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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
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TimesSquare Capital Management's U.S. Small/Mid Cap Growth Strategy returned 5.90% net in Q1 2024, underperforming the Russell 2500 Growth Index's 8.51% return primarily due to not owning Super Micro and MicroStrategy, which accounted for over a quarter of the index's return. The portfolio's fundamental research-driven approach focuses on companies with quality management and sustainable growth across multiple sectors. Key investment themes include AI and GenAI infrastructure development, data center energy demands that could reach 20-25% of U.S. power consumption, and electrical grid upgrades driven by energy infrastructure limitations. The manager actively trimmed positions in strong performers like Shockwave Medical (up 71% on J&J acquisition news), Krystal Biotech (up 42%), and several industrial names while adding to Five Below on weakness. Healthcare utilization strengthened beyond GLP-1 themes, while consumer spending remained mixed with value-conscious behavior. Looking ahead, the team monitors central bank policies and election developments while maintaining their bottom-up investment approach focused on earnings growth and business fundamentals.
TimesSquare Capital Management focuses on fundamental research-driven growth investing in U.S. small to mid-cap stocks, seeking companies with quality management, distinct competitive advantages, and strong sustainable growth while navigating a market environment dominated by AI and technology infrastructure themes.
Looking further into 2024, markets will keep a close eye on central banks and the election booths. Many central banks telegraphed plans for easing rates with the notable exception of Japan where the BOJ recently ended its negative interest rate policy, though remained dovish by continuing to buy government bonds. As bottom-up investors, we seek underpinnings to near-term valuations in the form of expected earnings growth and other business fundamentals.
As of Mar 31, 2024
TimesSquare Capital Management, LLC is a fundamental research-oriented equity investment management firm founded in 2000 and operating as an independent affiliate of Affiliated Managers Group, Inc. since 2004. The firm is headquartered at 75 Rockefeller Plaza in New York and employs 43 total employees, including 21 investment professionals averaging 23 years of industry experience and 13 years at TSCM. The firm is significantly employee-owned to align interests with clients and retain key professionals. TimesSquare serves a diverse client base including corporate, endowment/foundation, intermediaries, public, and Taft Hartley clients, primarily domiciled in the U.S. with additional presences in Canada, Europe, and Asia. The firm is registered with the SEC under CRD #132694 and CIK #0001313816 and complies with Global Investment Performance Standards (GIPS®).
TimesSquare Capital Management's investment philosophy emphasizes quality growth companies with sustainable competitive advantages, quality management teams, and strong, consistent growth profiles. The firm employs a well-established team approach to growth investing that has been in place since the mid-1980s. Their goal is to build diversified portfolios of growth stocks that generate competitive risk-adjusted returns. The firm's equity investment process utilizes a unique bottom up and research driven approach to identify quality growth companies. TimesSquare believes that its proprietary fundamental small/mid cap research skills enable it to build a diversified portfolio that will generate competitive returns. Investment ideas are primarily internally generated and confirmed through financial analysis, company visits, and management assessments. Portfolio exposures generally lend to favoring quality and profitability, while having a lower volatility and beta than the index. The U.S. Small/Mid Cap Growth strategy seeks to outperform the Russell 2500™ Growth Index in a risk-controlled manner, targeting companies with market capitalizations between $300 million and $12 billion using a bottom-up, fundamental research-intensive approach to identify stocks with potential for 25%-50% price appreciation.
Moderate Conviction Bullish
Market Conviction
The manager demonstrates moderate-high conviction through specific position sizing decisions, naming individual holdings with detailed investment rationales, and taking decisive action to trim winners and exit deteriorating positions. The 90-120 stock portfolio with active management and specific company analysis indicates solid conviction, though the diversified approach prevents a higher score.
Growth Outlook
The manager expresses cautious optimism noting global economic activity measures climbed into expansion territory for the first time in over a year, but acknowledges market distortions and notes that this quarter's rally was not driven by company fundamentals. Mixed signals with some positive economic data but concerns about market concentration.
Risk Appetite
The portfolio shows moderate risk appetite with active trimming of strong performers and selective adding on weakness. The manager maintains exposure across multiple sectors but demonstrates disciplined position sizing and risk management through profit-taking and position exits when fundamentals deteriorate.
Capital Deployment
Net capital deployment appears slightly negative with multiple position trims on strength (Floor & Decor, Cactus, Ascendis Pharma, Krystal Biotech, EMCOR, ESAB, Onto Innovation, CyberArk, NICE) and only selective additions like Five Below on weakness. The pattern suggests modest profit-taking and risk reduction.
Forward Guidance
The manager indicates a monitoring stance for 2024, watching central banks and elections while maintaining their bottom-up investment approach. Language suggests selective deployment with focus on earnings growth and business fundamentals rather than aggressive positioning changes.
Language Signal
Language is balanced with opportunities mentioned (AI infrastructure, data center energy needs, healthcare utilization) alongside risks (grid limitations, consumer selectivity, market concentration). More opportunity-focused than risk-focused but acknowledges meaningful headwinds.
Perceived Risk
The manager acknowledges moderate risks including electrical grid limitations, industry consolidation pressures, mixed consumer spending signals, and market concentration in mega-cap names. Risks are discussed but not characterized as systemic or alarming, representing standard business cycle and sector-specific concerns.
Opportunity Density
The manager sees selective opportunities across multiple themes including AI infrastructure, data center energy demands, healthcare utilization, and grid modernization. While acknowledging market selectivity and concentration issues, they identify specific investment areas and maintain active position management suggesting a reasonably rich opportunity set.
Time Horizon
The investment approach emphasizes fundamental research and business quality with references to longer-term benefits from current investments (Five Below shrinkage mitigation, technology infrastructure development through 2024). The focus on sustainable growth and quality management suggests a multi-year investment horizon typical of growth equity strategies.
Top Conviction Themes
Key Catalysts
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