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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Madison Small Cap Fund. This analysis is provided for institutional research purposes only and is not investment advice.
"Madison Small Cap Fund outperformed during Q1's market correction, driven by Healthcare strength and Financial underweights. Managers selectively trimmed Technology winners while adding to discounted names."
Madison Small Cap Fund delivered a -8.9% return in Q1 2025, slightly outperforming the Russell 2000's -9.5% decline during a market correction driven by tariff concerns and policy uncertainty. The fund's performance was primarily driven by stock selection, with Healthcare outperforming led by Encompass Health and Option Care Health, while an underweight in Financials contributed positively. Technology investments faced some pressure after strong 2024 performance, prompting the managers to monetize positions in Box and Confluent while adding to Power Integrations and Workiva at attractive prices. Consumer discretionary holdings underperformed despite strong fundamentals due to economic slowdown fears and tariff concerns. The managers remain focused on construction-related opportunities, believing these companies are attractively valued despite depressed industrial activity and delayed recovery expectations due to high interest rates. Looking forward, they maintain a cautious stance given policy uncertainty but view market dislocations as providing exceptional investment opportunities for patient capital deployment.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
The fund holds 44 positions with clear thesis articulation for individual holdings like EHC and OPCH. Managers provide specific reasoning for position additions and trims, demonstrate willingness to act during volatility, and express confidence in their construction and healthcare themes despite acknowledging longer timelines.
Growth Outlook
The managers acknowledge market correction and policy uncertainty but frame the pullback as providing opportunities. They express caution about tariff impacts and construction recovery delays, but maintain constructive view on selective opportunities.
Risk Appetite
Portfolio remained largely unchanged with no new names added, but managers selectively added to existing positions during the correction. They monetized some Technology positions while adding to others, showing measured risk appetite.
Capital Deployment
No new positions were added and no full positions were exited, but managers added to several existing names judiciously during the correction. This represents modest net deployment activity focused on existing holdings rather than aggressive new capital deployment.
Forward Guidance
Managers explicitly state they remain cautious in 2025 and emphasize the need to be patient and prudent in timing and selection. However, they express confidence in their ability to execute and see opportunities emerging.
Language Signal
Language includes risk-oriented terms like correction, uncertainty, depressed activity, jeopardy, and cautious, but balanced with opportunity-focused language like attractive valuations, exceptional opportunities, and confidence in execution.
Perceived Risk
Managers identify multiple specific risks including tariff policy disruption, construction recovery delays, consumer price fatigue, and policy uncertainty. They discuss these risks in detail with concrete examples and acknowledge potential negative impacts on their holdings.
Opportunity Density
Managers see selective opportunities in construction-related industries and believe market dislocations provide exceptional investment opportunities. They identify specific areas of focus but emphasize the need for selectivity and patience in the current environment.
Time Horizon
Managers acknowledge that construction-related stocks may take longer to inflect upwards than previously anticipated and emphasize the importance of patience in timing and selection. They focus on long-term demographic trends and company fundamentals rather than near-term catalysts.
