Q2 2026 Fund Commentary

Commentary and opinions are provided by Putnam Investments.

Market commentary

The second quarter of 2026 saw continued strength in artificial intelligence (AI)-related investments, with semiconductor companies leading performance as demand for AI infrastructure held firm. Market leadership also broadened beyond the initial AI beneficiaries, and several of the largest technology companies underperformed the broader growth universe, reflecting a healthier and less concentrated market backdrop. Consumer resilience continued to support select discretionary businesses, and improving corporate fundamentals across a wider range of sectors expanded the opportunity set for growth investors.

Performance

An overweight allocation to the information technology sector contributed to the Fund’s performance. Stock selection within industrials and consumer discretionary also contributed to performance.

Overweight positions in information technology sector companies Lam Research Corp., Advanced Micro Devices Inc. and Snowflake Inc. contributed to performance.

Stock selection within the communication services, financials and consumer staples sectors also detracted from the Fund’s performance.

Not holding information technology companies KLA Corp., Palo Alto Networks Inc. and Applied Materials Inc. detracted from performance as they performance well over the quarter.

Portfolio activity

The sub-advisor added Micron Technology Inc., ASML Holding NV, Corning Inc., SanDisk Corp. and Marvell Technology Inc. to the Fund and increased existing holdings in Meta Platforms Inc. and Alphabet Inc. AbbVie Inc. was sold, and holdings in Apple Inc., Microsoft Corp., Broadcom Inc. and Amazon.com Inc. were reduced.

Outlook

In the sub-advisor’s view, this year’s Russell 3000 Growth Index reconstitution serves as a timely reminder that the growth landscape continues to evolve. The annual rebalance resulted in a number of additions and deletions as companies’ fundamentals, market capitalizations and style traits shifted, and the changes generally reinforced the broadening the sub-advisor has been observing rather than signalling a return to greater concentration within the largest companies. The sub-advisor views this as a healthy development that could provide active managers with a broader set of opportunities to identify differentiated sources of long-term return.

Over the last few years, there has been extensive discussion on index concentration and the narrowness of leadership within the large-capitalization growth space. In the sub-advisor’s view, breadth is finally emerging in the growth universe across constituents and verticals, which is a notable and welcome change. A broader set of companies is beginning to benefit from AI buildouts and monetization, expanding the opportunity set.

Potential challenges for equities include weakening consumer sentiment, rising inflation, valuations and ongoing geopolitical tensions. The sub-advisor notes that strong equity returns are rarely realized in a straight line but rather are accompanied by higher volatility, and the sub-advisor doesn’t expect the current environment to be different. Heightened volatility can bring ongoing risks, but it can also create opportunities for long-term, fundamental investors.