US Equity Growth: investor letter Q3 2025

Your capital is at risk.

Headlines are simple. Reality isn’t.

Recent media coverage framed new US market highs as the consequence of retail “FOMO” (fear of missing out) amplified by buybacks. That makes for a tidy story, but markets are complex, adaptive systems, and headline narratives can distract attention from the factors that really matter to long-term compounding: company execution, cash generation and the reinvestment of that cash behind large and growing opportunities.

What our signals suggest

Our conversations with portfolio companies paint a more nuanced picture than media front pages suggest. Pockets of US consumer demand are soft, and some categories are wrestling with footfall and pricing pressure. Several consumer-facing businesses in the portfolio (Sweetgreen and YETI, for example) have called out greater price sensitivity. And yet the digital plumbing of the economy – internet infrastructure, AI compute and software platforms – continues to compound. Platforms with strong network effects are accelerating. Shopify, with heavy exposure to domestic and cross-border consumer activity through its merchants, is growing revenue at more than 30 per cent year-over-year, with gross merchandise volume expanding in the 20-30 per cent range. Education app Duolingo has been surprising Wall Street with the strength of its operational performance and operating leverage.

Contradictions abound. The data does not resolve to one neat macro plotline. The divergence highlights that, in a noisy macroeconomic environment, the way in which a company executes on its opportunity is critical. Shopify’s momentum, for example, is a function of technical groundwork laid several years ago: a modular product architecture that enables it to land-and-expand in big organisations, and pragmatic use of AI to raise productivity, margins and growth. Yet, Shopify remains exposed to global consumption, and so the true analytical hard yards are spent weighing these considerations against each other. For active stock pickers, these contradictions are welcome. Our edge is not in forecasting the next data print. It’s in identifying future-focused, technically fluent companies with resilient balance sheets and adaptable operating models. Such businesses are better placed to compound through uncertainty because they keep shipping and reinvesting while the world argues about narratives.

Positioning, risk and valuation in context

US benchmarks are more concentrated than they have been in years, which skews risk for passive investors. Take the Russell 3000 Growth index for example. Even when smaller constituents have outperformed the ‘Magnificent 7’ over one-, three- and five-year periods, their individual weights are small, so they contribute little to index returns. This observation provides fertile ground for active managers who can ignore index weight and focus on fundamentals.

Macro and policy risks, from US political shifts to geopolitics and trade, feature prominently in our discussions – as does AI. We believe that there is a non-zero chance that we’re in an exuberant phase of AI foundation-layer build-out, as with railroads, PCs or the early internet. Those eras minted both overinvestment and exceptional businesses. The lesson isn’t to avoid the space. Rather, it’s to be selective because the distribution of value capture will likely rhyme with history. A small set of infrastructure players will dominate the base layer. Above them, application-layer companies with distribution, data and iteration speed can become very large. We are still early, but we are already seeing tangible impacts. Several portfolio names, including Meta, Shopify, Samsara and Snowflake, have cited material AI-driven benefits to growth and operating leverage. At the same time, we remain sceptical of companies whose AI ‘agents’ pitch outstrips delivered customer value; some private-market conversations reinforce that caution. Together with our Investment Risk Team, we’ve been assessing the portfolio’s sensitivity to a consumer-led slowdown and to both AI adoption and AI capital expenditure cycles versus the benchmark. (In an irony not lost on us, we used generative AI alongside conventional tools to augment this work.) The synthesis is feeding into portfolio balance, position sizes and new ideas. It reflects the dichotomy we see in the signal.

