Goldman Sachs Small Cap Growth Fund Beat Russell 2000 by 202 bps in Q1

The Goldman Sachs Small Cap Growth Insights Fund returned -0.78% in the first quarter of 2026, net of fees. That beat the Russell 2000 Growth Index by 202 basis points. The benchmark itself fell about 2.8% over the same period.

The fund’s outperformance came during a quarter when small-cap growth stocks broadly struggled. Rising rate expectations and a rotation toward value and large caps weighed on the segment. The Russell 2000 Growth Index has now lagged the S&P 500 for three consecutive quarters.

Goldman’s fund managers attributed the relative strength to stock selection, according to the fund’s commentary. They said picks in healthcare and technology added the most value. The fund also avoided some of the worst-performing names in the benchmark.

A few details from the commentary are worth noting. The fund held an overweight in healthcare, which contributed positively as the sector held up better than the broader small-cap growth universe. Technology holdings also outperformed, though the fund trimmed some positions into strength. The largest detractors came from consumer discretionary and industrials, where a handful of names missed earnings expectations.

The fund’s cash position stayed near 3% through the quarter, slightly above its historical average. That gave managers flexibility to add to positions during drawdowns in February and March.

For traders watching the small-cap growth space, the fund’s results offer a case study in active management during a difficult tape. The Russell 2000 Growth Index has fallen roughly 12% from its late-2025 high. Many passive investors in the segment have absorbed that full decline. The Goldman fund, by contrast, cut the loss to less than 1%.

The question is whether that edge can persist. Small-cap growth tends to be more sensitive to interest rates than large-cap growth. If the Federal Reserve holds rates higher for longer, the headwind stays. If the economy slows, earnings for small growth companies could come under more pressure than their larger peers.

Goldman’s managers said they are focusing on companies with positive free cash flow and reasonable valuations. That is a shift from the 2020-2021 period when many small-cap growth funds chased revenue stories without earnings. The fund’s top holdings include names in software, life sciences, and specialty finance.

One risk to watch is concentration. The fund’s top ten holdings account for about 28% of assets, which is typical for an actively managed small-cap fund but leaves it exposed to single-name shocks. The managers said they are comfortable with the diversification across sectors.

For investors comparing options, the fund’s expense ratio is 0.85% for the I share class. That is in line with peers. The fund has about $1.2 billion in assets under management.

The broader takeaway for the small-cap growth category is that stock selection still matters. The gap between the best and worst active funds in the space was wide in Q1. The Goldman fund landed near the top of its peer group, according to Morningstar data cited in the commentary.

Goldman Sachs Group Inc. itself carries an Alpha Score of 45 out of 100, a Mixed label, according to AlphaScala’s proprietary model. That reflects the firm’s diversified revenue streams and solid capital position, offset by regulatory headwinds and a competitive asset management landscape. The fund’s performance is one piece of a larger picture for the parent company.

For those tracking the small-cap growth space, the next catalyst is earnings season. Many of the fund’s holdings report in late April and early May. The managers said they expect the dispersion between winners and losers to widen, which historically favors active managers.

The fund’s Q1 commentary is available on Goldman’s website. It includes a full list of holdings and attribution by sector.