| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 11.92% | 12.18% | 1.48% |
The Baird Chautauqua Global Growth Fund returned 12.18% in Q2 2026, underperforming the MSCI ACWI Index which returned 14.93%, as markets rewarded an extremely narrow AI capex trade with concentration not seen since 1999. The portfolio benefited from overweights in TSMC, ASML, Keyence, and Fanuc, but underweight memory stocks and lagging software, healthcare, and Greater China holdings detracted. Portfolio declines were driven by multiple compression rather than earnings deterioration, with revenues, profitability, and cash flow continuing to build even as multiples fell. The manager trimmed appreciated semiconductor and automation positions and added to beaten-down compounders including Adyen, Constellation Software, 3i, and AIA. Key risks include unresolved trade policy with tariffs expiring late July, synchronized hawkish central bank pivot, and questions around AI capex sustainability. The manager views the divergence between rising intrinsic value and falling stock prices as a coiled spring, with the multiple compression creating an attractive entry point for patient capital over the five-year investment horizon.
Concentrated quality portfolio of healthy, growing businesses whose earnings power has advanced while prices have reset through multiple compression rather than earnings deterioration, creating coiled spring as gap between rising intrinsic value and falling stock prices closes over five-year investment horizon.
Manager expects multiple compression of past two quarters has created unusually attractive entry point for patient capital over five-year investment horizon. Underlying earnings power of portfolio remains fully intact and in many cases has advanced while prices have fallen. Divergence between rising intrinsic value and falling stock prices viewed as coiled spring for future returns. Positioning does not rest on single binary outcome, owning indispensable semiconductor picks and shovels alongside de-rated growth franchises that benefit as market leadership broadens. International markets trade at considerably lower valuations than elevated U.S. markets, which paired with intact earnings tilts odds in favor over time.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 14 2026 | 2026 Q2 | 1299 HK, 6098.T, 6861.T, 6954.T, 7269.T, ADYEN.AS, ASML, BABA, BEPC, CSU.TO, D05.SI, GALD SW, GMAB, III.L, LULU, MU, REGN, RYA.L, SAF.PA, TJX, TSM | AI, China, energy, rates, semiconductors, software, tariffs, valuation | - | Q2 2026 saw extreme market concentration in AI infrastructure stocks drive 12.18% fund return versus 14.93% benchmark. Portfolio suffered multiple compression despite intact earnings growth across software, healthcare, and China holdings. Manager trimmed winners TSMC and ASML, added to de-rated compounders Adyen and Constellation. Views valuation reset as coiled spring for future returns over five-year horizon given rising intrinsic value. |
| Apr 9 2026 | 2026 Q1 | ADYEN.AS, ASML, MU, SE, TEAM, TSM | AI, energy, growth, inflation, international, semiconductors, software, Trade Policy | - | Global Growth Fund fell 9.54% as AI disruption fears triggered historic software repricing while energy surged on Iran conflict. Manager decisively exited positions with opaque AI economics while doubling down on mission-critical software and AI infrastructure. Valuation reset creates compelling entry point for five-year horizon despite macro uncertainty from Hormuz closure and stagflationary pressures. |
| Jan 6 2026 | 2025 Q4 | 2269.HK, 6098.T, 6954.T, ASML, BABA, BEKE, BEPC, CSU.TO, D05.SI, GALP.SW, GOOGL, INCY, LULU, MA, MU, PRX.AS, REGN, RYA.L, SCHW, SE, TEAM, TEMN.SW, TJX | AI, China, growth, international, rates, semiconductors, Trade Policy, value | - | Global Growth Fund outperformed in Q4 despite challenging environment for quality growth approach. International equities delivered strongest outperformance versus U.S. since GFC on dollar weakness and attractive valuations. AI infrastructure demand and trade tension de-escalation provided support. Fund maintains conviction-weighted quality growth strategy focused on secular trends, strong competitive advantages, and robust financials positioned to withstand external shocks. |
| Oct 13 2025 | 2025 Q3 | 2269.HK, 7269.T, ADYEN.AS, BABA, CP.TO, CSU.TO, FFH.TO, GMAB, GOOGL, LULU, MA, MU, NVO, OLED, PRX.AS, SAF.PA, TCS.NS, TEAM | AI, China, Cloud, growth, international, technology, Trade Policy, Valuations | BABA | Chautauqua's growth funds underperformed in Q3 despite strong markets as trade tensions eased and Fed cut rates. Chinese tech holdings and AI beneficiaries drove gains while software names detracted. Managers maintain overweight China positions believing valuations compensate for risks. They favor international equities over elevated U.S. markets while focusing on secular growth themes like AI and cloud computing. |
