Spotting Tech's Silver Lining: NYLI Epoch Capital Growth Fund Navigates Q1 Challenges

The first quarter of 2025 began with high hopes but quickly succumbed to the weight of economic uncertainty. The MSCI World Index fell 1.7% as equities sold off in the latter half of the quarter, driven by lingering tariff disputes and fading optimism following the U.S. presidential transition. Amid this turbulence, the NYLI Epoch Capital Growth Fund (MECDX) has positioned itself to capitalize on overlooked opportunities in technology—a sector now trading at multiyear lows but poised for recovery.

The Tech Sector: A Value Play in Disguise

Technology stocks have been among the hardest-hit sectors this year, pressured by rising interest rates, supply chain bottlenecks, and geopolitical tensions over trade policies. Yet, beneath the surface, the fundamentals remain compelling.

. Companies with strong free cash flow, high return on invested capital (ROIC), and secular growth drivers are increasingly appearing on bargain lists.

For NYLI Epoch Capital, this is familiar territory. The fund's investment philosophy emphasizes companies that can compound value over time, prioritizing those with management teams reinvesting capital wisely. As Jinda Noipho, the fund's manager, noted in its latest commentary, the team continues to focus on firms where net ROIC exceeds capital costs, a metric that often uncovers undervalued tech leaders.

Why Tech Could Be the Next Recovery Catalyst

The tech sector's current undervaluation is at odds with its role as a pillar of innovation. Consider:
- AI and cloud adoption: Spending on artificial intelligence and cloud infrastructure remains robust, with firms like Amazon, Microsoft, and NVIDIA reporting steady demand.
- 5G and IoT expansion: The rollout of 5G networks and the proliferation of internet-connected devices are creating new revenue streams for hardware and software providers.
- De-risking through diversification: Tech giants with global footprints and diversified revenue streams (e.g., Apple, Dell) are less vulnerable to regional trade conflicts.

The fund's global allocation strategy aligns with this thesis. By avoiding overexposure to any single region or sub-sector, NYLI Epoch Capital can navigate tariff-driven volatility while capturing growth in areas like semiconductors, cybersecurity, and enterprise software.

Data-Driven Insights: Is Tech Bottoming Out?

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While the NASDAQ fell sharply in January and February, it showed resilience in March as investors began pricing in stabilization. Similarly, semiconductor stocks—a bellwether for tech's health—have shown signs of stabilization after months of declines.

Risks and Considerations

The path to recovery is not without obstacles. Persistent trade tensions, a potential U.S. recession, and margin pressures in commoditized tech segments (e.g., memory chips) could prolong volatility. Investors should also note that NYLI Epoch's focus on free cash flow and ROIC may mean it underperforms in frothy markets but shines in corrections.

Investment Takeaways

• Long-term investors: The fund's emphasis on durable, cash-generative businesses makes it a compelling choice for those betting on tech's cyclical rebound.
• Tactical allocators: Pair the fund with a hedged exposure to trade-sensitive sectors (e.g., industrials) to mitigate downside risks.
• Avoid: Overweighting in pure-play hardware manufacturers without recurring software revenue streams.

Final Thoughts

The NYLI Epoch Capital Growth Fund isn't just riding the tech wave—it's actively steering through choppy waters to find the gems others overlook. In an era where uncertainty is the only certainty, its disciplined focus on valuation and capital efficiency offers a pragmatic path to outperformance. For investors willing to look past near-term noise, this could be the fund's moment to shine.

This article is for informational purposes only. Past performance does not guarantee future results. Always conduct your own research or consult a financial advisor before making investment decisions.