for that month. The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of fees and include the reinvestment of all income. Net of fee performance was calculated using either actual management fees or highest fees for fund structures. The annual composite dispersion presented is an asset-weighted standard deviation using returns presented gross of management fees calculated for the accounts in the composite the entire year. Policies for valuing investments, calculating performance, and preparing GIPS Reports are available upon request.
The separate account management fee schedule is as follows: Institutional: Per annum fees for managing accounts are 100 basis points (1.00%) on the first $50 Million and 85 basis points (0.85%) on all assets above $50 Million of assets under management. HNW: Per annum fees for managing accounts are 175 basis points (1.75%) of the first $500,000 of assets under management and 125 basis points (1.25%) of amounts above
$500,000 of assets under management. Actual investment advisory fees incurred by clients may vary.
The per annum fee schedule for managing the Polen U.S. Small Company Growth Fund, which is included in the U.S. Small Company Growth Composite, is 100 basis points (1.00%). The total annual fund operating expenses are up to 135 basis points (1.35%). As of 9/1/2023, the mutual fund expense ratio goes up to 1.35%. This figure may vary from year to year.
Past performance does not guarantee future results and future accuracy and profitable results cannot be guaranteed. Performance figures are presented gross and net of fees and have been calculated after the deduction of all transaction costs and commissions. Polen Capital is an SEC registered investment advisor and its investment advisory fees are described in its Form ADV Part 2A. The advisory fees will reduce clients’ returns. The chart below depicts the effect of a 1% management fee on the growth of one dollar over a 10 year period at 10% (9% after fees) and 20% (19% after fees) assumed rates of return.
The Russell 2000® Growth Index is a market capitalization weighted index that measures the performance of the small-cap growth segment of the U.S. equity universe. It includes Russell 2000® Index companies with higher price/book ratios and higher forecasted growth values. The index is maintained by the FTSE Russell, a subsidiary of the London Stock Exchange Group.
The volatility and other material characteristics of the indices referenced may be materially different from the performance achieved. In addition, the composite’s holdings may be materially different from those within the index. Indices are unmanaged and one cannot invest directly in an index.
The information provided in this document should not be construed as a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in the composite or that the securities sold will not be repurchased. The securities discussed do not represent the composite’s entire portfolio. Actual holdings will vary depending on the size of the account, cash flows, and restrictions. It should not be assumed that any of the securities transactions or holdings discussed will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. A complete list of our past specific recommendations for the last year is available upon request.
Return
1 Year
2 Years
3 Years
4 Years
5 Years
6 Years
7 Years
8 Years
9 Years
10 Years
10%
1.10
1.21
1.33
1.46
1.61
1.77
1.95
2.14
2.36
2.59
9%
1.09
1.19
1.30
1.41
1.54
1.68
1.83
1.99
2.17
2.37
20%
1.20
1.44
1.73
2.07
2.49
2.99
3.58
4.30
5.16
6.19
19%
1.19
1.42
1.69
2.01
2.39
2.84
3.38
4.02
4.79
5.69
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
Original Post
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
Polen U.S. Small Company Growth Q4 2024 Commentary (Mutual Fund:PBSIX)
imagedepotpro/iStock via Getty Images
Summary
Seeks Growth & Capital Preservation (Performance (%) as of 12-31-2024)
Qtr
YTD
1 Yr
3 Yr
5 Yr
10 Yr
Inception
(3-9-2017)
U.S. Small Company Growth (Gross)
5.09
4.93
4.93
-9.22
6.78
–
10.14
U.S. Small Company Growth (Net)
4.73
3.82
3.82
-10.29
5.67
–
9.03
Russell 2000 Growth
1.70
15.15
15.15
0.21
6.85
–
8.69
The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Periods over one-year are annualized. Performance figures are presented gross and net of fees and have been calculated after the deduction of all transaction costs and commissions, and include the reinvestment of all income. Please reference the GIPS Report which accompanies this commentary.
