Allspring SMID Cap Growth Fund: Q3 2025 Commentary & Outlook

Allspring’s SMID Cap Growth Fund navigated a mixed market backdrop in Q3 2025, as small- and mid-cap growth stocks faced sector rotation and macro volatility. Portfolio managers report that contributors to relative performance included select software and healthcare innovators that continued to show durable revenue growth and margin expansion. These holdings benefited from company-specific catalysts and strong execution amid broader investor caution.

Conversely, certain industrial and consumer-facing positions acted as detractors during the quarter. These names were more sensitive to slowing end-market demand and experienced temporary margin compression. The team emphasizes that these setbacks were generally valuation-driven rather than indicative of fundamental deterioration, and they used pockets of weakness to add to high-conviction ideas at attractive prices.

Positioning reflected a blend of growth orientation and quality bias. Managers maintained exposure to secular growth opportunities—software, specialty healthcare, and niche industrials—while trimming or exiting names with stretched valuations or rising idiosyncratic risk. Cash levels remained modestly above long-run averages to preserve optionality in a market where dispersion between winners and losers remained elevated.

Risk management and bottom-up stock selection were central themes. The portfolio’s overweight to differentiated growth stories with clear path-to-profitability frameworks supported relative resilience. The team also highlighted active engagement with company managements to assess capital allocation and execution risks.

Looking ahead, the fund’s strategy is cautious but constructive. The managers expect continued dispersion across SMID-cap spaces, driven by earnings variability and investor sentiment. They plan to remain selective—favoring companies with sustainable competitive positions, strong free-cash-flow potential, and realistic growth expectations. While mindful of the macro backdrop, the team believes the current environment can create attractive entry points for disciplined growth investors.

Investors should view recent activity as a tactical rebalancing aimed at improving long-term return potential rather than a dramatic strategy shift. Continued active management seeks to capture idiosyncratic upside while managing downside risks in a dynamic market environment.