| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 8.8% | 10.39% | -3.99% |
Baird Chautauqua International Growth Fund returned 10.39% in Q2 2026, underperforming the MSCI ACWI ex-U.S. Index which returned 14.49%, as extreme market concentration favored a narrow AI capex trade. The fund benefited from overweights in TSMC, ASML, Keyence, and Fanuc but was hurt by underweight in memory stocks that posted triple-digit gains and by holdings in software, health care, and Greater China that continued to de-rate. Manager trimmed appreciated semiconductor and automation positions and redirected proceeds into higher conviction laggards including Adyen, Constellation Software, 3i, and AIA. Year-to-date portfolio declines have been driven by valuation compression rather than earnings deterioration, with revenues, profitability, and cash flow continuing to build even as multiples contracted. This divergence between rising intrinsic value and falling stock prices creates foundation for conviction over five-year investment horizon. Portfolio maintains deliberate overweights in Greater China secular growth areas and owns de-rated software and health care franchises whose competitive moats remain intact despite market treating them as structural AI casualties. Manager views current valuation compression as unusually attractive entry point for patient capital.
Concentrated quality portfolio of businesses with durable competitive advantages, healthy margins, strong balance sheets, and consistent cash generation has experienced valuation compression disconnected from operational reality, creating unusually attractive entry point for patient capital over five-year horizon.
Manager maintains conviction over five-year investment horizon despite difficult Q2 relative performance. Extreme market concentration and AI capex trade sustainability remain key uncertainties alongside unresolved trade policy and newly hawkish central banks. Valuation compression in holdings has been function of multiple compression rather than earnings deterioration, creating coiled spring as gap between rising intrinsic value and falling stock prices closes. Portfolio positioned to participate in AI buildout economics through semiconductor picks and shovels while also owning de-rated growth franchises that benefit as market leadership broadens. International markets trade at considerably lower valuations than U.S., and paired with intact earnings, manager believes this tilts odds in favor of patient capital.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 14 2026 | 2026 Q2 | 0700.HK, 1299 HK, 2269 HK, 6098.T, 6861.T, 6954.T, 7269.T, ADYEN.AS, ASML, BABA, BEKE, BEPC, COLOB.CO, CP, CSU.TO, D05.SI, GALD SW, GMAB, III.L, LULU, MU, REGN, RYA.L, SAF.PA, SE, TEMN SW, TJX, TSM | AI, Automation, Greater China, international, semiconductors, Trade Policy, Valuation Compression | - | Fund underperformed in Q2 as extreme market concentration favored narrow AI capex trade, but manager maintains five-year conviction. Portfolio declines driven by valuation compression, not earnings deterioration, creating coiled spring as intrinsic value rises while prices fall. Trimmed appreciated semiconductor positions, added to beaten-down compounders. Owns indispensable AI picks-and-shovels plus de-rated growth franchises positioned for leadership broadening. Current compression creates attractive entry point. |
| 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 Q2 |
AIAI capex trade drove extreme market concentration in Q2, with memory stocks posting triple-digit gains. Manager owns semiconductor picks and shovels (TSMC, ASML) and automation leaders (Keyence, Fanuc) to participate in buildout economics without predicting downstream winners. Skepticism exists regarding hyperscaler capex sustainability and whether AI monetization will keep pace with hundreds of billions in data center deployment. |
Semiconductors Data Centers Automation Memory Capex |
Semiconductor CycleTSMC and ASML delivered strong results with robust demand driven by AI infrastructure investment. Manager trimmed semiconductor holdings after strong appreciation but maintains conviction in most moated companies. Memory stocks benefited from retail participation and leveraged ETFs, posting outsized returns, though manager was underweight this segment. |
TSMC ASML Memory Foundries Equipment | |
AutomationKeyence and Fanuc provided differentiated exposure to AI buildout through factory automation. Keyence reported strongest revenue growth in four years at 18% y/y with operating margins near 54%, driven by semiconductor and electronics demand. Manager trimmed positions after strong appreciation but maintains conviction in automation leaders. |
Robotics Factory Automation Industrial Japan | |
Greater ChinaHoldings represent deliberate overweights (18% International, 12% Global) concentrated in secular growth areas aligned with government priorities. Two-speed economy persists with strong policy-supported supply side but weak domestic demand. Quarter's weakness owed more to capital chasing AI trade elsewhere than fundamental deterioration. Alibaba, Tencent, KE, and AIA demonstrate business models driven by domestic demand with intact competitive positions. |
China E-commerce Platforms Insurance Real Estate | |