The commentary is not intended as a guarantee of profitable outcomes. Any forward-looking statements are based on certain expectations and assumptions that are susceptible to changes in circumstances. Opinions and views expressed constitute the judgment of Polen Capital as of the date herein, may involve a number of assumptions and estimates which are not guaranteed, and are subject to change. Contribution to relative return is a measure of a securities contribution to the relative return of a portfolio versus its benchmark index. The calculation can be approximated by the below formula, taking into account purchases and sales of the security over the measurement period. Please note this calculation does not take into account transactional costs and dividends of the benchmark, as it does for the portfolio. Contribution to relative return of Stock A = (Stock A portfolio weight (%) – Stock A benchmark weight (%)) x (Stock A return (%) – Aggregate benchmark return (%)).
All company-specific information has been sourced from company financials as of the relevant period discussed.
Commentary
As measured by the Russell 2000 Growth Index, U.S. small cap growth stocks were up 1.7% in the fourth quarter and 15% for 2024. In another volatile quarter, small caps were up over 10% after November’s U.S. Presidential election but relinquished almost all those gains in December, with the U.S. Federal Reserve setting the tone for a slower-than-expected interest rate reduction in 2025. Despite the volatility, our U.S. Small Company Growth Composite Portfolio returned 5.09% gross of fees, and 4.73% net of fees, beating the Russell 2000 Growth Index. This marked an encouraging end to an overall disappointing year in which the Portfolio returned 4.9% gross of fees and 3.8% net of fees, underperforming the Russell 2000 Growth’s 15.2% return.
Despite the Portfolio’s muted 2024 results, we believe the fundamentals of our Portfolio businesses are strong and improving. For much of 2024, the Russell 2000 Growth performance was largely driven by crowded AI trades and companies that stood most to benefit from declining interest rates (housing, biotech, and unprofitable “moonshot” companies such as space exploration, quantum computing, etc.). As evidence of this narrowness, the top ten contributors to the year’s Russell 2000 Growth performance accounted for nearly half of its return. This is decidedly not a conducive environment for most profitable, high-quality companies to outperform, and for us, it represented a meaningful headwind to relative performance.
Among our Portfolio holdings, the market’s time horizon seemed to shrink significantly with a heightened focus on AI, excessively punishing businesses that did not meet expectations for the quarter well beyond what the underlying fundamentals would justify. Last quarter, we highlighted Goosehead Insurance (GSHD) as an illustration of this—down 40% at one point and later rebounding 60% as fundamentals proved stronger than expected. We witnessed a continuation of this trend when companies reported earnings in October and November, which worked to our benefit in the fourth quarter.
Many lower-quality companies did not meet our Flywheel framework for quality, weighing heavily on relative performance. The most notable example is Super Micro Computer (SMCI), up nearly 190% in the first half of the year, driving a notable headwind.
Particularly frustrating in this scenario—Super Micro was reconstituted out of the Index in late June and was down -62% in the second half of 2024. There are many other examples of this kind of high beta, AI-adjacent growth company outperforming the broader investable universe. While we did not own these stocks due to their low quality, which hurt our performance, we believe the Portfolio overall is well-positioned to benefit from Gen AI- driven transformation—albeit in a more sustainable, long-term manner.
While volatility and narrowly defined, crowded trades in the Index have presented challenges, we believe these dynamics create an excellent environment for stock pickers with a long-term business-owner mindset. We remain focused on our collaborative, rigorous research process to identify the best long-term compounders in the small cap asset class. We aim to generate returns by identifying attractive businesses that are underappreciated for the duration of their long-term compounding potential. In environments like this, many are doubly underappreciated due to the market’s short-term focus and inability to see past the next rate-cut decision. This has led to crowding in some securities and skittishness in others.
We use our five-point Flywheel investment criteria to see past the noise and rely on the research process to take multiple perspectives and leverage our team’s extensive collective experience. We are disciplined about paying the right price to reach our mid-teens return target and often utilize our library of vetted Flywheel companies to wait for the right opportunity to buy when volatility works in our favor. As a result, we are excited about the prospects for our Portfolio even as the economic environment remains uncertain. We focus on investing only in businesses that can self-fund their own growth and are positioned to advance their competitive advantages in any economic environment.
