Tech Innovation Fund: Q1 2026 Performance Review
Our flagship technology fund delivered an exceptional +34.2% return in Q1 2026, significantly outperforming the NASDAQ Composite benchmark of +11.8%. The outperformance was driven by concentrated positions in AI infrastructure, next-generation semiconductor manufacturers, and cloud-native SaaS platforms operating at enterprise scale.
AI Infrastructure — Core Driver
Positions in hyperscale data center operators and NVIDIA supply-chain beneficiaries contributed approximately 18% of the fund's total return. Demand for GPU compute capacity continued to accelerate far ahead of supply, maintaining elevated pricing and driving margin expansion across the ecosystem. We increased our weighting in custom ASIC developers early in Q1, which proved prescient as several announced landmark hyperscaler contracts.
Semiconductor Positioning
The semiconductor sub-portfolio returned +41% in the quarter, anchored by advanced packaging technology companies whose revenues grew 60-80% year-over-year. We maintained a deliberate underweight to legacy DRAM and NAND segments, which underperformed on continued pricing pressure, while overweighting logic and analog segments serving automotive and industrial end markets.
Cloud-Native SaaS Platforms
Enterprise SaaS holdings contributed +9.2% to fund performance. We concentrated in vertical SaaS players with net revenue retention above 130%, strong free cash flow generation, and defensible moats through deep workflow integration. Two of our top holdings announced accretive M&A transactions during the quarter, driving re-rating events.
Risk Management & Portfolio Construction
Despite the strong performance environment, we maintained disciplined position sizing with no single holding exceeding 8% of NAV. We used equity derivatives to hedge tail risk around earnings events for our top five positions, which reduced volatility without materially impacting returns. The portfolio's beta to the S&P 500 was maintained at 1.12.
Q2 2026 Outlook
We remain constructive on AI infrastructure spending, which shows no signs of deceleration. Our primary concern is multiple compression in high-growth SaaS if interest rates rise unexpectedly. We are gradually rotating some gains from pure-play AI names into infrastructure-adjacent plays with more reasonable valuations and near-term earnings visibility.
Important Disclosure: Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. The information presented here is for informational purposes only and does not constitute investment advice. Please consult your Stellaris Investments advisor before making investment decisions.
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