| Aug 7 2025 | 2025 Q2 | 0388.HK, ADYEN.AS, BEKE, COLO-B.CO, CP.TO, CSU.TO, FFH.TO, HDB, ILMN, LULU, MU, NVDA, NVO, OLED, REGN, RYA.L, SAF.PA, SE, TCS.NS, TEAM, WCN | AI, China, growth, semiconductors, tariffs, technology, Trade Policy, Travel |
SAF FP FFH CN 2423 HK NVDA |
Baird Chautauqua targets quality growth companies with strong competitive positions and financial resilience. Despite Q2 underperformance from Asia holdings amid trade volatility, the strategy focuses on secular themes like AI, e-commerce, and travel. Overweight Greater China positions reflect attractive valuations. International markets offer better value than elevated U.S. markets for long-term returns. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI capex trade dominated Q2 returns with extreme concentration in AI infrastructure stocks. Manager owns semiconductor picks and shovels (TSMC, ASML) and automation leaders (Keyence, Fanuc) to participate in buildout economics without predicting downstream winners. Skepticism noted regarding hyperscaler capex sustainability and whether AI monetization will keep pace with hundreds of billions in data center deployment. |
Semiconductors Data Centers Automation Capex Infrastructure |
Semiconductor CycleMemory stocks posted triple-digit gains driven by retail participation including leveraged ETFs. Manager underweight memory in International portfolios and holds Micron in Global. TSMC and ASML positions trimmed after strong appreciation. Micron reduced due to cyclicality concerns despite strong AI-driven demand and pricing. |
Memory DRAM NAND Foundries Equipment | |
ValuationPortfolio declines driven by multiple compression rather than earnings deterioration. Revenues, profitability, and cash flow continued building while multiples fell. Manager views divergence between rising intrinsic value and falling stock prices as coiled spring for future returns. International markets trade at considerably lower valuations than elevated U.S. markets. |
Multiples Compression Intrinsic Value Discount | |
Greater ChinaHoldings represent 18% of International and 12% of Global portfolios as deliberate overweights. Concentrated in secular growth areas aligned with government priorities. Quarter weakness owed more to capital chasing AI trade elsewhere than fundamental deterioration. Alibaba and Tencent may not lead in open-source AI models but value can accrue to cloud, distribution, and commerce layers they dominate. |
China E-commerce Cloud Domestic Demand | |
SoftwareMarket de-rated software and digital platforms as structural casualties of AI disruption narrative. Manager views terminal value assessment as disconnected from operational reality. Competitive moats of Constellation Software, Adyen, and Sea built on deep customer integration, regulatory complexity, and network scale. Businesses too critical to rip and replace. Added to beaten down compounders. |
SaaS Payments Platforms Moats | |
Trade PolicySupreme Court struck down prior tariff regime, cutting average effective U.S. tariff rate from 16% to 9%. Administration implemented temporary 10% across-the-board tariff expiring late July unless Congress acts. More durable sector-specific tariffs on steel, aluminum, copper becoming replacement. Tariff question expected to stay unresolved and episodic. Late July cliff is near-term catalyst. |
Tariffs Supreme Court Congress Steel | |
RatesFirst synchronized hawkish impulse across developed world in several years. Fed held rates but flipped dot plot to signal coming increase under new Chairman Kevin Warsh. ECB delivered first rate increase since 2023, reversing eight consecutive cuts in stagflationary posture. BOJ raised policy rate to three-decade high. Consumer inflation likely peaked in May as oil retraced wartime gains. |
Fed ECB BOJ Hawkish Inflation | |
EnergyDe-escalation of Iran war removed macro and energy overhangs. Energy sector gave back gains to trail market after prior quarter outperformance. Energy-fueled inflation spike in spring set off hawkish central bank impulse. Oil retraced wartime gains, with consumer inflation likely peaking in May. |
Oil Iran Geopolitical Inflation | |
| 2026 Q1 |
AIThe quarter was defined by AI disruption fears causing severe repricing of software and digital businesses as the market reassessed terminal values on fears of AI disruption. The emergence of agentic applications like Cowork and OpenClaw demonstrated capabilities extending beyond basic coding into complex automated workflows, treating this technological leap as an existential threat to capital-light platforms. |
Disruption Software Automation Platforms Agentic |
