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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Madison Sustainable Equity Fund 2024 Q2 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q2 2024 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

YTD+13.05%

Annualized+5.68%

Digest Analysis

Quick Take

"Madison Sustainable Equity Fund delivered solid Q2 performance driven by AI adoption, GLP-1 therapies, and renewable energy themes."

Executive Summary

Madison Sustainable Equity Fund delivered solid Q2 2024 performance, returning 4.44% and bringing year-to-date returns to 13.05%, roughly in line with the S&P 500. The fund benefited from strong stock selection in healthcare, communication services, utilities, and materials, with top contributors including Alphabet, Eli Lilly, Costco, Qualcomm, and NextEra Energy. Key themes driving performance included AI adoption in smartphones, continued GLP-1 therapy demand, and renewable energy development. The managers initiated a position in Equifax while eliminating Jacobs Solutions due to management changes. Looking ahead, they express caution about stretched valuations, particularly the S&P 500's 21x forward P/E ratio and narrow market leadership from the top ten stocks. Despite expecting Fed rate cuts in the second half, they question whether this optimism is already priced in. The team plans to redouble stock selection efforts, focusing on high-quality companies with strong long-term growth prospects at attractive valuations, using market volatility as buying opportunities.

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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 with a concentrated portfolio of 34 holdings, specific position sizing (top 10 holdings represent 47.6% of assets), and detailed thesis explanations for individual holdings. The managers provide clear rationale for new positions like Equifax and exits like Jacobs Solutions, though some hedging language around market outlook prevents a higher score.

Growth Outlook

38%

BearishBullish

Neutral (38%)

The managers express caution about the market outlook, citing stretched valuations with the S&P 500 at 21x forward P/E, narrow market concentration, and questioning whether Fed rate cut optimism is already priced in. While they acknowledge potential positives from rate cuts and earnings growth, the overall tone is cautious rather than optimistic.

Risk Appetite

45%

DefensiveAggressive

Balanced (45%)

The fund maintains its equity positioning but with increased selectivity and caution. The managers state they are 'approaching equities with caution' and plan to 'redouble efforts in stock selection,' suggesting a more defensive tilt without major de-risking.

Capital Deployment

48%

De-riskingDeploying

Net Neutral (48%)

The managers initiated one new position (Equifax) and eliminated one (Jacobs Solutions), representing rotation rather than net deployment. Their stated intention to 'use volatility to add to companies' suggests they are waiting for better entry points rather than actively deploying capital at current levels.

Forward Guidance

43%

CautiousExpansionary

Neutral (43%)

The managers plan to be more selective going forward, focusing on stock selection and waiting for volatility to create buying opportunities. This suggests a more cautious deployment approach rather than aggressive capital deployment.

Language Signal

40%

BearishBullish

Balanced (40%)

The letter contains more cautious language including 'stretched valuations,' 'approaching with caution,' and concerns about market concentration, while positive language around individual holdings is more muted and specific rather than broadly optimistic.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

The managers identify several specific risks including stretched valuations, narrow market concentration, economic slowdown, and pressure on low-income consumers from high rates and inflation. They express concern about whether market optimism around Fed cuts is already priced in, indicating meaningful risk awareness.

Opportunity Density

45%

ScarceAbundant

Selective (45%)

The managers indicate they are 'redoubling efforts in stock selection' and plan to 'use volatility' to find opportunities, suggesting the current environment requires more work to find attractive investments. This implies a moderately challenging opportunity set rather than abundant opportunities.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The fund focuses on 'high quality companies with strong long-term growth prospects' and maintains a sustainable investment approach that inherently requires longer holding periods. The detailed sustainability scorecards and multi-year thesis development for holdings like Equifax suggest a multi-year investment horizon.