Portfolio Performance & Attribution
During the fourth quarter, the Portfolio returned 5.1% gross of fees and 4.73% net of fees, compared to the Index return of 1.7%.
The top contributors to the Portfolio’s relative and absolute performance during the quarter were Warby Parker (WRBY), Revolve Group (RVLV), and Dutch Bros. (BROS)
Warby Parker, a U.S.-based omnichannel retailer of eyewear products with a unique vertically integrated direct-to-consumer business model, reported encouraging quarterly results. The company experienced robust growth in its glasses business and continued momentum in contact lenses and optometry. The company’s substantial investment in optometrists is yielding results, driving improved gross margins through enhanced utilization. Warby Parker appears to be emerging from a challenging period that was adversely impacted by post-pandemic changes in consumer behavior. Management’s steps to reduce costs appear to be paying off. More recently we’ve seen fundamentals improve, with marketing spend recovering now that margins have settled. We believe the company can potentially enhance its profitability as demand recovers and it completes and capitalizes on heavy investments in areas such as optometry services, which previously weighed on margins.
Revolve Group, an online apparel retailer targeting primarily Millennial and Gen Z demographics, was another top performer, with the stock’s total return ending the year up over 100%. This strong performance followed a period of improving fundamentals after facing earlier challenges. While the consumer environment remains under pressure, we are encouraged by efforts to drive cost efficiencies, reduce return rates, expand product lines, and continue its international push. We believe Revolve is well- positioned to grow earnings at an accelerating rate over the near term while the long-term outlook remains intact.
Dutch Bros, a drive-through coffee and beverage company with just under 1,000 locations, reported compelling quarterly results, raising its full-year revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) guidance. Robust same-store sales and steady unit growth have driven top-line growth of +28% year-over-year. Earnings growth appears poised to accelerate as the company ramps up unit growth in 2025, innovates its menu (into the untapped opportunity to drive food sales), and margins inflect higher with scale. We believe it’s still early days for Dutch Bros, which has a unique concept and is just starting to tap into proven value drivers like online ordering and food. We believe Dutch Bros has the potential to be a substantially long-duration EPS (earnings per share) growth business.
The most significant detractors from the Portfolio’s relative performance in the quarter were Insight Enterprises (NSIT), AMN Healthcare Services (AMN), and Option Care Health (OPCH). The most significant absolute detractors were Insight Enterprises, Installed Building Products (IBP), and Option Health Care.
Insight Enterprises, a global provider of IT solutions to small- and medium-sized businesses across various end markets, disappointed during the quarter. Despite establishing itself as a trusted technology partner enabling IT modernization and cloud migration over recent years, revenue, margins, and forward guidance were below previous estimates for the quarter. This was driven by challenging IT spending trends in Insight’s underlying client base. Our research suggests the company will benefit from a return to normal IT spending levels as companies prioritize hardware upgrades and continue to migrate workloads to the cloud.
AMN Healthcare Services, the nation’s largest healthcare staffing provider, saw fundamentals deteriorate over 2024 as the temp nurse staffing market endures a painful reset following a surge during COVID. Overall, the reset has been more severe than we initially expected and amplified by significant cost pressures as hospitals attempt to right-size their balance sheets. Ultimately, this contributed to an outsized negative stock reaction following earnings—a 30% decline—as investors questioned the timeline for a recovery in the temp nurse staffing market. While we believe the market will normalize and performance will improve, we currently have AMN under review, as dictated by our investment process.
Option Care Health is a healthcare company that provides home and center-based infusions. During the quarter, the company’s reported results raised red flags about its ability to sustain growth and margins, given drug pricing pressure from the Inflation Reduction Act (IRA) and increased biosimilar competition. Historically, Option Care has effectively navigated biosimilar competition and, in some cases, even benefited; however, we believe these dynamics are evolving, making future outcomes harder to predict. Since we believe biosimilars will continue to gain traction, this leaves the Flywheel in question for Option Care, which ultimately compelled us to eliminate the position in favor of better opportunities in new ideas and existing holdings.
Portfolio Activity
During the quarter, we initiated positions in four new investments: Willscot Holdings (WSC), TREX, Fabrinet (FN), and Belden (BDC). We also added to several existing positions.
