In the fourth quarter of 2025, the Alger Mid Cap Focus Fund's Class A shares did not match the performance of the Russell Midcap Growth Index. This period saw Information Technology and Industrials as the most heavily weighted sectors within the fund's portfolio. Notably, the fund maintained a significant overweight position in Information Technology, while maintaining a substantial underweight in the Consumer Discretionary sector. The fund's investment philosophy centers on a concentrated selection of roughly 50 mid-capitalization growth-oriented companies.
The underperformance of the Alger Mid Cap Focus Fund's Class A shares in the final quarter of 2025 was primarily attributed to negative contributions from the Consumer Discretionary and Communication Services sectors. Specific holdings such as RBLX, HOOD, and NBIS significantly hindered overall results, largely due to volatility within these sectors and ongoing concerns surrounding artificial intelligence (AI) infrastructure. These market dynamics presented notable challenges for the fund's diversified investment approach.
Conversely, the fund's overweight allocation to Information Technology proved beneficial, positively influencing performance. This favorable outcome was driven by robust secular trends in digitalization, cloud computing, and AI advancements, which continued to fuel growth within the sector. Despite the positive impact, the future returns in this area are contingent on sustained demand and the effective management of potential bottlenecks in AI infrastructure development.
Looking ahead, the Alger Mid Cap Focus Fund faces both opportunities and risks. Significant opportunities are expected to arise from accelerated spending in AI technologies and broader business investments. However, the fund must navigate potential challenges including sector concentration risks and the inherent circularity of AI infrastructure development. Additionally, macroeconomic headwinds, such as a softening labor market and cautious consumer behavior, could impact future performance.
Ultimately, the fourth quarter of 2025 presented a mixed landscape for the Alger Mid Cap Focus Fund. While strategic overweighting in Information Technology offered some upside, the drag from Consumer Discretionary and Communication Services highlighted the inherent volatility in mid-cap growth investing. The fund's ability to capitalize on future AI-driven growth while mitigating sector-specific and macroeconomic risks will be critical for its long-term success.
