International small-cap equities demonstrated robust growth during the second quarter, indicating sustained investor confidence even in the face of considerable global geopolitical instability. The Victory Trivalent International Small-Cap Fund (Class A shares at NAV) notably surpassed its benchmark, a testament to its effective security selection strategy. This positive performance was observed across three of five regions and five of the eleven economic sectors. This period also saw a significant resurgence in international equities, largely attributed to a shift in the US-Iran conflict from heightened disruption to a more stable resolution, which positively influenced market sentiment.
The market environment for international small-cap equities during the second quarter was characterized by an upward trend. Despite ongoing geopolitical tensions, investors maintained an optimistic outlook, contributing to a rise in equity values. The S&P® Developed Ex-U.S. SmallCap Index recorded a 7.0% increase for the quarter, highlighting the sector's overall strength. This positive momentum was further reinforced by the strong performance of the Victory Trivalent International Small-Cap Fund, which exceeded the index's returns. The fund's success underscores the importance of granular analysis and strategic positioning in navigating complex global markets. Factors such as evolving geopolitical landscapes and their impact on global trade routes and economic stability played a crucial role in shaping market dynamics during this period.
The recovery observed in international equities during the second quarter of 2026 was significantly influenced by a perceived de-escalation in the US-Iran conflict. This shift helped alleviate some of the broader market anxieties that had previously weighed on global investments. For the Victory Trivalent International Small-Cap Fund, the positive performance was not merely a reflection of a rising tide but also a result of diligent stock picking. The fund's ability to generate excess returns in key regions and sectors demonstrates a sophisticated investment approach that capitalizes on both macroeconomic trends and microeconomic opportunities. This strategic agility allowed the fund to outperform its peers and benchmark indices, providing value to its investors.
Overall, the second quarter presented a constructive period for international small-cap equities. Investor resilience and a more favorable geopolitical backdrop propelled growth, with specialized funds showcasing their ability to generate alpha through superior stock selection. The market's capacity to absorb uncertainty and pivot towards growth opportunities indicates an underlying strength and adaptability within the global financial system.
