During the final quarter of 2025, the Virtus KAR Small-Cap Value Fund (Class I) recorded a return of -2.80%, which was notably below the 3.26% achieved by the Russell 2000® Value Index. The investment landscape continued to be dominated by technology companies, especially those involved in artificial intelligence, prompting considerable discussion about the durability of their market surge and the magnitude of capital investments. Concerns emerged among investors regarding the potential overextension of AI-related expenditures.
A key strategic move for the fund in this period was the addition of Alliance Laundry Holdings to its portfolio. This acquisition reflects the fund's ongoing commitment to a concentrated investment approach, specifically within the industrial sector. This focus highlights the inherent exposure to both the risks and potential rewards associated with sector-specific market dynamics, as no divestitures were made during the quarter.
The current market environment underscores the critical importance of diligent research and strategic adaptation. By understanding sector-specific trends and maintaining a focused investment strategy, investors can navigate the complexities of dynamic markets, aiming for sustained growth and resilience against volatility.
