The Calamos Timpani Small Cap Growth Fund demonstrated a robust performance in the fourth quarter of 2025, significantly outpacing its benchmark. This success was primarily driven by strategic investments in companies exhibiting strong growth potential and resilient market positions. The fund's ability to identify and capitalize on emerging trends, such as the increasing demand for AI-related optical products, played a crucial role in its outperformance. However, challenges in certain sectors, particularly those affected by enrollment fluctuations and revised growth outlooks, presented headwinds that required careful navigation. Despite these varied market dynamics, the fund's diversified approach and focus on high-potential small-cap growth companies enabled it to deliver superior returns for its investors.
A detailed analysis of the fund's performance for the quarter ending December 31, 2025, reveals a net return of 3.77% for its Class I shares, measured at Net Asset Value (NAV). This comfortably exceeded the Russell 2000 Growth Index, which posted a return of 1.22% over the same period. This noteworthy alpha generation underscores the fund management's expertise in selecting undervalued or rapidly expanding small-cap enterprises. The positive returns were achieved amidst a dynamic market environment, characterized by both significant opportunities and unexpected downturns for individual companies. The fund’s investment philosophy, centered on a blend of quantitative and qualitative analysis, proved effective in mitigating risks and maximizing gains in a volatile small-cap segment.
Market Leaders: Lumentum’s AI-Driven Surge and Owlet's Operational Excellence
Lumentum emerged as a significant contributor to the fund's success in Q4 2025, showcasing remarkable stock appreciation. Its stellar performance was underpinned by an impressive earnings report that surpassed analyst expectations, coupled with a burgeoning demand for optical solutions critical to artificial intelligence infrastructure. The company also achieved record shipments of Electro-absorption Modulated Lasers (EMLs) and provided an optimistic revenue forecast, projecting over $600 million quarterly by mid-2026. This positive outlook, driven by innovation in its core technologies and strategic alignment with key market trends, solidified its position as a market leader and a top-performing asset within the fund's portfolio.
Another notable outperformer was Owlet, which saw its stock price surge by 91% during the quarter. This exceptional growth was attributed to a strong financial report, with the company beating both earnings per share (EPS) and revenue consensus estimates. Owlet reported an EPS of $0.03 against an expected -$0.23, and revenues reached $32 million, exceeding the $26 million forecast. These results were further bolstered by record operational achievements, robust international expansion, and significant growth in its subscription services. Owlet's ability to consistently exceed financial targets and expand its market reach through innovative products and services contributed significantly to the fund's overall positive returns.
Challenges and Underperformance: Lenz Therapeutics and Stride's Setbacks
Despite the fund's overall positive performance, certain investments faced notable challenges. Lenz Therapeutics experienced a substantial stock decline of 66% during the quarter. This downturn was largely due to increasing investor apprehension regarding potential side effects associated with its presbyopia treatment. Despite the initial promise of its therapeutic pipeline, concerns over product safety and efficacy can quickly erode market confidence, leading to significant valuation adjustments. The case of Lenz Therapeutics highlights the inherent risks in biotech investments, where clinical outcomes and regulatory approvals can dramatically impact stock performance.
Similarly, Stride, an education technology company, saw its common stock fall by 56%. This decline occurred despite the company reporting earnings that met or exceeded EPS and revenue expectations. The primary factors contributing to its underperformance were disruptions in student enrollments and a more cautious growth guidance for 2026. These operational and forward-looking concerns overshadowed the immediate financial achievements, as investors reacted negatively to the perceived uncertainties in its future business trajectory. The experiences of both Lenz Therapeutics and Stride underscore the importance of not only meeting current financial metrics but also effectively managing future expectations and addressing market concerns to sustain investor confidence.