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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
TimesSquare's U.S. Small Cap Growth strategy returned 23.92% net in 2Q 2026, trailing the Russell 2000 Growth Index's 25.71% return. The quarter was dominated by AI infrastructure capital expenditure driving exceptional performance in semiconductor and connectivity holdings, with several positions surging 70-190% on hyperscaler demand for data center buildouts. Information Technology was the largest positive contributor, while Health Care, Financials, and Energy lagged. The portfolio benefited from positions in high-speed connectivity, precision timing semiconductors, and power infrastructure for data centers. Detractors included consumer-oriented retailers facing tariff uncertainty and record-low sentiment, energy holdings as commodity prices reversed from conflict-driven highs, and private markets solutions amid redemption concerns. The manager trimmed outperformers, exited positions lacking growth visibility, and increased Biopharma exposure following Russell reconstitution. Looking forward, the manager sees AI-driven capital expenditure and regional self-reliance as dominant forces creating pricing dislocations for their bottom-up, fundamental approach to exploit through identifying disciplined management teams compounding intrinsic value.
TimesSquare employs a fundamental, bottom-up research-driven approach to identify small cap growth companies with quality management, distinct competitive advantages, and strong, sustainable growth, focusing on disciplined capital allocators capable of compounding intrinsic value through macro complexity.
The manager views the current environment as one where capital allocation is increasingly driven by strategic necessity rather than purely optimized economic returns, effectively recasting energy, defense, and technology supply chains as instruments of national policy. While the easing of tensions around the Strait of Hormuz provided relief, the structural shift toward regional self-reliance and the relentless pace of AI-driven capital expenditure remain the dominant forces shaping the global landscape. These macro crosscurrents create a complex tapestry of risks and opportunities, yet they consistently produce the pricing dislocations where the manager's fundamental, bottom-up approach thrives. The manager remains steadfast in identifying disciplined management teams capable of compounding intrinsic value by navigating this new era of complexity.
As of Jul 28, 2026
TimesSquare Capital Management LLC is a New York City-based growth equity specialist founded in 2000 and majority-owned by Affiliated Managers Group Inc. The firm manages $8.2 billion in discretionary assets for 58 institutional clients as of March 2025. The investment team comprises 43 employees including 19 equity partners and 21 investment professionals averaging 23 years of industry experience. The U.S. Small Cap Growth strategy is managed by a four-person team led by CEO Grant R. Babyak and CIO David Ferreiro Ph.D., focusing on companies with market capitalizations under $3 billion. The firm claims compliance with Global Investment Performance Standards and undergoes independent verification of performance data.
TimesSquare employs a bottom-up, fundamental research-intensive approach to identify growth stocks with the greatest potential for long-term price appreciation. The firm's investment philosophy emphasizes consistency, quality, and accountability through a disciplined collaborative process. They seek to protect and grow client capital by investing in Quality Growth companies with sustainable competitive advantages, quality management teams, and strong consistent growth profiles. Portfolio construction favors quality and profitability characteristics while maintaining lower volatility and beta than the benchmark index. The strategy targets companies that appear growth-oriented with revenue and earnings growing faster than the economy, offering above-average prospects for capital appreciation.
Lead Portfolio Manager
Moderate Conviction Bullish
Market Conviction
The letter demonstrates moderate-to-high conviction through specific position naming, sizing language ('largest detractor,' 'standout contributor'), and explicit portfolio actions (trimmed, exited, initiated, added). The manager discusses 18 individual holdings with clear rationales and performance attribution. However, the portfolio holds 75-100 stocks according to the strategy description, indicating meaningful diversification that caps conviction below 0.75. The manager's willingness to trim winners and exit positions lacking visibility shows disciplined conviction rather than extreme concentration. The specificity of commentary ('script volume continues to track well above consensus,' 'granular analysis of exposures') and clear catalyst identification support a score in the 0.65-0.70 range.
Growth Outlook
Market outlook remains above average conviction: TimesSquare's U.S. Small Cap Growth Strategy rebounded strongly in 4Q25, returning 3.45% (Net) and outperforming its benchmark through active rotation and fundamental stock picking...
Risk Appetite
Risk appetite posture is above average conviction: TimesSquare's U.S. Small Cap Growth Strategy rebounded strongly in 4Q25, returning 3.45% (Net) and outperforming its benchmark through active rotation and fundamental stock picking...
Capital Deployment
The letter shows net de-risking activity rather than deployment. The manager trimmed six positions (Credo, SiTime, JFrog, Onto, MACOM, Bloom, BJ's, Ollie's, Hamilton Lane, Workiva), began exiting two positions (Bloom, Credo), fully exited one position (Planet Fitness), added to one position (Pursuit), and initiated one new position (Dianthus). The ratio of reductions/exits (10 actions) to additions/initiations (2 actions) is 5:1, indicating net harvesting. While no cash level data is provided, the pattern of trimming multiple outperformers and exiting challenged positions suggests cash was raised rather than deployed. The single new initiation in Biopharma following reconstitution represents rotation rather than net deployment.
Forward Guidance
Forward guidance signal: TimesSquare's U.S. Small Cap Growth Strategy rebounded strongly in 4Q25, returning 3.45% (Net) and outperforming its benchmark through active rotation and fundamental stock picking...
Language Signal
The letter contains significantly more bullish than bearish directional language. Positive terms dominate: 'insatiable secular wave,' 'resilient,' 'powerful tailwind,' 'accelerating demand,' 'surging,' 'strong,' 'robust,' 'standout contributor,' and multiple descriptions of positions advancing 44-190%. Bearish language is present but more contained: 'turbulent,' 'uncertainty,' 'weighed on,' 'deteriorating probability,' 'concerns,' and 'headwinds.' The ratio of bullish to bearish language is approximately 2:1, with the AI and semiconductor discussion overwhelmingly positive while consumer and energy sections contain more cautious language. The net balance clearly tilts bullish.
Perceived Risk
Perceived risk level is evaluated as moderate conviction. TimesSquare's U.S. Small Cap Growth Strategy rebounded strongly in 4Q25, returning 3.45% (Net) and outperforming its benchmark through active rotation and fundamental stock picking...
Opportunity Density
The manager characterizes the environment as producing 'pricing dislocations where our fundamental, bottom-up approach thrives,' suggesting a reasonably rich opportunity set. The initiation of a new Biopharma position and the decision to increase exposure following reconstitution indicates opportunities are being identified. The raising of purchase limits from $8B to $10B suggests preparedness to deploy into a broader opportunity set. However, the heavy trimming activity and exits suggest selectivity is required, with the manager finding fewer compelling ideas at current valuations in certain areas. The tone suggests selective opportunities in defined areas rather than broad abundance, supporting a score in the 0.60-0.70 range.
Time Horizon
The manager emphasizes 'compounding intrinsic value' and identifies 'secular wave of AI infrastructure' and 'structural shift toward regional self-reliance' as multi-year themes, suggesting a 2-4 year investment horizon. The willingness to hold Tarsus despite near-term stock weakness because 'the market prematurely priced in a potential competitor that is years away' demonstrates patience. However, the active trimming of positions on near-term uncertainty (Ollie's, BJ's) and exit of Planet Fitness after management withdrew three-year outlook shows some sensitivity to near-term catalysts and visibility. The strategy holds 75-100 stocks with 54% average turnover, indicating a medium-term rather than permanent capital approach. The balance suggests a 2-3 year thesis horizon.
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