Trade PolicySupreme Court struck down prior tariff regime, cutting average effective U.S. tariff 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 being implemented. Tariff question expected to remain unresolved and episodic rather than settle, with late July cliff as near-term catalyst. |
Tariffs Trade Policy Uncertainty | |
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. Energy-fueled inflation spike drove moves, though consumer inflation likely peaked in May as oil retraced wartime gains. |
Central Banks Fed ECB BOJ Inflation | |
Energy TransitionBrookfield Renewable reported 15% y/y FFO/share growth in 1Q26, well above consensus and above 10% growth target. New project delivery and higher capital recycling underpin acceleration, with BEPC doubling pace of projects commissioned from 85 GW pipeline. Despite strong fundamentals, shares lagged due to temporary technical trading factors tied to proposed consolidation of share classes. |
Renewables Infrastructure Power Utilities | |
BiotechnologyHealth care holdings experienced valuation compression despite strong fundamentals. BeOne Medicines and WuXi Biologics continued to execute well but fell sharply in sympathy move sweeping Chinese biopharma complex rather than company-specific events. Genmab remains valuable for pipeline but market fixated on future Darzalex royalty step-down. Regeneron's LAG3 melanoma trial failure hurt investor confidence despite strong Dupixent performance and solid cash generation. |
Pharmaceuticals Drug Development China Pipeline | |
| 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 |
|---|---|
| TSM | We benefited through overweights in what we regard as the most moated semiconductor companies in the world, TSMC and ASML. However, we took the opportunities afforded by the strong market to trim holdings that appreciated the most, led by our semiconductor and automation names. |
| 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 took the opportunities afforded by the strong market to trim holdings that appreciated the most, led by our semiconductor and automation names. |
| 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 took the opportunities afforded by the strong market to trim holdings that appreciated the most, led by our semiconductor and automation names. |
| 6954.T | We benefited through our differentiated exposure through automation leaders Keyence and Fanuc. We took the opportunities afforded by the strong market to trim holdings that appreciated the most, led by our semiconductor and automation names. |
| MU | Memory stocks, which also benefited from a surge in retail participation including through leveraged ETFs and derivatives, posted triple digits gains and produced the most outsized return contributions to the overall index. This was detrimental to relative performance because we did not own these stocks in International portfolios and under-owned them in Global portfolios, where 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, led by our semiconductor and automation names, 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 and Constellation Software. The market has de-rated many of our holdings in software and digital businesses, treating them as structural casualties of the AI disruption narrative. We view this terminal value assessment as materially disconnected from operational reality. The competitive moats of Constellation Software, Adyen, and Sea are built on deep customer integration, regulatory complexity, and network scale. |
| CSU.TO | We took the opportunities afforded by the strong market to trim holdings that appreciated the most, led by our semiconductor and automation names, 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 and Constellation Software. The market has de-rated many of our holdings in software and digital businesses, treating them as structural casualties of the AI disruption narrative. We view this terminal value assessment as materially disconnected from operational reality. The competitive moats of Constellation Software, Adyen, and Sea are built on deep customer integration, regulatory complexity, and network scale. |
| 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, demonstrating 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. |
| SE | 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. |
| TEMN.SW | Both software and platform holdings continued to execute robustly through the stock price drawdown. In the case of Temenos, there has been an overhang over its Gulf customer base stemming from the Iran conflict, rather than a structural flaw in its software business. |
| BEKE | Companies such as KE, which is an entrenched real estate platform in a stabilizing housing market, and AIA, which is the leading pan-Asia life insurer, demonstrate business models driven by domestic demand. |
| 0700.HK | 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. |
| 2269.HK | In health care, the strongest fundamental stories were among the hardest hit as the sector fell out of favor. BeOne Medicines and WuXi Biologics both continued to execute well, yet fell together in a sharp decline that swept the entire Chinese biopharma complex, a sympathy move rather than company-specific events. |
| GALD.SW | Galderma has continued to compound its dermatology franchise. |
| GMAB | Genmab remains valuable for its pipeline, but the market has been fixated on a future royalty step-down for Darzalex. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
