In the second quarter of 2026, the AMG Frontier Small Cap Growth Fund (Class N) delivered a notable return of 21.90%. This performance reflects a period where smaller capitalization equities demonstrated strong momentum, significantly outpacing their large-cap counterparts. The Russell 2000® Growth Index surged by 25.7%, while the Russell 1000® Growth Index rose by 16.7%, indicating a broader trend of small-cap outperformance. This environment created favorable conditions for the fund's holdings, contributing to its positive results.

Amidst these market dynamics, specific industries experienced shifts that influenced investment opportunities. The aviation sector, for instance, has historically seen airlines implement cost-reduction strategies, particularly in response to escalating oil prices. Such pressures typically lead to a heightened demand for cost-effective maintenance solutions. Companies like FTAI, which offer specialized services such as module swapping, stand to benefit from these industry-wide efforts to control operational expenses, potentially expanding their customer base and accelerating growth.

Concurrently, the semiconductor industry is undergoing a strategic realignment. Silicon Motion (SIMO) is strategically capturing a larger market share in NAND controllers. This expansion is largely due to several of its competitors redirecting their focus towards manufacturing NAND controllers for data centers, thereby intentionally yielding a significant portion of the consumer market to Silicon Motion. This strategic pivot by peers has created a lucrative niche for SIMO, allowing it to solidify its position in the consumer segment.

The market environment presents both challenges and opportunities. For funds like the AMG Frontier Small Cap Growth Fund, identifying and capitalizing on these shifts is crucial. The ability to adapt to changing market conditions, leverage industry trends, and select companies with robust growth potential ensures sustained positive performance and value creation for investors. Focusing on innovation, operational efficiency, and strategic market positioning will continue to be key drivers of success.