Willscot Holdings provides turnkey space and storage solutions with leading market share in North America, serving customers through 250 branch locations. The company offers mobile offices, portable storage containers, climate-controlled storage, clear span structures, and associated services, including delivery and installation. The business model is highly predictable as assets are leased with an average duration of three years—this stability has enabled management to allocate capital effectively. Construction markets (industrial, non-residential, and residential) have been sluggish over the last few years, and we anticipate an improved volume backdrop ahead. We expect this, combined with continued pricing gains through higher attach rates of their Value-Added Services, to lead to mid-teens EPS growth over the next five years.
Trex is the market leader in composite decking, uniquely positioned to benefit from rising demand for sustainable building materials and outdoor living spaces. Trex’s operational discipline, pricing power, and environmental differentiation support strong market share gains from wood alternatives. Its long-term growth is underpinned by robust consumer trends and secular tailwinds. We already own Trex in our U.S. SMID Company Growth Portfolio and decided to initiate a new position here, as we believe the stock is attractively priced, with fundamentals appearing to have bottomed likely to inflect positively.
Fabrinet is a leader in advanced optical and precision electromechanical manufacturing, delivering high-value components for data centers, cloud computing, and high-speed networks. The company benefits from strong secular growth drivers in AI, digitization and network infrastructure, an asset- light model, and consistent free cash flow conversion, positioning it for a robust earnings trajectory over the cycle. We are excited about Fabrinet’s growth as NVIDIA, its largest customer, continues to scale, and the company’s telecom business also appears to be bottoming, which should provide added tailwind to growth.
Finally, we started a new position in Belden as it is transforming into a solutions-driven leader in networking, connectivity, and security, focused on high-growth sectors like industrial automation, broadband services, and data centers. Its Solutions Transformation Strategy enables margin expansion, deeper customer relationships, and recurring revenue models, with a mid- single-digit annual revenue growth target and 10%-12% EPS growth through 2028. Belden’s strong balance sheet and disciplined management create additional upside opportunities.
By contrast, we eliminated four positions— Option Care Health, Euronet Worldwide (EEFT), NV5 Holdings (NVEE), and Alarm.com (ALRM) —and also trimmed several existing positions.
As noted earlier, we exited our position in Option Care Health after reported results raised red flags about their ability to sustain growth and margins with drug pricing pressure from the Inflation Reduction Act (IRA) and increased biosimilar competition. The price curve of expensive drugs exiting exclusivity has been far steeper than a year ago—we concede this will be more challenging to predict than we initially anticipated. Thus, Option Care is not a good fit for our strategy.
We exited Euronet Worldwide as we remain cautious about the existential challenges facing its ATM business due to the rapid shift toward a cashless society, which we believe limits the company’s appreciation potential even if the fundamentals remain strong. While we believe Euronet is still a very high-quality business, we identified better opportunities for our capital.
With NV5 Holdings, we have concerns about execution and management effectiveness. While we like NV5’s collection of unique engineering and infrastructure-related assets, our expectation of the company successfully streamlining its disparate operations to drive better consistency has not played out as expected. With the thesis proving incorrect and concerns arising about NV5’s ability to meet our criteria for effective management and value-creating reinvestment criteria, we determined it was time to move on to better opportunities.
We exited our position in Alarm.com, the cloud, SaaS-based (Software as a Service) software platform for residential and commercial security companies. While Alarm.com remains a high-quality business, the EPS growth and return profile no longer compared favorably to the new companies in our pipeline. We sold Alarm.com to make room for new ideas, as is consistent with our best ideas and opportunity cost-driven mindset.
During the quarter we added to and trimmed existing holdings, largely reflecting the above-mentioned opportunity cost mindset. We added to positions with what we believe are better risk- reward profiles and stronger Flywheels, and trimmed positions largely due to valuation to fund new positions and add to existing holdings. During the quarter, we added to positions in Paylocity (PCTY), Dutch Bros, SiteOne Landscape Supply (SITE), Rambus (RMBS), Applied Industrial Technologies (AIT), and Insight Enterprises. We trimmed positions in Goosehead Insurance, Warby Parker, Clearwater Analytics (CWAN), and Houlihan Lokey (HLI).
