| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 7.95% | -13.03% | -13.03% |
The first quarter was defined by overlapping macro shocks including the Iran war, Strait of Hormuz closure, and violent market rotation driven by AI disruption fears. The fund significantly underperformed benchmarks as capital-light software holdings experienced severe multiple compression while energy and physical assets surged. The managers responded decisively by executing portfolio triage, fully exiting positions where AI made long-term economics too opaque including Atlassian and Tata Consultancy, while concentrating capital in Taiwan Semiconductor and maintaining conviction in mission-critical software like Constellation and Temenos. Key risks include the unresolved Hormuz situation determining stagflationary outcomes, Fed policy constraints with potential rate hikes, and July tariff policy cliff. Catalysts include Germany's historic fiscal expansion and China's consumption pivot. The valuation reset provides a compelling entry point for the five-year investment horizon, with international markets trading at considerably lower valuations than elevated U.S. markets, offering better expected future returns.
The fund maintains conviction in quality companies with strong competitive advantages, healthy profit margins, robust balance sheets, and consistent cash flow generation, believing the recent valuation reset provides a compelling entry point for long-term value creation despite near-term AI disruption fears and macro uncertainties.
Looking ahead, we enter the second quarter navigating a more uncertain environment than at any point since the pandemic. The valuation reset across our remaining holdings provides, in our view, a compelling entry point for our five-year investment horizon. We believe our portfolio companies are poised to compound shareholder value over our five-year investment horizon.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 9 2026 | 2026 Q1 | ADYEN.AS, ASML, CP, SE, TEAM, TSM | AI, China, energy, growth, international, semiconductors, software, Trade Policy | - | Baird's international growth funds suffered significant underperformance as AI disruption fears triggered severe software repricing while energy surged on Iran conflict. Managers executed decisive portfolio triage, exiting AI-vulnerable positions while concentrating in Taiwan Semiconductor and mission-critical software. Despite macro uncertainties including Hormuz closure and tariff cliffs, the valuation reset creates compelling entry points for patient capital. |
| Jan 6 2026 | 2025 Q4 | 2269.HK, 6098.T, 6954.T, ASML, BABA, BEKE, BEPC, CSU.TO, D05.SI, FFH.TO, GALDA.SW, GOOGL, INCY, LULU, MA, MU, PRX.AS, REGN, RYA.L, SCHW, SE, TEAM, TEMN.SW, TJX | AI, Automation, China, growth, international, semiconductors, Trade Policy, value | - | International growth fund underperformed in Q4 as value/cyclical themes dominated and China holdings faced profit-taking, despite strong full-year international outperformance. Portfolio focuses on quality growth companies with strong competitive advantages positioned for secular trends including AI, automation, and e-commerce. Cautious optimism for 2026 with trade tensions eased but inflation and labor market risks persisting. |
| 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 | Biotechnology, China, Fed policy, growth, international, tariffs, technology, Valuations | - | Chautauqua's International Growth Fund underperformed in Q3 2025 despite strong global equity rally following tariff resolution. Chinese holdings led performance while software names detracted. Fund maintains overweight China exposure at attractive valuations, focusing on AI, biotech, and consumption themes. Cautious outlook given Fed policy complexity and tariff inflation risks, emphasizing quality businesses with defensive characteristics. |
| Aug 7 2025 | 2025 Q2 | 2423.HK, ADYEN.AS, COLOB.CO, CP.TO, CSU.TO, FFH.TO, HDB, LULU, MU, NVDA, NVO, OLED, REGN, RYA.L, SAF.PA, SE, TCS.NS, TEAM, WCN | China, growth, international, tariffs, technology, Travel, Valuations | - | Baird Chautauqua's growth funds underperformed in Q2 due to China exposure amid trade tensions, but managers remain optimistic about their quality-focused approach. Strong travel demand benefited Ryanair while tariff concerns weighed on Chinese holdings. The team maintains conviction in secular growth themes and believes international markets offer better value than elevated U.S. valuations. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 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 Agentic Terminal Value |
SemiconductorsTaiwan Semiconductor and ASML were among the largest contributors as AI demand drove strong performance. TSMC reported December quarter results exceeding expectations with capacity in leading-edge nodes remaining tight and supply-demand imbalances likely persisting through early 2027. Management guided 2026 capex significantly above prior year, signaling confidence in multi-year AI demand. |
TSMC ASML AI Demand Capacity Leading Edge | |
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 created overlapping macro shocks that drove capital surges into physical assets including energy, materials, and defense sectors. |
Oil Supply Hormuz Iran Physical Assets Geopolitical | |
Trade PolicyA landmark Supreme Court ruling stripped the President of emergency executive powers used to impose recent tariffs, invalidating duties on China, Canada, Mexico and others. The administration imposed a baseline 10% tariff on virtually all imports using alternative temporary authority, but this expires in late July creating another policy cliff. The effective U.S. tariff rate remains at its highest level since the 1940s. |
Supreme Court Tariffs Policy Cliff China Trade War | |
ChinaChina faces a pivotal year with policymakers lowering the growth target to a record low of 4.5% to 5% while elevating domestic consumption to their top priority. A record trade surplus in 2025 underscored unsustainable reliance on exports, signaling a structural pivot toward household income growth is overdue. The portfolios maintain significant overweight positions in Greater China holdings concentrated in secular growth areas. |
Growth Target Consumption Trade Surplus Domestic Structural Pivot | |
| 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 agreement in October. The U.S. reduced fentanyl-related tariffs and extended suspension of reciprocal tariffs for one year. However, the average effective U.S. tariff rate of 17% remains significantly elevated compared to 2-3% at end of 2024. |
