In the third quarter of 2025, the ClearBridge Growth Fund achieved notable outperformance compared to its benchmark, the Russell Midcap Growth Index. This success was primarily attributed to judicious stock selection across various sectors, with a particular emphasis on information technology and communication services. The fund's commitment to diversified growth strategies played a crucial role in navigating the dynamic market landscape.
A significant driver of the fund's strong performance was Broadcom, a long-standing holding that continues to be a top position. Broadcom's innovation in specialized XPU chips, designed for artificial intelligence workloads, garnered substantial attention after the company secured a fourth customer. This highlights the fund's ability to identify and capitalize on companies at the forefront of technological advancements.
Despite the overall positive performance, the quarter also presented its share of challenges. Macroeconomic uncertainties led to pockets of weakness among consumer discretionary holdings, including prominent names like Chipotle, CAVA, and Airbnb. This reflects a broader trend of a softer spending environment as consumers grapple with economic shifts. In response, the fund demonstrated a disciplined approach by divesting from positions where the original investment thesis no longer aligned with evolving market conditions.
The ClearBridge Growth Fund's strategic adjustments extended to new additions and exits within the portfolio. The fund introduced new holdings such as On Holding, Roblox, Natera, and XPO, aiming to capture fresh growth opportunities. Conversely, it reduced exposure to sectors facing pressure, exemplified by the exit from UnitedHealth due to concerns surrounding its Optum division and a general reduction in application software exposure.
Looking forward, the fund anticipates potential tailwinds in 2026, primarily driven by monetary easing and prospective regulatory changes. However, it also acknowledges that many stocks have already begun to reflect a more optimistic future, suggesting a need for continued vigilance and selective investment. The fund's strategy remains focused on balancing growth prospects with a keen awareness of economic and geopolitical risks that could impact market momentum.
The fund's outperformance underscores its robust investment philosophy, which prioritizes disciplined portfolio management and a forward-looking approach. By continuously evaluating market conditions and adapting its holdings, the ClearBridge Growth Fund aims to generate sustained returns for its investors, even amidst evolving economic landscapes.