Outlook
As we look to 2025 and beyond, we are optimistic about our Portfolio companies’ EPS growth outlook and the relatively low valuations for small cap stocks. We also think business fundamentals are likely to improve due to growing evidence suggesting 2024 was the EPS bottom for small caps broadly, and the M&A market may continue to improve on early gains in 2024. Under the Trump Presidency, we anticipate that reduced regulatory burdens and a focus to prioritize domestic businesses could disproportionately benefit small cap companies, as they typically generate the majority of their revenue in the U.S.
We don’t expect persistent uncertainty will limit our ability to achieve our long-term return targets as the fundamentals of our Portfolio businesses and potential for superior earnings growth will ultimately drive the stocks. While we can’t predict what will happen in 2025, we are nonetheless prepared for continued volatility with economic uncertainty and shifting interest rate expectations. We have always aimed to invest in resilient businesses that can self-fund their own growth. This is a key tenet of our Flywheel investment criteria, which we consistently uphold in good times and in bad.
Thank you for your interest in Polen Capital and the U.S. Small Company Growth Portfolio. Please contact us with any questions.
Sincerely,
Rayna Lesser Hannaway, CFA
Whitney Young Crawford
Important Disclosures & Definitions:
Disclosure: This commentary is very limited in scope and is meant to provide comprehensive descriptions or discussions of the topics mentioned herein. Moreover, this commentary has been prepared without taking into account individual objectives, financial situations or needs. As such, this commentary is for informational discussion purposes only and is not to be relied on as legal, tax, business, investment, accounting or any other advice. Recipients of this commentary should seek their own independent financial advice. Investing involves inherent risks, and any particular investment is not suitable for all investors; there is always a risk of losing part or all of your invested capital.
No statement herein should be interpreted as an offer to sell or the solicitation of an offer to buy any security (including, but not limited to, any investment vehicle or separate account managed by Polen Capital). Recipients acknowledge and agree that the information contained in this commentary is not a recommendation to invest in any particular investment, and Polen Capital is not hereby undertaking to provide any investment advice to any person. This commentary is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Unless otherwise stated in this commentary, the statements herein are made as of the date of this commentary and the delivery of this commentary at any time thereafter will not create any implication that the statements are made as of any subsequent date. Certain information contained herein is derived from third parties beyond Polen Capital’s control or verification and involves significant elements of subjective judgment and analysis. While efforts have been made to ensure the quality and reliability of the information herein, there may be limitations, inaccuracies, or new developments that could impact the accuracy of such information. Therefore, this commentary is not guaranteed to be accurate or timely and does not claim to be complete. Polen Capital reserves the right to supplement or amend these slides at any time, but has no obligation to provide the recipient with any supplemental, amended, replacement or additional information.
Any statements made by Polen Capital regarding future events or expectations are forward-looking statements and are based on current assumptions and expectations. Such statements involve inherent risks and uncertainties and are not a reliable indicator of future performance. Actual results may differ materially from those expressed or implied.
The Russell 2000® Growth Index is a market capitalization weighted index that measures the performance of the small-cap growth segment of the U.S. equity universe. It includes Russell 2000® Index companies with higher price/book ratios and higher forecasted growth values. The index is maintained by the FTSE Russell, a subsidiary of the London Stock Exchange Group.
It is impossible to invest directly in an index. The performance of an index does not reflect any transaction costs, management fees, or taxes.
Past performance is not indicative of future results.
Source: All data is sourced from Bloomberg unless otherwise noted. All company-specific information has been sourced from company financials as of the relevant period discussed.
Definitions:
Headwind: a factor or condition that can impede the performance or growth of investments, sectors, or entire economies. These obstacles could be economic, political, or market-related and can affect investment returns negatively.
Flywheel: Polen Capital’s Flywheel framework is how we assess a company’s quality aimed at supporting sustainable growth. It is comprised of five self-reinforcing elements: 1) unique positioning,
2) repeatable sales process, 3) robust business model, 4) effective management, and 5) value-creating reinvestment.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): a metric that can be used to determine a company’s financial performance and gauge its profitability before non-core expenses and charges. It is calculated by taking net income and adding interest, taxes, depreciation, and amortization back to it.
