Voya Small Cap Growth Fund Quarterly Commentary - 2Q25

For the quarter ended June 30, 2025, the Fund underperformed the Index on a NAV basis, due to stock selection. Negative stock selection in the industrials, health care and consumer discretionary sectors were the leading detractors from performance. An overall positive allocation effect, coupled with positive stock selection in the consumer staples sector were the largest contributors.

Top individual detractors to performance included Champion Homes, Inc., Saia, Inc. and ACI Worldwide, Inc. Champion Homes, Inc. (SKY), a manufacturer and seller of manufactured housing, was the top detractor for the quarter, after being one of our best performers the prior quarter. Manufactured housing fundamentals remain slow with expected acceleration in order rates for both residential and community being pushed out from late 2025 into 2026. Although the demand delay is frustrating, we continue to hold the stock given the company’s strong returns profile coupled with reset expectations.

Saia, Inc. (SAIA), a national transportation company focused on less-than-truckload (LTL) services, was a negative contributor to performance. Following SAIA’s strategic terminal expansion resulting from the bankruptcy of Yellow, industry demand slowed during the first quarter. We believe SAIA is well positioned for future market share growth but have adjusted our position size to reflect the short-term economic challenges the company faces. 

ACI Worldwide, Inc. (ACIW), an electronic payments provider, underperformed for the quarter. Following the announcement of a new CFO in early June and an in line prior quarter, ACIW stock was down for much of the quarter. Positively, ACI announced the redemption of U.S. $400 million in senior notes, which will lower their net interest expense going forward and benefit future earnings. We are encouraged by the long-term fundamentals of the company and continue to hold our current position. 

Top individual positive contributors included e.l.f. Beauty, Inc., Lumentum Holdings, Inc. and Kratos Defense & Security Solutions, Inc. e.l.f. Beauty, Inc. (ELF), a specialty cosmetics and skin care company, was the top contributor to performance for the quarter. ELF continues to take market share from legacy cosmetic companies via their online and partnership distribution strategy and the recent accretive acquisition of rhode skin is expected to drive market share gains. Although we are mindful of the high expectations, we continue to hold our position. 

Lumentum Holdings, Inc. (LITE), a provider of optical and photonic products utilized in cloud, networking and industrial applications, saw its stock price nearly double off the April lows as the company positively pre-announced in early June. LITE’s Cloud Light data center unit saw 50% growth during the quarter and although LITE is not NVIDIAs exclusive supplier, they are currently the only “approved” supplier. We continue to hold the stock and believe LITE is well positioned for continued growth. 

Kratos Defense & Security Solutions, Inc. (KTOS), a supplier of mission critical services and products and unmanned systems focused on United States national security priorities, was a positive contributor for the quarter. With a positive government spending backdrop and recent program rewards, KTOS is positioned well for future growth. A successful capital raise of $575 million during the quarter will be used to advance growth initiatives. We trimmed the stock during the quarter but are maintaining our current weighting in the stock.

With macros dominating investor sentiment, the pending tariff deadline of July 9 looming and the uncertain timing of future rate cuts relative to an overall healthy economic backdrop, stocks remained volatile during the quarter. Despite these macro headwinds, we have not been without individual stock challenges. We continue to focus on individual company fundamental factors and seek to identify companies that can grow revenue, expand margins and produce solid cash flow and earnings, all while seeking sustainable valuations. We remain cognizant of the risk versus reward balance within the portfolio and at the individual company level and have tightened up our relative sector weights to our benchmark given market uncertainty. As always, we are mindful of valuation in the context of stocks meeting their growth expectations. This environment has allowed us to make quality portfolio upgrades, and we are seeing opportunities in sectors and industries that have not been attractive in recent memory. As an example, we have found opportunities in the consumer staples sector in e.l.f. Beauty, mentioned above, Celsius Holdings, Inc. and Vita Coco Co., all contributors this past quarter. 

As a sidenote, there are unprecedented dynamics within our Russell 2000 Growth benchmark that we have not seen in the last 25 years of managing small cap growth assets. Higher beta names (Hims & Hers, RocketLab, IonQ and Credo Technologies) are continuing to have more meaningful weights in the benchmark. Many of these companies don’t align with our quality bias. This year in particular, these stocks have been strong performers, thus impacting our relative performance. This is something we are aware of and are discussing frequently as it relates to managing a portfolio relative to a benchmark yet being mindful of risk.

Companies mentioned in this report—percentage of portfolio investments, as of 06/30/25: Champion Homes, Inc. 1.38%, Saia, Inc. 0.54%, ACI Worldwide, Inc. 1.63%, e.l.f. Beauty, Inc. 1.15%, Lumentum Holdings, Inc. 2.38%, Kratos Defense & Security Solutions, Inc. 1.55%, Hims & Hers 0%, RocketLab 0.49%, IonQ 0% and Credo Technologies 0%; 0% indicates that the security is no longer in the Fund. Portfolio holdings are subject to daily change.