The curated database of hedge funds that publish investor letters. Research by geography, strategy, and schools of thought.
| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
As of Oct 12, 2026
During the third quarter of 2026, the Madison Small Cap Fund declined 5.8% net of fees (with Class Y returning -5.93% net), outperforming the Russell 2000 and Russell 2500 benchmarks, which declined 7.2% and 6.4%, respectively. Year-to-date, the fund's Class Y shares have returned 6.17% net of fees, lagging its primary benchmark. Outperformance for the quarter was driven entirely by favorable stock selection, notably within Technology, Healthcare, and Consumer Discretionary, whereas sector allocation proved to be a detractor. The portfolio maintained a cash allocation of 5.40% across 49 total equity holdings, carrying an active share of 97.71% versus the Russell 2000. The macroeconomic environment remains characterized by persistent inflation spurred by higher energy prices, tight labor markets, and substantial AI capital expenditure, keeping benchmark bond yields elevated. Market breadth has stayed remarkably narrow, with small-cap leadership heavily skewed toward speculative, non-earning companies, AI supply chain beneficiaries, and biotech equities. While the manager eschews unprofitable businesses and speculative hype, they note the initial unwinding of AI exuberance, which catalyzed a sharp rotation back into beaten-down, high-quality enterprise software franchises and opened compelling opportunities across cyclical building products. Portfolio activity was marked by capital reallocation from rich valuations and headwinds into high-quality franchises. The fund initiated new positions in spinal surgery innovator Alphatec and civil engineering software leader Bentley Systems, while capitalizing on software rebounds in GitLab and Workiva. To fund these additions, the manager fully exited Baldwin Insurance Group following its private takeover offer, harvested gains in semiconductor test maker FormFactor on valuation grounds, and eliminated cyclical positions in WillScot Holdings and Olin Corporation due to prolonged end-market slumps.
Invest in durable, high-quality, cash-generative small-cap franchises with sustainable competitive advantages trading at attractive discounts to intrinsic value while avoiding unprofitable speculative companies.
The manager anticipates that valuation, business quality, and cash flow generation will ultimately reassert themselves following periods of speculative excess in small caps. While elevated bond yields and protectionist policies will keep pressure on interest-rate-sensitive sectors in the near term, the team plans to continue investing in high-quality franchises trading at discounts to intrinsic value and stands ready to aggressively deploy capital into beaten-down construction-exposed and software leaders when dislocations present attractive entry points.
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