ClearBridge Large Cap Growth Strategy Q3 2025 Commentary

Market and Performance Overview - Equities experienced significant gains in Q3, with the S&P 500 Index rising 8.1% and the Nasdaq Composite increasing 11.2% to record highs, driven by positive tariff outcomes, the passage of the One Big Beautiful Bill Act, anticipated interest rate cuts, and strong corporate earnings, particularly in technology [2][3] - The Russell 1000 Growth Index rose 10.5% for the quarter and is up 46.7% from early April lows, highlighting a strong market rebound post-Liberation Day [3] AI Sector Dynamics - A notable trend has emerged with a divergence between "AI winners" and "AI losers," where AI winners, mainly cloud providers and chip makers, have seen stock prices increase significantly, with some up over 100% since April [3] - Capital has flowed out of perceived AI laggards, including application software and services, indicating a widening dispersion in market performance [3] Portfolio Positioning - The ClearBridge Large Cap Growth Strategy has underperformed its benchmark due to underexposure to perceived AI winners and holding several names considered AI losers [6] - New positions were initiated in Oracle and Datadog, with Oracle expanding its market share in cloud infrastructure for AI workloads and Datadog positioned for growth in cloud application monitoring [7][8] - Exited positions in Workday and Accenture due to decelerating growth and concerns around AI, while maintaining a position in Salesforce [9] Health Care Sector Insights - The health care sector faces challenges related to spending levels and regulatory risks, leading to the exit from positions in UnitedHealth Group, Eli Lilly, and Novo Nordisk, while upgrading exposure with Vertex Pharmaceuticals [10] Early Cyclical Companies - The strategy has repurchased shares in Chipotle Mexican Grill and increased positions in Starbucks and Parker-Hannifin, indicating optimism about early cyclical companies benefiting from an improving economic environment [11][12] Overall Strategy and Outlook - The ClearBridge Large Cap Growth Strategy is positioned as an all-weather portfolio, aiming for consistent results through various market cycles, despite recent underperformance relative to the benchmark [13][16] - The strategy remains focused on long-term growth, disciplined investment in AI-indexed ideas, and maintaining a diversified portfolio to manage risks [14]