SECOND QUARTER 2026

Letter to Investors

July 29, 2026

My fellow investors,

The closing of the second quarter of 2026 coincides with Lux Fund’s three year anniversary. Since July of 2023, Lux Fund has returned 23.5% annually net of fees. We believe the performance over this period represents leadership among micro cap equity managers as well as premium returns compared to other asset classes.

Lux Fund’s returns have been consistent across different market environments: relying on stock selection to provide protection in down markets and while also achieving participation in up markets.

The last three years of independent operations provide evidence that our investment process continues to be highly effective within the micro cap universe. We note consistency, diversification, and quantitative qualitative blend as strengths that make us unique. The fund’s significant remaining capacity represents an opportunity for institutional investors to build significant presence to this asset class.

Taking a closer look at the second quarter 2026, Gurnee Group Lux Fund produced a positive 28.8% return vs the benchmark’s (Blackrock iShares MicroCap) returns of 25.6% and the S&P500’s 15.2%

We believe the current market environment represents a crossroads and is a critical time to consider micro cap exposure within your total portfolio. In this quarter's Portfolio Outlook, we trace micro cap's history through prior cycles to show why today marks a rare, historically compelling entry point for the asset class. We believe our investment process, which relies on quantitative portfolio construction tools with investments in underlying businesses operating in fundamentally unique industries, gives a balanced and risk controlled means to access the sector.

We are grateful for the confidence you have placed in Gurnee Group. As always, thank you for your trust.

Sincerely,

J.P. Gurnee, CFA
Portfolio Manager
jp@gurneegroup.com | 989.513.0082

  • Portfolio Outlook

    We believe today’s market environment presents a compelling case for allocating to micro cap equities, grounded in historical precedent, structural market dynamics, and persistent inefficiencies unique to the asset class.

    Read more

  • Position Changes

    Our investment process emphasizes investing in profitable businesses at valuations that permit future appreciation, which we believe will result in long lasting success for our investors.

    Read more

  • Performance Summary

    View quarterly results including returns, top contributors and detractors, and portfolio characteristics.

    Read more

Portfolio Outlook

We believe today’s market environment presents a compelling case for allocating to micro cap equities, grounded in historical precedent, structural market dynamics, and persistent inefficiencies unique to the asset class. The following analysis outlines why we believe today's cycle sets the stage for a meaningful rotation into micro caps—and why Lux Fund is uniquely positioned to capitalize on it.

Micro cap equities have historically delivered a durable performance edge over their large cap counterparts, generating an average annual relative outperformance of 285 basis points and outperforming in two thirds of rolling ten-year periods. This edge has proven cyclical rather than incidental, reasserting itself across distinct market regimes—including the Postwar Blue Chip Era, the Nifty Fifty Era, and the Dot Com Era—each of which was followed by a pronounced period of small cap outperformance.

The Dot Com Bubble offers a compelling historical parallel to today's environment: small caps appreciated even as large caps declined in the early 2000s. While initial optimism and capital flowed to large internet stocks, the productivity gains from the internet ultimately accrued broadly across the economy, improving fundamentals and valuations disproportionately for smaller companies. We believe the current AI-driven cycle is likely to resolve in a similar fashion, and see an eventual rotation as an opportunity to both reduce potential large cap-related losses while capturing small cap gains—rotating, in effect, when the odds are in our favor historically speaking.

The Nifty Fifty era provides a second historical case study reinforcing this cyclical pattern of large cap concentration followed by small cap resurgence, underscoring that today's dynamics are not unprecedented but rather consistent with a recurring market structure.

History suggests the current valuation gap between micro and large cap equities is unusually stretched—and especially promising in our view. In the late 1990s, micro caps traded at a 15–20% discount to large caps as capital concentrated in large internet companies; that discount narrowed over the following six years as investors rotated back into neglected small caps, driving significant outperformance. Today's setup appears even more extreme, with a 25–30% discount between small and large cap equities, suggesting micro caps may benefit to an even greater degree as the current cycle unwinds.

The scale of today's mega cap concentration dwarfs that of the dot-com era, and with it, the potential magnitude of any rotation back toward small caps. The top 10 S&P 500 companies now represent a combined market cap of $30 trillion, around ten times their dot-com-era peak of $3 trillion, while the entire small cap universe (as measured by the S&P 600) has grown far more modestly, from roughly $325 billion to $2 trillion. As a result, 10% of the top 10 companies' market cap today equates to 150% of the entire small cap index—compared to 90% at the dot-com peak—implying that even a modest reallocation out of mega cap names could represent an outsized capital flow into small caps relative to the last cycle.

Micro cap equities remain structurally underappreciated in ways that create a persistent opportunity for active managers. Unlike large caps, the majority of micro cap shares are held by retail investors who are often less attuned to material business developments, while Wall Street research coverage continues to prioritize large cap names with greater investment banking revenue potential. Compounding this, institutional capacity dedicated to the micro cap space continues to shrink—reinforcing the structural inefficiency and the opportunity for skilled managers to identify and capitalize on mispricings.

