Here’s Why TCW Concentrated Large Cap Growth Fund Chose to Exit Tyler Technologies (TYL)

TCW Funds, an investment management firm, published its first-quarter 2026 investor letter for the ‘TCW Concentrated Large Cap Growth Fund.’ A copy of the letter is available to download here. The first quarter was marked by volatility in equity markets, driven by geopolitical tensions, concerns about the private credit sector, a government shutdown, and ongoing AI concerns. During this period, The Fund (I Share) reported a net loss of 11.75%, lagging behind the Russell 1000 Growth Index return of -9.78%. The Fund considers the market’s broadening as a healthy sign and remains confident that the market will eventually recognize the portfolio’s intrinsic value. Please review the Fund’s top five holdings to gain insights into their key selections for 2026.

In its first-quarter 2026 investor letter, TCW Concentrated Large Cap Growth Fund highlighted stocks like Tyler Technologies, Inc. (NYSE:TYL). Tyler Technologies, Inc. (NYSE:TYL) is a leading integrated software and technology solutions provider for the public sector in the United States. On May 19, 2026, Tyler Technologies, Inc. (NYSE:TYL) closed at $322.74 per share. One-month return of Tyler Technologies, Inc. (NYSE:TYL) was -6.82%, and its shares lost 43.06% over the past 52 weeks. Tyler Technologies, Inc. (NYSE:TYL) has a market capitalization of $13.28 billion.

TCW Concentrated Large Cap Growth Fund stated the following regarding Tyler Technologies, Inc. (NYSE:TYL) in its Q1 2026 investor letter:

“Tyler Technologies, Inc. (NYSE:TYL) (TYL; Information Technology) – Tyler Technologies provides mission-critical, vertical software solutions for the public sector, primarily state and local governments. When we first purchased shares, we were attracted to the fact that governments have lagged commercial industry in tech modernization and we believed Tyler would be a key beneficiary of the accelerating migrations of local and state governments to more modern, SaaS (Software-as-a-Service) and Cloud-based solutions. Given the company’s focus on vertical market software for state and local governments and schools, we believed the company enjoyed a sticky customer base with low churn and more limited economic sensitivity. Growth has been below our initial expectations, the government spending backdrop has been pressured, and AI disintermediation concerns have created added difficulties for all software companies. As part of effort to reduce our application software exposure, we concluded our conviction in Tyler’s business model advantage and market potential were below other names in the portfolio. We therefore elected to sell our shares.”

Tyler Technologies, Inc. (NYSE:TYL) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 40 hedge fund portfolios held Tyler Technologies, Inc. (NYSE:TYL) at the end of the fourth quarter, compared to 44 in the previous quarter. While we acknowledge the potential of Tyler Technologies, Inc. (NYSE:TYL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Tyler Technologies, Inc. (NYSE:TYL) and shared Conestoga Capital Advisors’ views on the company. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.