Sustainable Growth Advisers (SGA), an investment management company, has released its second-quarter 2026 investor letter for its "U.S. Large Cap Growth Strategy." SGA focuses on building high-conviction portfolios of quality growth businesses expected to deliver mid-teens earnings growth with less variability, with an investment approach designed to protect and compound client capital.

In Q2, the SGA U.S. LCG Portfolio returned 6.8% (Gross) and 6.6% (Net), underperforming both the Russell 1000 Growth Index, which returned 16.7%, and the S&P 500 Index, which returned 15.2%. According to the letter, the underperformance was driven by momentum-driven market dynamics and the widening disparity between beneficiaries of AI capital expenditure and other market segments. Despite the shortfall, the firm remains confident in the portfolio's fundamental resilience and downside protection during market dips. SGA also noted it is positioned for a potential shift in market leadership, with projected revenue growth of 14% and earnings growth of 19% over the next three years, and said portfolio valuations remain at favorable levels.

The Aon plc Exit

In its Q2 2026 letter, SGA's U.S. Large Cap Growth Strategy highlighted Aon plc (NYSE:AON), a professional services firm providing risk management, insurance brokerage, and human capital consulting solutions to organizations. The position was liquidated from the Strategy's holdings during the quarter.

The exit illustrates a broader dynamic in the insurance brokerage industry: because brokers such as Aon earn commissions and fees that are partly linked to the premiums insurers charge, their revenue growth tends to move with the insurance pricing cycle. When insurers raise premiums—a phase often called a hard market—brokerage revenue grows quickly, while a soft market, in which pricing moderates, weighs on that growth even when client retention and execution remain strong.

On September 4, 2026, Aon plc (NYSE:AON) closed at $323.09 per share. The stock declined 9.49% over the past month and lost 12.68% over the trailing 52 weeks. Aon plc (NYSE:AON) has a market capitalization of $68.54 billion.

SGA stated the following regarding the decision:

"We liquidated our position in Aon plc (NYSE:AON) during the quarter. Aon continues to execute well operationally and has outperformed peers during a period of softer insurance pricing. The backdrop has become less favorable as the insurance industry entered a softer phase following several years of strong property insurance pricing driven by inflation and elevated catastrophe losses. As pricing has moderated, revenue growth across the brokerage industry has come under pressure, creating a headwind for firms whose revenues are tied to insurance premiums. Although Aon has navigated this environment better than competitors and we continue to view the underlying business as high-quality and resilient, we exited the position and reallocated the funds to a more attractive long-term growth opportunity in Arista Networks."

The reallocation itself is notable: SGA moved capital from an insurance-services holding into Arista Networks, a networking equipment supplier squarely tied to the AI infrastructure buildout—the same theme SGA cited as a source of market dispersion during the quarter, even as the firm positioned for a potential broadening of market leadership.

Hedge Fund Positioning

According to Insider Monkey's database, 61 hedge fund portfolios held Aon plc (NYSE:AON) at the end of the second quarter, down from 65 in the previous quarter. The stock is not included in Insider Monkey's list of the 40 Most Popular Stocks Among Hedge Funds.

In a separate article, Insider Monkey reported that Aon plc (NYSE:AON) is set to acquire USI Insurance Services from KKR and other shareholders for $17 billion in cash. The reported deal, if completed, would add a large U.S. middle-market brokerage to Aon's operations, a scale-expanding step that contrasts with SGA's concerns about industry-wide revenue headwinds and will be a key item to watch as the pricing cycle plays out.

This article was originally published at Insider Monkey.