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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Madison Sustainable Equity Fund 2023 Q4 Investor Letter | Buyside Digest

Back to Fund Profile (Madison Sustainable Equity Fund)

Primary Source Intelligence • Q4 2023 Letter Analysis

Madison Sustainable Equity Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Madison Sustainable Equity Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+11.9%

YTD+18%

Annualized+5.68%

Positioning StanceConstructive

Market CapLarge Cap

GeographyUS

Digest Analysis

Quick Take

"Strong Q4 performance was driven by declining rates and Fed rate cut expectations. Managers trimmed underperforming positions while adding Agilent Technologies."

Executive Summary

The Madison Sustainable Equity Fund returned 11.9% in Q4 2023, bringing full-year returns to 18.0%, underperforming the S&P 500's 26.3% annual gain. The quarter's strength was driven by declining interest rates as inflation moderated and markets began pricing in Fed rate cuts for 2024. Top contributors included US Bank, Target, Agilent Technologies, Costco, and Qualcomm, while detractors included Jacobs Solutions, Oracle, Becton Dickinson, Alphabet, and Estee Lauder. Portfolio activity included purchasing Agilent Technologies and selling American Tower, Estee Lauder, Procter & Gamble, and Veralto to focus on companies with more durable long-term growth prospects. Looking ahead, managers expect the yield curve may shift back up as rate cut expectations appear overly aggressive, potentially pressuring both stocks and bonds. Economic growth is expected to slow in 2024 as consumer spending moderates due to depleted Covid savings and rising credit card balances. The fund continues targeting high-quality companies with sustainable business practices and attractive valuations.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

68%

CautiousHigh

Moderate (68%)

The fund demonstrates moderate-high conviction through its concentrated approach (35 holdings with 46.8% in top 10), detailed individual stock analysis, and specific position sizing decisions. The managers provide clear rationale for both purchases and sales, with detailed commentary on individual holdings. However, the diversified nature across multiple sectors and the hedged language around market outlook prevents a higher score.

Growth Outlook

38%

BearishBullish

Neutral (38%)

The managers express cautious optimism about 2024 markets, noting that while 2023 finished strong, there's a wide range of estimates for 2024. They specifically warn that rate cut expectations may be overly aggressive and could lead to yield curve normalization, driving downside pressure on stocks and bonds. This reflects mild caution rather than outright pessimism.

Risk Appetite

10%

DefensiveAggressive

Defensive (10%)

The fund made selective portfolio changes, selling four positions and adding one new position (Agilent), suggesting a neutral to slightly constructive positioning. The managers are being selective but continue to deploy capital into companies that meet their criteria for durable long-term growth, indicating a balanced risk appetite.

Capital Deployment

0%

De-riskingDeploying

De-risking (0%)

The portfolio activity represents rotation rather than net deployment, with the sale of four positions (American Tower, Estee Lauder, Procter & Gamble, Veralto) funding the purchase of Agilent Technologies. No cash level changes are mentioned, indicating neutral capital deployment with proceeds from sales funding new purchases.

Forward Guidance

0%

CautiousExpansionary

Cautious (0%)

The managers state they continue to look for companies with durable long-term growth opportunities that are attractively valued, but provide no clear directional bias for deployment. They acknowledge a wide range of market estimates for 2024 and focus on company fundamentals rather than aggressive positioning changes.

Language Signal

45%

BearishBullish

Balanced (45%)

The letter contains a balanced mix of language with slightly more cautionary terms. Risk-related language includes warnings about overly discounted rate cuts, slower economic growth, depleted consumer savings, and credit card balance concerns. Positive language focuses on individual company fundamentals and long-term positioning, but the overall tone leans slightly cautious.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

The managers identify several specific risks including overly aggressive rate cut expectations, slowing economic growth, and consumer spending headwinds from depleted savings and rising credit card balances. These risks are discussed with moderate detail but are not presented as systemic threats, representing standard economic cycle concerns rather than crisis-level warnings.

Opportunity Density

55%

ScarceAbundant

Selective (55%)

The managers demonstrate selective opportunity identification, adding one new position while trimming four others that no longer met their criteria. They continue to look for companies with durable long-term growth opportunities that are attractively valued, suggesting a moderately selective environment where opportunities exist but require careful evaluation.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The fund emphasizes durable long-term growth companies and sustainable business practices, with detailed analysis of multi-year business fundamentals rather than near-term catalysts. The focus on companies like Agilent with strong product portfolios and capable management teams, plus the sustainable investing approach, indicates a multi-year investment horizon of 2-5 years.