Lux Fund offers a strategic and differentiated way to access this opportunity, led by a management team with institutional pedigree, with roots tracing back to the 2007 inception of the BMO Global Asset Management Disciplined Equity Micro Cap Fund, later the Columbia Threadneedle Integrated Equity Micro Cap Fund. Gurnee Group Lux Fund has demonstrated a consistent track record across varied market regimes, outperforming in 13 of 15 down months since July 2023. With $450 million of available capacity—among the most of any offering in the space—and a commitment to close the fund to preserve strategy integrity, Lux Fund strives to maintain among the lowest average market caps of any manager in the category, offering investors genuine style purity and a disciplined path to capturing the structural opportunity in micro cap equities.

Position Changes

  • New positions are initiated in the fund when they are attractive per LuxβetaTM (quantitative review) and validated through LuxαlphaTM (qualitative analysis). The fund initiated new positions in the following companies during the quarter:

    BOWHEAD SPECIALTY HOLDINGS

    CASTELLUM

    GORILLA TECHNOLOGY GROUP

    HONEST COMPANY

    INSPIRE MEDICAL SYSTEMS

    JOURNEY MEDICAL CORPORATION

    MATRIX SERVICE COMPANY

    OPTIMIZERX CORPORATION

    SONO-TEK CORPORATION

    STABILIS SOLUTIONS

    TECOGEN

    TRISALUS LIFE SCIENCES

  • Positions are sold from the fund when their LuxβetaTM profile deteriorates, the company develops significant off model, appreciates out of the micro cap asset class, or the company is acquired. The fund sold positions in the following companies during the quarter:

    AVIAT NETWORKS

    BIOTE CORP

    COMMERCE.COM

    JOINT CORP

    GEN RESTAURANT GROUP

    MASTECH DIGITAL

    NCS MULTISTAGE HOLDINGS (received acquisition offer)

    ONESPAN

    PERDOCEO CORP

    SOLENO THERAPEUTICS (received acquisition offer)

    TURNING POINT BRANDS

    WEAVE COMMUNICATIONS

  • Featured New Positions

    BOWHEAD SPECIALTY HOLDINGS provides casualty, professional liability, and healthcare liability insurance through a variety of underwriting models. The company’s complementary methods have enabled Bowhead to scale substantially over the last five years without sacrificing underwriting quality. Bowhead’s growth in recent years has been in the face of relatively soft markets across its specialties. We believe the company is well positioned to benefit from harder markets in the next insurance pricing cycle. We appreciate Bowhead’s leadership by industry veteran Stephen Sills, who has delivered multiple successful insurance company exits over the course of his career.

  • Featured New Positions

    JOURNEY MEDICAL CORPORATION provides a suite of dermatological therapies. We believe the company’s recent launch of Emrosi for treatment of rosacea will propel the company for years to come. Emrosi is positioned as the lowest-dose oral minocycline available, delivering significantly superior clinical outcomes in the treatment of rosacea compared to incumbent therapies, while maintaining a comparable safety profile. Journey Medical has increased payer access following Emrosi’s launch, with commercial coverage expanding from roughly 100 million to over 150 million lives earlier this year, putting access at approximately 85% of U.S. commercial lives. With an estimated 17 million rosacea patients in the United States, Emrosi's clinical superiority and improving formulary access give Journey Medical a credible path to capture a disproportionate share of this large and underpenetrated dermatology category.

  • Featured New Positions

    STABILIS SOLUTIONS provides liquified natural gas via its corporately owned plants and via third party sourcing to the marine, aerospace and data center industries. Liquified natural gas has emerged a solution to the rapid proliferation of data centers in remote locations. Grid interconnection delays have hampered the ability for data centers to come online. Liquified natural gas solves the problem, as a fuel of choice for bridging power and behind-the-meter power at data centers while the grid is built out. The company's recent multi year contract to supply liquified natural gas for power generation at a US data center will be transformative to the company’s fundamentals and importantly validates Stabilis’ foothold in a this new high-growth vertical, distinct from its legacy marine and industrial businesses. We believe this new market opportunity is underappreciated in Stabilis’ current valuation.

Performance Summary

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ⁱUnaudited return net of fees.

Gurnee Group, LLC (the “General Partner”) is not registered as an investment adviser with the Securities and Exchange Commission. However, the General Partner is registered as an investment adviser with the Department of Commerce of the State of Ohio. The limited partnership interests (the “Interests”) in Gurnee Group Lux Fund, LP (the “Fund”), are offered under a separate private offering memorandum (the “Offering Memorandum”), have not been registered under the Securities Act of 1933, as amended (the “Securities Act"), nor any state's securities laws, and are sold for investment only pursuant to an exemption from registration with the SEC and in compliance with any applicable state or other securities laws. Interests are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws. Investors should be aware that they could be required to bear the financial risks of this investment for an indefinite period of time.

