The Thrivent Small Cap Growth Fund experienced a period of underperformance during the third quarter of 2025, falling short of the Russell 2000 Growth Index. This outcome was largely influenced by specific investment choices across the Healthcare, Industrials, and Information Technology sectors. The fund's strategy continues to prioritize identifying businesses with robust growth trajectories in sales, earnings, and free cash flow, despite the prevailing economic uncertainties and elevated interest rates that could affect market dynamics.
In the third quarter of 2025, the Thrivent Small Cap Growth Fund recorded performance below its benchmark, the Russell 2000 Growth Index. This deviation was mainly due to less favorable stock picks within the Healthcare, Industrials, and Information Technology sectors. Over the preceding twelve months, this trend of underperformance persisted, predominantly stemming from similar challenges in stock selection across the same key sectors. These sectors, despite their potential, presented hurdles that impacted the fund's overall returns compared to the broader market index.
Amidst ongoing economic ambiguities and a sustained high Federal Funds rate, the extent and duration of economic impacts remain a significant concern. The investment landscape is characterized by cautious sentiment, where businesses face an environment of unpredictable growth and shifting consumer behaviors. Such conditions necessitate a disciplined investment approach focused on resilience and intrinsic value.
Looking ahead, the fund's management remains committed to its core investment philosophy. The emphasis is firmly placed on uncovering high-quality growth companies that demonstrate substantial opportunities for increases in sales, income, and free cash flow. This selective approach aims to build a portfolio capable of navigating market volatility and delivering long-term value to investors. The team continues to conduct thorough research and analysis to identify companies that are not only financially sound but also possess compelling competitive advantages and sustainable growth models.
Despite the recent challenges, the fund maintains its dedication to seeking out businesses that exhibit strong fundamentals and potential for significant expansion. The focus on qualitative and quantitative analysis helps in pinpointing companies that are poised for success, even in an evolving economic climate. This strategic alignment ensures that the fund's portfolio is constructed with an eye toward future profitability and stability, rather than short-term market fluctuations.