There’s Still Hope for This Struggling Concentrated Growth Fund

Polen Growth POLRX, a onetime consistently strong-performing and highly rated concentrated growth fund, has had a rough go the past few years.

Its institutional shares have trailed the Russell 1000 Growth for six straight calendar years, landing it in the lowest tenth of large-growth Morningstar Category peers over trailing one-, three-, five-, and 10-year periods through February 2026. The prolonged slump is out of character for the strategy whose thoughtful leaders and rigorous approach to investing in stocks with strong competitive positions had once produced strong results with less volatility than peers and its benchmark. Yet, there have been enough execution wobbles in recent years to warrant a Process Pillar downgrade to Above Average from High in February. Here’s the story behind that change and why we still think this is a compelling offering.

Why It Has Lagged

Polen Growth has fallen far behind. Though it posted a decent 10.9% annualized gain over the trailing 10 years through March 17, 2026, that looked meager beside the average large-growth fund’s 14.4% and the Russell 1000 Growth Index’s 17.5%. In fact, the strategy has lagged both measures over all trailing periods.

At least three factors—market headwinds, portfolio and market concentration, and execution missteps—can explain this poor relative performance. The market has been unfavorable for Polen’s style. Momentum, or the tendency of fast-rising stocks to keep appreciating, has driven the stock market in recent years and hurt this strategy’s relative performance. The fund tends to have low exposure to high-momentum stocks, while its preference for quality, or stocks that the managers think can generate consistent and enduring profits, hasn’t set it apart from peers or the benchmark index, according to Morningstar’s Risk Model.

While headwinds have detracted, single stock picks have been a bigger drag. The strategy’s 20-25 stock portfolio has exacerbated stock-picking errors, because each pick has more influence in a concentrated portfolio. And, like all large-growth peers, it has had to operate in an increasingly concentrated universe, which has raised the stakes on managers’ decisions to own or not own and to overweight or underweight a handful of names.

The fund’s choices regarding those names—the so-called Magnificent Seven stocks of Alphabet GOOGL, Amazon.com AMZN, Apple AAPL, Meta META, Microsoft MSFT, Nvidia NVDA, and Tesla TSLA—have hampered performance. Only positions in Alphabet, Amazon, and Apple have helped. Not owning Nvidia from March 2019 to August 2025—a period of tremendous appreciation—was particularly painful.

In fact, the managers’ preference for stocks with high margins and high recurring revenue led them to favor software rather than cyclical semiconductor stocks. So, it missed owning high-flying artificial intelligence winners like Nvidia and Broadcom AVGO while holding big stakes in software stocks like Adobe ADBE and ServiceNow NOW that have struggled amid fears that AI threatens their business models and growth (the managers sold Adobe in January 2026). Indeed, Morningstar’s equity research team lowered the Economic Moat Ratings of several software stocks in March, including Adobe and ServiceNow, whose moats dropped to narrow from wide.

Meanwhile, the strategy has had its share of bad calls, such as overweighting the healthcare sector and making poor stock picks within it in recent years, including Illumina ILMN and Zoetis ZTS. The managers have been perhaps too patient with some poor-performing stocks, such as Thermo Fisher Scientific TMO, whose price languished over the roughly three years the fund owned it before the managers exited in September 2025.

Why We Still Like This Strategy

The managers are more aware of momentum now. By tracking price and business momentum more closely, they can trim stocks that run ahead of fundamentals and add to those temporarily out of favor. The managers, however, have not increased turnover to chase momentum and still fall on the patient, deliberate end of the investing spectrum.

Otherwise, the process remains intact. Companies still must clear strict hurdles before the managers consider owning their stocks. Those criteria include strong returns on equity, unencumbered balance sheets, consistent margins, and real organic growth. The concentrated portfolio also remains packed with stocks poised to continue to grow well into the future, such as Intuitive Surgical ISRG, which has a wide moat and an Exemplary Morningstar Capital Allocation Rating. Recent addition Idexx Laboratories IDXX, a pet and livestock healthcare company, has similar characteristics. Historically, stocks like these tend to reward investors over the long term.

The team also remains strong. The firm saw unusually high turnover in the past year, with the departure of the former head of sustainability and three managers of other growth strategies. But the strategy’s thoughtful and experienced lead manager Dan Davidowitz and team leader Damon Ficklin, who once was a Morningstar equity analyst, remain. The addition of analyst Connor Carollo, who spent seven years at WCM Investment Management, also should help.

The fund’s recent streak of underperformance has been disappointing. Still, this strategy’s combination of a disciplined process, experienced team, and more balanced positioning suggests it can post better results.