SemiconductorsTaiwan Semiconductor and ASML were among the largest contributors as AI infrastructure beneficiaries. TSMC reported strong results with capacity in leading-edge nodes remaining tight, while ASML saw record bookings due to strong AI demand for DRAM and advanced logic. The fund increased its tilt toward AI infrastructure beneficiaries. |
TSMC ASML Infrastructure Memory Foundries | |
EnergyEnergy posted the strongest quarterly return in years as the Strait of Hormuz closure removed roughly 20% of global oil supply from transit. The war in Iran and closure of the strait created overlapping macro shocks that drove capital into physical assets including energy, materials, and defense. |
Oil Geopolitical Supply Iran Hormuz | |
Trade PolicyA Supreme Court ruling stripped the President of emergency executive powers used to impose tariffs, invalidating duties on China, Canada, Mexico and others. The administration imposed a baseline 10% tariff using alternative authority, but this expires in July creating a policy cliff. The effective U.S. tariff rate remains at its highest level since the 1940s. |
Tariffs Supreme Court China Policy Cliff | |
InflationCore PCE inflation reaccelerated with the Fed revising projections sharply higher. The combination of tariff pass-through and oil shock drove U.S. gasoline above $4 per gallon, creating stagflationary pressures. European flash inflation accelerated to 2.5% as the energy crisis complicated disinflation trends. |
Stagflation PCE Gasoline Energy Fed | |
| 2025 Q4 |
AIAI-related infrastructure demand drove materials rallies and memory semiconductors delivered outsized returns as high-bandwidth memory demand for AI datacenters rewarded players in that consolidated industry. However, application software and IT services faced persistent pressure on concerns that generative AI could disrupt traditional business models. |
Infrastructure Memory Software Disruption |
Trade PolicySignificant de-escalation in U.S.-China trade tensions occurred with Presidents Trump and Xi reaching an agreement that reduced fentanyl-related tariffs and extended suspension of reciprocal tariffs. However, the average effective U.S. tariff rate remains significantly elevated at 17% compared to 2-3% at end of 2024. |
Tariffs China Agreement Tensions | |
ChinaEconomic data remained mixed despite trade war stabilization. Exports have been resilient but domestic demand remains stubbornly weak. The property sector downturn continues to weigh on investment and consumer confidence, though policymakers identified raising household incomes as a priority for boosting consumption. |
Exports Property Consumption Stimulus | |
SemiconductorsMemory semiconductors delivered outsized returns as high-bandwidth memory demand for AI datacenters rewarded players in that consolidated industry. The U.S. announced a partial rollback of semiconductor export controls, allowing shipments of previously banned yet still lagging-edge datacenter chips. |
Memory Export Controls Datacenter | |
RatesCentral bank policy paths diverged with the Fed continuing easing, the ECB holding steady, and the BOJ raising rates to their highest level in nearly three decades. The Fed faces a delicate balancing act between a weakening labor market and inflation that remains above target. |
Fed ECB BOJ Divergence | |
InflationInflation has been stubbornly persistent with core inflation easing only modestly and remaining well above the Fed's 2% target. Tariff pass-through remains an upside risk to inflation in 2026 as businesses conclude that tariffs will endure and their buffers are depleting. |
Persistent Tariffs Pass-through | |
| 2025 Q3 |
Trade PolicyThe quarter saw significant resolution of trade disputes with the U.S. formalizing agreements with EU, Japan, and South Korea establishing higher baseline tariffs but removing punitive reciprocal rates. While these agreements provided market relief, tariff impacts are beginning to filter into economic data with businesses citing higher input costs. |
Tariffs Trade agreements Global trade Inflation Supply chains |
AIArtificial intelligence continues to drive growth across portfolio holdings, particularly in Chinese technology companies where AI-related product revenue accounts for over 20% of external customer revenue and is expected to accelerate further. AI optimism also contributed to strong performance in emerging markets technology stocks. |
Artificial intelligence Technology Cloud computing Data centers Innovation | |
ChinaChinese holdings represent significant overweight positions in both funds with roughly 19% in International Fund and 13% in Global Fund. The managers believe Chinese holdings are attractively valued given long-term growth outlooks and are positioned in secular growth areas like private consumption and healthcare that align with government priorities. |
