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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused on high-quality compounders with attractive entry points."
The Madison Small Cap Fund (Class Y) generated a return of 4.42% in the second quarter of 2025, lagging behind the Russell 2000 Index, which rose 8.5% over the same period. This underperformance was mainly driven by market dynamics rather than investment mistakes. Specifically, the early-cycle small-cap rally favored lower-quality, beaten-down laggards in a phenomenon referred to by the managers as a 'dash for trash.' The fund's stock selection in Information Technology and Consumer Staples also faced short-term headwinds. Cogent Communications (CCOI) underperformed due to minor misses in expectations for its new Wavelength Services, which the fund capitalized on by increasing its position. Hain Celestial (HAIN) suffered volume declines, compounded by a 5.5% to 8.6% drop in grocery spending among households using GLP-1 weight-loss medications; this prompted the fund to fully liquidate its position. Conversely, Consumer Discretionary investments like Shake Shack (SHAK) excelled due to strong menu innovations and unit growth potential. To optimize the portfolio, the managers initiated three new positions: The Hanover Insurance Group (THG), GMS Inc. (GMS), and Advanced Drainage Systems (WMS), while fully exiting LegalZoom.com (LZ), Hain Celestial (HAIN), and Hillman Solutions Corp (HLMN).
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High-conviction positioning: The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
Growth Outlook
Market outlook remains above average conviction: The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
Risk Appetite
Risk appetite posture is above average conviction: The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
Capital Deployment
Manager actively deployed capital into high-conviction opportunities. The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
Forward Guidance
Forward guidance signal: The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
Language Signal
Tone analysis indicates moderate conviction language: The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
Perceived Risk
Perceived risk level is evaluated as moderate conviction. The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
Opportunity Density
Opportunity density index indicates above average conviction actionable entry points. The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
Time Horizon
Investment time horizon reflects a high conviction orientation. The fund returned 4.42% in Q2 2025, underperforming the Russell 2000's 8.5% return due to an early-cycle 'dash for trash' rally favoring low-quality laggards, but remains focused o...
