In the third quarter of 2025, the Macquarie SMID Cap Core Fund experienced positive returns, albeit trailing its primary benchmark, the Russell 2500 Index, which also saw substantial gains. This period marked a robust advancement in the market, highlighting specific dynamics that influenced fund performance and broader economic sentiment. The market's upward trajectory was particularly notable for small and mid-cap equities, demonstrating resilience and growth potential.
The Russell 2500 Index, serving as the Fund’s benchmark, recorded an impressive 9.00% increase during the third quarter of 2025, reaching an unprecedented peak. This performance contributed to a cumulative 18.36% gain over the combined second and third quarters of the year, establishing it as the strongest six-month period since the post-COVID recovery in late 2020. Such a significant rally underscores a period of heightened investor confidence and favorable market conditions for this segment of the equity market.
Throughout the quarter, positive returns were observed across all months in the US equity market. A notable surge occurred in August, following a speech by Federal Reserve Chair Jerome Powell at Jackson Hole. His remarks were perceived as more accommodative than anticipated by the market, leading to a significant boost in investor sentiment and further propelling the equity market's upward movement. This dovish outlook from the Federal Reserve played a crucial role in shaping market expectations and fostering an environment conducive to growth.
The sustained positive momentum in the market during this period reflects a complex interplay of economic factors, corporate earnings, and monetary policy signals. While the Macquarie SMID Cap Core Fund aims to capitalize on opportunities within the small and mid-cap space, its relative underperformance against a soaring benchmark indicates sector-specific challenges or investment allocation decisions that diverged from the top-performing segments of the index. Understanding these dynamics is key to evaluating the fund's strategy and future potential.
This market overview highlights a period of strong performance for small and mid-cap equities, driven by a combination of broad market strength and specific policy shifts. The substantial gains in the Russell 2500 Index illustrate a buoyant market environment that rewarded investors in this segment. Despite lagging the benchmark, the Macquarie SMID Cap Core Fund still achieved positive returns, reflecting its participation in the overall market appreciation. The coming quarters will likely reveal how these trends evolve, especially concerning Federal Reserve policy and its impact on various market capitalizations.
