Voya Small Cap Growth Fund Quarterly Commentary - 2Q25
Focusing on High-Quality Companies with Sustainable Growth Trends

Voya Small Cap Growth Fund Quarterly Commentary - 2Q25

Key Takeaways

Equity markets rebounded in the second quarter after April’s post-Liberation Day volatility, ending above the February peak. Growth outperformed value, driven by strength in technology and communication services, while energy and health care lagged. Easing inflation, selective rate cuts, and increased demand for safe-haven assets highlighted cross-asset dynamics.

For the quarter ended June 30, 2025, the Fund underperformed the Russell 2000 Growth Index (the Index) on a net asset value (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.

As we enter the second half, investors face ongoing geopolitical risks and shifting monetary policy. Expanding leadership beyond mega-cap stocks is creating new opportunities, especially in defensive sectors. We remain focused on refining strategies to align with evolving conditions amid persistent uncertainty and inflationary pressures.

Actively managed small cap growth strategy driven by bottom-up fundamental research seeking stocks with superior revenue and earnings potential and sustainable valuations.

Portfolio review

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.

Current strategy and outlook

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.

Holdings detail

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.

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The Russell 2000 Growth Index is an unmanaged index that measures the performance of smaller U.S. companies with greater-than-average growth orientation. It is a small-cap stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index.Index returns do not reflect fees, brokerage commissions, taxes or other expenses of investing. Investors cannot invest directly in an index. 


All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. You could lose money on your investment and any of the following risks, among others, could affect investment performance. The following principal risks are presented in alphabetical order which does not imply order of importance or likelihood: Company; Currency; Environmental, Social, and Governance (Equity); Focused Investing; Foreign (Non-U.S.) Investments/ Developing and Emerging Markets; Growth Investing; Health Care Sector (Focused Investing); Investment Model; Liquidity; Market; Market Disruption and Geopolitical; Other Investment Companies; Securities Lending; Small-Capitalization Company; Technology Sector (Focused Investing). Investors should consult the Fund’s Prospectus and Statement of Additional Information for a more detailed discussion of the Fund’s risks.


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This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. 
The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Portfolio holdings are fluid and are subject to daily change based on market conditions and other factors. Past Performance does not guarantee future results.
 

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