Chinese equities Emerging markets Valuation Domestic consumption Healthcare | |
CloudCloud computing remains a compelling long-term growth driver with strong performance from cloud businesses in the portfolio. Cloud revenue growth of 26% was highlighted as a key driver for portfolio companies, representing one of the secular trends less affected by near-term global events. |
Cloud infrastructure Software-as-a-service Digital transformation Technology Growth | |
| 2025 Q2 |
Trade PolicyPresident Trump imposed baseline 10% tariffs and reciprocal tariffs up to 50% on trading partners, creating market volatility. The U.S. and China de-escalated tensions with tariff reductions, but uncertainty remains about future trade deals and their economic impact. |
Tariffs Trade War China Negotiations Economic Impact |
AIArtificial intelligence represents a key secular growth theme within the portfolio's top holdings. AI datacenter build-out continues despite supply constraints, with companies like NVIDIA demonstrating strong demand commentary outside of China. |
Datacenter NVIDIA Computing Growth Technology | |
E-commerceE-commerce remains a significant secular growth opportunity, particularly in emerging markets and Asia. The portfolio includes holdings exposed to digital transformation and online commerce platforms that benefit from long-term consumer behavior shifts. |
Digital Online Platforms Consumer Asia | |
TravelTravel demand showed robust recovery with Ryanair reporting stronger-than-expected summer travel outlook and peak fares trending 5-6% year-over-year. The industry remains capacity-constrained through 2030, creating favorable pricing dynamics. |
Airlines Tourism Capacity Pricing Recovery | |
SemiconductorsSemiconductor companies performed well with the Philadelphia Semiconductor Index up 29% in the quarter. High-bandwidth memory DRAM for AI computing drove strong performance, though supply constraints and potential overcapacity concerns persist. |
Memory DRAM AI Computing Supply Demand |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 13, 2025 | Fund Letters | Jesse Flores | BABA | Alibaba Group Holding Ltd. | Consumer Discretionary | Internet & Direct Marketing Retail | Bull | - | AI, China, cloud, e-commerce, growth, Value | Login |
| Aug 7, 2025 | Fund Letters | Jesse Flores | SAF FP | Safran S.A. | Industrials | Aerospace & Defense | Bull | Euronext Stock Exchange | aftermarket, backlog, Engines, Pricing, Utilization | Login |
| Aug 7, 2025 | Fund Letters | Jesse Flores | FFH CN | Fairfax Financial Holdings Limited | Financials | Property & Casualty Insurance | Bull | Toronto Stock Exchange | Bookvalue, Catastrophes, Reinsurance, Repurchases, underwriting | Login |
| Aug 7, 2025 | Fund Letters | Jesse Flores | 2423 HK | KE Holdings Inc. | Real Estate | Real Estate Services | Bull | New York Stock Exchange | China, COST, guidance, Housing, Property | Login |
| Aug 7, 2025 | Fund Letters | Jesse Flores | NVDA | NVIDIA Corporation | Information Technology | Semiconductors & Semiconductor Equipment | Bull | NASDAQ | AI, CapEx, datacenters, Export controls, GPUs | Login |
| TICKER | COMMENTARY |
|---|---|
| TSM | We benefited through overweights in what we regard as the most moated semiconductor companies in the world, TSMC and ASML. We reduced positions in TSMC. |
| ASML | We benefited through overweights in what we regard as the most moated semiconductor companies in the world, TSMC and ASML. ASML reported solid 1Q26 results and raised its guidance for 2026. Management noted that orders remained strong and that demand continues to strengthen, driven by AI infrastructure investment, robust chip demand, and customers accelerating capacity-expansion plans for 2026 and beyond. We reduced positions in ASML. |
| 6861.T | We benefited through our differentiated exposure through automation leaders Keyence and Fanuc. Keyence reported March quarter results that beat consensus estimates, with revenue growing 18% y/y, its strongest growth in four years. Overseas markets were particularly strong, and strong demand from the semis and electronics end markets were specifically called out. Operating margin expanded to nearly 54%. Management also revised the company charter to facilitate share buybacks for the first time, signaling a more shareholder-friendly capital allocation stance. We reduced positions in Keyence. |
| 6954.T | We benefited through our differentiated exposure through automation leaders Keyence and Fanuc. We reduced positions in Fanuc. |