Biosimilar: a nearly identical, lower-cost version of an approved biologic drug, with no meaningful differences in safety, efficacy, or quality.
EPS growth: the percentage increase in a company’s earnings per share (EPS) over a specified period, indicating its profitability growth on a per-share basis.
Tailwinds: favorable conditions or factors that can propel asset prices or financial markets upwards. These can include economic growth, technological advancements, regulatory changes, or other external influences that enhance the performance of investments.
Contribution to relative return: a measure of a security’s contribution to the relative return of a portfolio versus its benchmark index. The calculation can be approximated by the below formula, taking into account purchases and sales of the security over the measurement period. Please note this calculation does not take into account transactional costs and dividends of the benchmark, as it does for the portfolio. Contribution to relative return of Stock A = (Stock A portfolio weight (%) – Stock A benchmark weight (%)) x (Stock A return (%) – Aggregate benchmark return (%)). All company-specific information has been sourced from company financials as of the relevant period discussed.
GIPS Report
Polen Capital Management U.S. Small Company Growth Composite—GIPS Composite Report
UMA
Firm
CompositeAssets
Annual PerformanceResults
3 YearStandard Deviation 2
Year End
Total ($Millions)
Assets ($Millions)
Assets ($Millions)
U.S.Dollars ($Millions)
Numberof Accounts
Composite Gross(%)
Composite Net (%)
Russell 2000G (%)
Composite Dispersion (%)
Polen Gross(%)
Russell 2000G (%)
2023
58,910
22,269
36,641
12.16
34
23.13
21.69
18.66
0.1
24.59
21.79
2022
48,143
18,053
30,090
87.89
36
-42.10
-42.86
-26.36
0.1
29.29
26.20
2021
82,789
28,884
53,905
83.77
155
18.67
17.69
2.83
0.6
23.54
23.08
2020
59,161
20,662
38,499
48.06
68
56.41
55.08
34.63
1.7
25.52
25.10
2019
34,784
12,681
22,104
8.28
8
22.73
21.62
28.50
0.1
N/A
N/A
2018
20,591
7,862
12,729
3.82
6
3.30
2.31
-9.29
0.0
N/A
N/A
2017 1
17,422
6,957
10,466
5.65
4
20.74
19.82
18.22
N/A
N/A
N/A
Performance % as of 12-31-2024:
(Annualized returns are presented for periods greater than one year)
1 Yr
5 Yr
10 Yr
Inception
U.S. Small Company Growth (Gross)
4.93
6.78
–
10.14
U.S. Small Company Growth (NET)
3.82
5.67
–
9.03
Russell 2000 Growth
15.15
6.85
–
8.69
1 Performance represents partial period (March 9, 2017 through December 31, 2017), assets and accounts are as of December 31, 2017.
2 A 3 Year Standard Deviation is not available for 2017, 2018 and 2019 due to 36 monthly returns are not available. Some versions of this GIPS Report previously included assets of the Firm’s wholly-owned subsidiary in the 2022 Firm Assets figure, in error. The figure above has been corrected to no longer count assets at the subsidiary level. Total assets and UMA assets are supplemental information to the GIPS Composite Report. N/A – There are five or fewer accounts in the composite the entireyear. While pitch books are updated quarterly to include composite performance through the most recent quarter, we use the GIPS Report that includes annual returns only. To minimize the risk of error we update the GIPS Report annually. This is typically updated by the end of the first quarter.
GIPS Report
The U.S. Small Company Growth Composite created on July 3, 2017 with inception date March 9, 2017 contains fully discretionary small company equity accounts that are not managed within a wrap fee structure and for comparison purposes is measured against Russell 2000 Growth. Effective January 2022, fully discretionary small company equity accounts managed as part of our U.S. Small Company Growth strategy that adhere to the rules and regulations applicable to registered investment companies subject to the U.S. Investment Company Act of 1940 were included into the U.S. Small Company Growth Composite. The accounts comprising the portfolios are highly concentrated and are not constrained by EU diversification regulations.