China Tariffs Agreement Tensions | |
Greater ChinaGreater China holdings gave back a portion of their substantial gains amid profit-taking, though they remained additive to full-year performance. Economic data remained mixed despite trade war stabilization, with exports resilient but domestic demand stubbornly weak. The property sector downturn continues in its fifth year. |
Property Exports Domestic Stabilization | |
ValueValue extended its lead over growth across both developed and emerging markets, led by financials and materials. European banks posted their strongest year in nearly three decades as net interest margins expanded and return on equity recovered from post-crisis lows. Japanese banks rallied on BOJ rate normalization. |
Banks Margins Recovery Normalization | |
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 cut rates by 25 basis points in both October and December to bring the target range to 3.50-3.75%, though divisions emerged over supporting the softening labor market versus managing above-target inflation. |
Fed ECB BOJ Divergence | |
| 2025 Q3 |
Trade PolicyThe resolution of Liberation Day tariffs through framework agreements with major trading partners reduced uncertainty, though establishing higher baseline tariffs. The U.S. reached deals with EU, Japan, and South Korea at 15% baseline tariffs, while negotiations with India failed resulting in 50% tariffs. |
Tariffs Trade Agreements Global Trade Protectionism Supply Chains |
ChinaChina continues navigating property sector challenges with incremental policy support while maintaining around 5% growth target. The funds maintain overweight positions in Greater China holdings at attractive valuations, focusing on secular growth areas like private consumption and healthcare. |
Property Sector Domestic Consumption Policy Support Valuation Healthcare | |
AIArtificial intelligence emerged as a key driver across portfolio holdings, with Alibaba's AI-related cloud products accounting for over 20% of external customer revenue and expected to accelerate further. Chinese technology stocks surged amid AI optimism during the quarter. |
Cloud Computing Technology Revenue Growth Innovation Semiconductors | |
BiotechnologyBiotech holdings delivered strong performance with BeOne Medicines raising FY25 guidance driven by Brukinsa market share gains, while Genmab announced positive clinical trial results and FDA breakthrough therapy designation for pipeline candidates. |
Clinical Trials Drug Development Market Share Pipeline FDA Approval | |
| 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 growth theme in the portfolio, particularly in emerging markets and Asia. Companies like Sea Limited and KE Holdings represent exposure to digital commerce trends despite near-term tariff-related headwinds. |
Digital Asia Platforms Growth Consumer | |
TravelTravel demand remains robust with Ryanair reporting stronger-than-expected summer travel outlook and peak fares trending 5-6% year-over-year. The industry is capacity-constrained through 2030, creating favorable medium-term pricing dynamics. |
Airlines Capacity Pricing Recovery Demand |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| ASML | ASML reported solid 4Q25 results and record bookings due to strong AI demand for DRAM and advanced logic, and FY2026 guidance is above consensus. Tight DRAM supply and adoption of more advanced nodes in AI XPUs should continue to sustain strong orders into FY2027. |
| TSM | Taiwan Semiconductor (TSMC) reported December quarter results that exceeded expectations, with revenue growing 20% q/q and gross margin reaching above 62%, both well above guidance. Capacity in leading-edge nodes and advanced packaging remains tight, with supply-demand imbalances likely persisting through at least early 2027. Management guided 2026 capex of $52-56 billion, roughly 30% above the prior year and ahead of consensus expectations, signaling confidence in multi-year AI demand. TSMC also raised its datacenter AI revenue growth CAGR expectation to the mid-to-high 50% range through 2029. |
| CP | Canadian Pacific Kansas City (CPKC) reported in-line 4Q25 results despite an adverse freight environment. Assuming no improvement in the economy, CPKC expects to grow 2026 EPS by an industry-leading, low-double-digit rate driven by ongoing revenue synergy realization from the KCS merger, a record North American grain harvest, and continued operational efficiency gains. CPKC continues to highlight the long-term value we see in the company by planning to buy back an additional 5% of shares outstanding on top of the 4% repurchased in 2025. |
| ADYEN.AS | Adyen reported December quarter results slightly below consensus expectations, with net revenue growing 19% y/y. For FY2025, the business delivered 21% net revenue growth with EBITDA margin expanding 300 basis points to 53%. On the outlook, management refined 2026 net revenue growth guidance to 20-22% y/y from the prior low-to-mid twenties framework communicated just months earlier at its Capital Markets Day. The narrower near-term guide coincided with broader risk-off sentiment in digital growth names, amplifying the de-rating. Adyen remains a deeply embedded financial infrastructure that enterprises cannot easily replace, and the secular shift from legacy payment processors to modern unified commerce platforms continues to provide a long runway for growth. |
| TEAM | Atlassian was caught in the SaaS apocalypse along with other software stocks and significantly underperformed even though its earnings report was strong. We exited the position because long-term uncertainties have drastically increased due to the advancement of AI, which in turn led to a significantly lower terminal value. |
| SE | Sea Limited reported December quarter results with GMV growing 29% and revenue growing 36% for the full year, but the stock sold off sharply as management guided 2026 Shopee EBITDA to be no lower than 2025 in absolute dollar terms, implying margin compression on 25% GMV growth. The market had expected at least flat margins. Management framed the year as one of disciplined reinvestment in logistics, fulfillment, VIP subscriptions, and new lending markets, though the lack of near-term margin visibility has weighed on sentiment. |
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