| MU | We hold a position in Micron. Micron reported very strong FY3Q26 results and issued above-consensus guidance, as AI-driven demand and supply tightness continued to drive pricing, which was again the primary driver of growth for both DRAM and NAND. Micron announced 16 strategic customer agreements covering 20% of its DRAM volume and 1/3 of its NAND volume. We reduced our weight because the business remains cyclical and very high pricing does not last as new competitors emerge and industry participants increase capacity. |
| ADYEN.AS | We took the opportunities afforded by the strong market to trim holdings that appreciated the most and to redirect the proceeds into a small number of higher conviction positions that lagged. For example, we added to beaten down compounders such as Adyen. The competitive moats of Constellation Software, Adyen, and Sea are built on deep customer integration, regulatory complexity, and network scale. We believe these businesses are too critical to clients' daily operations and revenue generation to rip and replace. |
| CSU.TO | We added to beaten down compounders such as Constellation Software. The competitive moats of Constellation Software, Adyen, and Sea are built on deep customer integration, regulatory complexity, and network scale. We believe these businesses are too critical to clients' daily operations and revenue generation to rip and replace. |
| III.L | We continued to build our recently initiated positions in 3i and AIA. |
| 1299.HK | We continued to build our recently initiated positions in 3i and AIA. AIA is the leading pan-Asia life insurer and demonstrates business models driven by domestic demand. |
| BABA | Alibaba reported an in-line quarter, and the stock reacted positively after the report. However, from mid-May through quarter-end, the stock declined as investors became more cautious on its AI model performance, AI capex spending, and lackluster consumer spending in China. Alibaba and Tencent may not lead in open-source AI models, but value can accrue to the cloud, distribution, and commerce layers they already dominate. |
| LULU | Lululemon reported an in-line 1Q26 but lowered its 2Q26 and FY26 guidance, reflecting slowing North American demand despite continued international growth. The stock declined as investors reset near-term expectations amid uncertainty around the brand reset. We continue to own it given the resilient core franchise, material differentiation, strong cash generation, aggressive buybacks, and a refreshed board and CEO—factors that, combined with a depressed valuation, keep the risk-reward attractive. |
| BEPC | Brookfield Renewable (BEPC) reported 15% y/y FFO/share growth in 1Q26, well above consensus and above its 10% growth target. New project delivery and higher capital recycling underpin this acceleration, with BEPC doubling the pace of projects commissioned from its 85 GW pipeline. Despite strong fundamentals, shares lagged in the quarter due to temporary technical trading factors tied to Brookfield's proposed consolidation of BEP and BEPC share classes. |
| 6098.T | Recruit reported March quarter results that beat consensus expectations, with its HR Technology segment substantially exceeding the outlook management previously set. More specifically within HR Technology, U.S. revenue grew 26% y/y, with the price/mix effect from AI-driven Premium Sponsored Jobs more than offsetting soft volumes. Management guided monetization to continue higher and HR Technology margins to expand toward 41%, with growth accelerating past 20% if volumes recover. |
| REGN | Regeneron reported a quarter with good financial results, supported by strong Dupixent performance, but slower-than-expected conversion from Eylea to Eylea HD was a concern for some investors. The failure of its phase III LAG3 melanoma trial was a blow to investor confidence. Regeneron's current cash balance and free cash flow generation provide a valuation floor as we await progress across the rest of its pipeline. |
| TJX | For its fiscal 1Q ending in April, TJX delivered another high-quality beat on sales, margins, and EPS. Consolidated same-store sales rose 6% y/y, well above guidance, and operating leverage drove higher-than-expected margins and profit. On its strong start to the July quarter, TJX raised its full-year outlook and lifted its annual buyback target 10% to ~$3 billion. We believe the market has yet to fully recognize TJX's solid fundamentals. |
| D05.SI | We reduced positions in DBS. |
| GMAB | Genmab remains valuable for its pipeline, but the market has been fixated on a future royalty step-down for Darzalex. |
| RYA.L | We reduced positions in Ryanair in the International Fund. Proceeds were used to increase positions in Ryanair in the Global Fund. |
| SAF.PA | We reduced positions in Safran. |
| 7269.T | We reduced positions in Suzuki. |
| GALD.SW | Galderma has continued to compound its dermatology franchise. |
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