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The Artisan Mid Cap Value Fund reported a period of underperformance in the first quarter, falling short of the Russell Midcap® Value Index benchmarks. This outcome was largely influenced by prevailing market conditions that showed a clear preference for momentum-driven equities, sidelining investments that prioritize fundamental quality. Notable declines impacted holdings such as ICON, Gartner, and Pinterest, each experiencing substantial drops of 30% or more within the quarter. In light of these market dynamics, the fund strategically acquired new positions in Brown & Brown, Veralto, and IQVIA Holdings, focusing on businesses identified for their robust quality, compelling valuations, and strong cash flow generation, underscoring a commitment to long-term risk/reward profiles.

During the initial three months of the year, the Artisan Mid Cap Value Fund's investment performance did not meet the expectations set by the Russell Midcap® Value Index. This divergence was primarily attributed to a market environment where investment capital gravitated towards companies exhibiting strong short-term price momentum, rather than those possessing enduring quality characteristics. Such a trend often overlooks companies with solid fundamentals, which are typically favored by value-oriented investment strategies. The fund’s exposure to companies like ICON, Gartner, and Pinterest proved challenging, as these stocks witnessed considerable declines, directly impacting the overall portfolio returns.

The decision to introduce new positions in Brown & Brown, Veralto, and IQVIA Holdings reflects a calculated move to enhance the portfolio's resilience and long-term growth potential. These companies were selected based on their assessment as high-quality entities trading at what are considered undemanding valuations. Such businesses typically exhibit strong cash flow generation, possess resilient business models capable of weathering various economic cycles, and offer an attractive risk-adjusted return outlook over the long term. This strategic reallocation demonstrates the fund's proactive management in adjusting to market shifts while adhering to its core investment philosophy of identifying undervalued, quality assets.

The underperformance in Q1 for the Artisan Mid Cap Value Fund underscores the dynamic nature of financial markets, where short-term trends can sometimes overshadow fundamental value. Despite the headwinds, the fund's strategic adjustments, particularly the addition of Brown & Brown, Veralto, and IQVIA Holdings, signify a disciplined approach to portfolio management. These new acquisitions are expected to bolster the fund’s holdings with companies that are well-positioned for future growth, aligning with the fund's long-term objective of delivering value to its investors.