ECP Emerging Growth Limited’s portfolio plunged 19.4% in the March quarter, dragging its net tangible asset value down by nearly 30%, as growth stocks stumbled amid geopolitical tensions and rising rates. The fund added furniture retailer Koala Company and sees value in its resilient holdings despite the rough patch.
- NTA fell 29.9% to 95.4 cents per share in Q1 2026
- Portfolio dropped 19.4%, underperforming ASX indices
- Growth stocks, especially software and healthcare, were hit hard
- Added The Koala Company and increased stakes in Temple & Webster, Megaport, SiteMinder
- Management highlights operational resilience despite market volatility
Sharp NTA Decline Reflects Growth Stock Volatility
ECP Emerging Growth Limited (ASX:ECP) endured a punishing first quarter in 2026, with its net tangible asset value (NTA) plunging 29.9% to 95.4 cents per share. The fund’s concentrated portfolio of Australian small to mid-cap growth stocks fell 19.4% over the quarter, sharply underperforming the ASX Small Ordinaries Accumulation Index’s 10.9% decline and the broader ASX All Ordinaries’ modest 2.7% drop.
This steep slide was driven largely by a selloff in growth sectors, particularly software and healthcare, as investors grappled with heightened geopolitical risks stemming from the Middle East conflict and rising interest rate expectations. Stocks such as Megaport, Nuix, and SiteMinder each lost more than 30%, reflecting a broader rotation away from high-valuation tech names. The fund’s exposure to interest-rate sensitive companies like ARB Corp and Temple & Webster also weighed heavily on performance.
Portfolio Adjustments and Operational Resilience
In response to the market turbulence, ECP added The Koala Company Limited (ASX:KOA), a direct-to-consumer digital furniture brand, to its holdings while boosting positions in Temple & Webster, Megaport, and SiteMinder. Conversely, it trimmed stakes in PWR Holdings and Chrysos Corp. Despite the short-term price swings, the manager emphasised that portfolio companies continue to demonstrate strong operational performance. For instance, HUB24 reported robust inflows and growth in funds under administration, while Block expanded its Square and Cash App ecosystems amid rising digital payments. REA Group and Temple & Webster both posted solid revenue growth, underscoring the underlying quality of these businesses.
The Koala Company, alongside PWR Holdings and US-based asset manager GQG Partners, contributed positively during the quarter, partially offsetting losses from SiteMinder, Temple & Webster, Megaport, and ARB. The fund’s active management and high-conviction approach aim to capitalise on these dislocations, with management noting that valuations currently do not reflect the growth trajectories of their holdings.
Economic and Market Backdrop
The quarter’s headwinds were compounded by a 6.9% fall in developed market shares as measured by the MSCI World Index in Australian dollars. Domestically, Australia’s economy expanded by 0.8% in Q4 2025, marking its 17th consecutive quarter of growth supported by household spending, private investment, and government infrastructure programs. However, inflation remained above the Reserve Bank of Australia’s target at 3.7%, prompting a cash rate increase to 4.1% amid persistent inflation risks.
The fund’s performance and strategy should be viewed in light of its recent half-year results, where ECP posted a 6.9% portfolio loss but maintained dividend payments and hinted at a special dividend linked to reinvestment participation. This history of navigating volatility while engaging investors is part of the company’s ongoing effort to unlock shareholder value and promote itself among advisers and associations across Australia.
Portfolio Composition and Investment Philosophy
As of 31 March 2026, ECP’s portfolio was heavily concentrated, with the top 20 holdings accounting for 92.8% of assets. Sector allocation remains focused on consumer discretionary and financials, each representing 34.3%, followed by information technology at 12.5%. Key holdings include Block Inc (10.5%), HUB24 Ltd (6.5%), and REA Group (6.4%). The fund maintains a research-driven, bottom-up investment philosophy centred on identifying high-quality, growing Australian small to mid-cap companies with strong economic moats.
Active promotion by the investment manager through media appearances and a series of articles on software and SaaS companies highlights the team’s commitment to educating investors on competitive advantages, particularly in the evolving AI landscape. This engagement aims to build investor confidence amid the current market turbulence.
Bottom Line?
ECP’s sharp quarterly NTA decline underscores the volatility facing growth stocks, but operational strength and attractive valuations may reward patient investors.
Questions in the middle?
- Will ECP’s high-conviction growth strategy withstand prolonged market volatility?
- How will rising interest rates and geopolitical risks continue to shape small-cap growth stocks?
- Can recent additions like The Koala Company deliver meaningful portfolio diversification and returns?