Polen Capital Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Polen Capital Management has been independently verified for the periods April 1, 1992 through December 31, 2023. The verification reports are available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards.
Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm- wide basis. Verification does not provide assurance on the accuracy of any specific performance report.
Polen Capital Management is an independent registered investment adviser. Polen Capital Management maintains related entities which together invest exclusively in equity portfolios consisting of high-quality companies. A list of all composite and pooled fund investment strategies offered by the firm, with a description of each strategy, is available upon request. In July 2007, the firm was reorganized from an S-corporation into an LLC and changed names from Polen Capital Management, Inc. to Polen Capital Management, LLC.
A material error in the 2017 annual performance for the Russell 2000 Growth was corrected as of April 17, 2020. Results are based on fully discretionary accounts under management, including those accounts no longer with the firm.
Effective January 1, 2022, composite policy requires the temporary removal of any portfolio incurring a client initiated significant net cash inflow or outflow of 10% or greater of portfolio assets, provided, however, if invoking this policy would result in all accounts being removed for a month, this policy shall not apply for that month. The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of fees and include the reinvestment of all income. Net of fee performance was calculated using either actual management fees or highest fees for fund structures. The annual composite dispersion presented is an asset-weighted standard deviation using returns presented gross of management fees calculated for the accounts in the composite the entire year. Policies for valuing investments, calculating performance, and preparing GIPS Reports are available upon request.
The separate account management fee schedule is as follows: Institutional: Per annum fees for managing accounts are 100 basis points (1.00%) on the first $50 Million and 85 basis points (0.85%) on all assets above $50 Million of assets under management. HNW: Per annum fees for managing accounts are 175 basis points (1.75%) of the first $500,000 of assets under management and 125 basis points (1.25%) of amounts above
$500,000 of assets under management. Actual investment advisory fees incurred by clients may vary.
The per annum fee schedule for managing the Polen U.S. Small Company Growth Fund, which is included in the U.S. Small Company Growth Composite, is 100 basis points (1.00%). The total annual fund operating expenses are up to 135 basis points (1.35%). As of 9/1/2023, the mutual fund expense ratio goes up to 1.35%. This figure may vary from year to year.
Past performance does not guarantee future results and future accuracy and profitable results cannot be guaranteed. Performance figures are presented gross and net of fees and have been calculated after the deduction of all transaction costs and commissions. Polen Capital is an SEC registered investment advisor and its investment advisory fees are described in its Form ADV Part 2A. The advisory fees will reduce clients’ returns. The chart below depicts the effect of a 1% management fee on the growth of one dollar over a 10 year period at 10% (9% after fees) and 20% (19% after fees) assumed rates of return.
The Russell 2000® Growth Index is a market capitalization weighted index that measures the performance of the small-cap growth segment of the U.S. equity universe. It includes Russell 2000® Index companies with higher price/book ratios and higher forecasted growth values. The index is maintained by the FTSE Russell, a subsidiary of the London Stock Exchange Group.
The volatility and other material characteristics of the indices referenced may be materially different from the performance achieved. In addition, the composite’s holdings may be materially different from those within the index. Indices are unmanaged and one cannot invest directly in an index.
The information provided in this document should not be construed as a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in the composite or that the securities sold will not be repurchased. The securities discussed do not represent the composite’s entire portfolio. Actual holdings will vary depending on the size of the account, cash flows, and restrictions. It should not be assumed that any of the securities transactions or holdings discussed will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. A complete list of our past specific recommendations for the last year is available upon request.
Return
1 Year
2 Years
3 Years
4 Years
5 Years
6 Years
7 Years
8 Years
9 Years
10 Years
10%
1.10
1.21
1.33
1.46
1.61
1.77
1.95
2.14
2.36
2.59
9%
1.09
1.19
1.30
1.41
1.54
1.68
1.83
1.99
2.17
2.37
20%
1.20
1.44
1.73
2.07
2.49
2.99
3.58
4.30
5.16
6.19
19%
1.19
1.42
1.69
2.01
2.39
2.84
3.38
4.02
4.79
5.69
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
Original Post
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