Consensus expectations for the next 12 months are for 21 per cent and 24 per cent faster sales growth relative to the Russell 1000 Growth and the Russell 3000 Growth, respectively. A similar picture holds for forward earnings. Extending the horizon, three-year consensus points to superior margin expansion and, on forecast sales growth, the portfolio screens at a discount to those growth indices. We are mindful not to anchor to peak Covid-19 multiples. Today’s levels are well below that period. Over five-year horizons and beyond, earnings and cash flow growth dominate returns. On those drivers, we believe the portfolio is on a stronger footing, but we will not anchor to indices or to recent winners if the risk-reward deteriorates. Nor will we discard exceptional growth because the multiple is optically higher if the reinvestment runway, cash flow durability and vast opportunity justify it.

What we’ve been doing

New position: Knife River. We initiated a stake in this vertically integrated aggregates and construction-materials business. Our prior work in the category, most notably with Martin Marietta in the 2010s, gives us conviction in the industrial opportunity. With rock expensive to transport, local quarries can become natural monopolies with pricing power. Knife River dominates in its markets, follows a disciplined M&A playbook to build share, and runs a lean operating model aligned to margin expansion. US infrastructure demand, including data centre-related spend, provides underappreciated, durable tailwinds. We like the business quality and the entry multiple relative to the indices.

IPO participation: Figma. We also participated in Figma’s IPO. We believe Figma is positioned to become the dominant collaborative design platform as AI transforms digital creation workflows. The company enjoys strong network effects, deepening with usage and broadening across adjacent teams. Under CEO Dylan Field, Figma is evolving into a core platform for designing and orchestrating software experiences, precisely where we expect AI-native creation to be embedded. Our private-company relationships helped secure a meaningful allocation in a heavily oversubscribed deal.

Rebalancing capital: To fund these, we trimmed several consumer-exposed names, Affirm, DoorDash and Roblox, following strong long-run performance. These remain high-conviction, long-duration holdings, but we reduced position sizes to reflect gains and to manage exposure to a potential consumer slowdown. We also took partial profits in Cloudflare following strong execution and share appreciation. Cloudflare is replacing physical enterprise networking with a global software platform and opening new avenues such as Workers AI. We trimmed to add to NVIDIA and balance our AI exposure across enablers and application beneficiaries.

Across the portfolio, we remain focused on businesses that combine fast growth with attractive unit economics, high gross margins, robust cash generation and prudent balance sheets. We want leaders who can self-fund innovation and compound through cycles.

 
Emerging weirdness

The defining feature of this market is not a single macro answer but the coexistence of conflicting truths: consumer caution and infrastructure expansion; AI exuberance and genuine productivity gains; concentrated indices and broad underlying opportunity. That dissonance is uncomfortable for headline writers, but it is a gift for stock pickers.

If you want a glimpse of how strange the future could look, consider Aurora’s autonomous trucking progress. Since commercial deliveries began in April, it has surpassed 50,000 autonomous miles with a perfect safety record – currently on one route, one freeway, one state. The US trucking market was about $875bn in 2021, with roughly a third in driver wages. If autonomy scales, the industry’s cost structure – and its profit pools – will be reshaped. Normal might look weird in a decade, and our job is to translate weirdness into advantage: to look through the noise to cultures that adapt fast, generate cash and reinvest into vast, durable problems. Those are the ingredients of multi-year compounding. In our view, they are also underappreciated by a market preoccupied with the next data point.

Headlines will stay loud, but reality will stay lumpy. We can’t predict every macro twist and turn. That isn’t our edge. We will stay focused on owning adaptable, well-led companies that widen their moats by shipping, learning and reinvesting. We will trim when upside asymmetry narrows, add when it widens, and hold long enough for culture and cash generation to do the compounding.

Price is a headline. The story is resilience, reinvestment and adaptability. As autonomy, agentic software and new digital rails propagate, the world will get weirder. That is exactly where disciplined patience earns its edge.

US Equity Growth

Annual past performance to 30 September each year (%)

Annualised returns to 30 September 2025 (%)

Source: Revolution, S&P. US dollars. Returns have been calculated by reducing the gross return by the highest annual management fee for the composite. 1 year figures are not annualised. 

Past performance is not a guide to future returns.

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