This presentation is being furnished to you on a CONFIDENTIAL basis to provide preliminary summary information regarding an investment in the Fund managed by the General Partner and may not be used for any other purpose. Any reproduction or distribution of this presentation or accompanying materials, if any, in whole or in part, or the divulgence of any of its contents is prohibited. The information set forth herein does not purport to be complete and no obligation to update or otherwise revise such information is being assumed. It is meant to be read in conjunction with the Offering Memorandum prepared in connection herewith, and does not constitute an offer to sell, or a solicitation of an offer to buy, by anyone in any jurisdiction in which such an offer or solicitation is not authorized or in which the making of such an offer or solicitation would be unlawful. The information contained herein does not purport to contain all of the information that may be required to evaluate an investment in the Fund. The information herein is qualified in its entirety by reference to the Offering Memorandum, including, without limitation, the risk factors therein.

A prospective investor should only commit to an investment in the Fund if such prospective investor understands the nature of the investment and can bear the economic risk of such investment. THE FUND IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. The Fund may lack diversification, thereby increasing the risk of loss. The Fund's performance may be volatile. There can be no guarantee that the Fund's investment objectives will be achieved, and the investment results may vary substantially from year to year or even from month to month. AS A RESULT, AN INVESTOR COULD LOSE ALL OR A SUBSTANTIAL AMOUNT OF ITS INVESTMENT. In addition, the Fund's fees and expenses may offset its profits. There are restrictions on withdrawing and transferring interests from the Fund. In making an investment decision, you must rely on your own examination of the Fund and the terms of the Offering Memorandum and such other information provided by the General Partner to you and your tax, legal, accounting or other advisors. The information herein is not intended to provide, and should not be relied upon for, accounting, legal, or tax advice or investment recommendations. You should consult your tax, legal, accounting or other advisors about the matters discussed herein. The Fund's ability to achieve its investment objectives may be affected by a variety of risks not discussed herein. Please refer to the Offering Memorandum for additional information regarding risks and conflicts of interest.

No representations or warranties of any kind are made or intended, and none should be inferred, with respect to the economic return or the tax consequences from an investment in the Fund. No assurance can be given that existing laws will not be changed or interpreted adversely. Prospective investors are not to construe this presentation as legal or tax advice. Each investor should consult his or its own counsel and accountant for advice concerning the various legal, tax, ERISA and economic matters concerning his or its investment.


No person other than the General Partner, and its Principal, has been authorized to make representations, or give any information, with respect to these membership interests, except the information contained herein, and any information or representation not expressly contained herein or otherwise supplied by the Principal in writing must not be relied upon as having been authorized by the General Partner or any of its members. Any further distribution or reproduction of these materials, in whole or in part, or the divulgence of any of its contents, is prohibited.

An investment in the Fund has not been approved by any U.S. federal or state securities commission or any other governmental or regulatory authority. Furthermore, the foregoing authorities have not passed upon the accuracy, or determined the adequacy, of this document, the Offering Memorandum or limited partnership agreement associated with the Fund. Any representation to the contrary is unlawful.

Certain information contained in this document constitutes “forward-looking statements” which can be identified by use of forward-looking terminology such as “may,” “will,” “target,” “should,” “expect,” “attempt,” “anticipate,” “project,” “estimate,” “intend,” “seek,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to the various risks and uncertainties, actual events or results in the actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements. The General Partner is the source for all graphs and charts, unless otherwise noted. 

This document may present past performance data regarding prior/other investments, funds, and/or trading accounts managed by the General Partner and/or the Principal. This is presented solely for explanatory purposes. The Fund may face risks not previously experienced or anticipated by the General Partner and/or Principal, and therefore, prospective investors should evaluate the Fund on its own merits.  Furthermore, there is no guarantee the General Partner and/or Principal will be able to replicate the mandate, strategy, portfolio construction and risk management parameters reflected in their prior performance data.  Market factors and unforeseen circumstances both internally and externally may result in a wide deviation from the returns reflected in the prior performance data, and there is no guarantee the General Partner and/or Principal will be able to avoid and/or remediate such internal and external factors. 

Furthermore no representation or warranty can be given that the estimates, opinions or assumptions made herein will prove to be accurate. Any such estimates, opinions or assumptions should be considered speculative and are qualified in their entirety by the information and risks disclosed in the Offering Memorandum. The assumptions and facts upon which any estimates or opinions herein are based are subject to variations that may arise as future events actually occur. There is no assurance that actual events will correspond with the assumptions. Potential investors are advised to consult with their tax and business advisors concerning the validity and reasonableness of the factual, accounting and tax assumptions. Neither the General Partner nor any other person or entity makes any representations or warranty as to the future profitability of the Fund.

PAST PERFORMANCE IS NOT INDICATIVE OR A GUARANTEE OF FUTURE RESULTS.     

This document may also present “sample holdings” or “case studies” of a type of asset(s) the Fund may invest in or are expected to be typical of its holdings. Such “sample holdings” are not currently holdings of the Fund and are presented solely for explanatory purposes. Prospective Investors should not assume that such “sample holdings” will actually be purchased by the Fund when determining whether to make an investment in the Fund.