In the first quarter of 2026, the Pzena Mid Cap Value Composite experienced a marginal net decrease of 0.5%. This period was characterized by considerable market volatility, primarily influenced by ongoing tariff debates and evolving projections for domestic economic growth. During this time, mid-cap equities demonstrated stronger performance compared to large-cap stocks, and value-oriented investments generally outpaced growth stocks.
Despite the broader market trends favoring mid-cap value, the portfolio encountered underperformance. This was largely attributed to specific challenges within its healthcare, technology, and financial sector holdings. Notably, Humana was the most significant individual detractor from performance, while Dow emerged as the largest positive contributor. Reflecting a proactive investment strategy, Pzena Mid Cap Value initiated a new position in CDW, indicating a strategic shift towards companies with evolving service models. Conversely, the portfolio divested from the agricultural chemical firm FMC, citing concerns over its balance sheet and issues related to inventory management.
This quarter's results underscore the dynamic nature of market forces and the continuous need for adaptive investment strategies. The management team remains focused on identifying undervalued companies with strong long-term fundamentals and the potential for earnings recovery. Such an approach aims to navigate market uncertainties effectively and capitalize on opportunities that align with a value-driven philosophy, ensuring sustained growth and resilience in diverse economic conditions.