Pzena's Comprehensive Review of U.S. Small-Cap Value Investments for Q2, 2025
In the volatile second quarter of 2025, small-cap and value stocks underperformed their large-cap and growth counterparts. This trend was reflected in the performance of Pzena Investment Management's strategies, which, as a result, showed differences and at times more volatility compared to the indices.
The performance information presented for each investment strategy represents the composite performance of separately-managed accounts and/or commingled funds. The Pzena strategies are significantly more concentrated in their holdings and have different sector/regional weights than their respective benchmarks. Gross rates of return are presented gross of investment management fees and net of the deduction of transaction costs.
The portfolio underperformed its benchmark during the quarter. The basic materials, consumer staples, and health care sectors detracted from performance. On the other hand, some standout performers included Douglas Dynamics, a snowplow manufacturer supported by improved snowfall trends and anticipation of tariff risks, and Adient, an automotive seat manufacturer that rebounded as tariffs were reduced.
Consumer products company Helen of Troy, which manufactures most of its products in Asia, and X-ray tube manufacturer Varex Imaging, which sells products produced in the U.S. into China, navigated challenges posed by announcements related to Libya sanctions, feared tariffs, and potential recession. Asian companies such as Samsung and LG faced negative impacts on their sales and revenue, leading them to diversify supply chains and increase production in other regions to mitigate risks.
The document does not constitute or form part of any offer to issue or sell or any solicitation of any offer to subscribe for or purchase any particular investments. It is important to note that the specific portfolio securities discussed in the document were selected for inclusion based on their ability to help understand the investment process and not based on performance.
The contents of this document are for informational purposes only, and it does not constitute an offer to sell, or a solicitation of an offer to buy, any strategy referenced herein. The Pzena Emerging Markets Focused Value Fund, Pzena Emerging Markets Select Value Fund, Pzena Global Focused Value Fund, and Pzena Global Value Fund are registered and approved under section 65 of CISCA. These funds, along with several other indices such as the MSCI World Value Index, MSCI ACWI Value Index, and TOPIX Value Index, are constructed from their respective parent index.
President Trump's stance softened throughout the quarter, leading to a rebound in stocks. However, uncertainty around tariffs, domestic demand, and a potential recession arose due to 'Liberation Day' announcements. Markets remained volatile throughout the quarter.
It is important to remember that past performance is not indicative of future results. The securities discussed do not represent an account's entire portfolio and may represent only a small percentage of an account's portfolio holdings. The document provides information about the investment strategies managed by Pzena Investment Management, LLC, and disclaimers about the content of the document.
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