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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Madison Sustainable Equity Fund 2024 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Madison Sustainable Equity Fund)

Primary Source Intelligence • Q3 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

Annualized+5.68%

Digest Analysis

Quick Take

"Madison Sustainable Equity outperformed in Q3 through positive sector allocation and stock selection in renewable energy and cloud infrastructure. Despite elevated market valuations at 21x forward earnings, managers see opportunities in high-quality sustainable companies."

Executive Summary

The Madison Sustainable Equity Fund outperformed the S&P 500 in Q3 2024, returning 6.09% versus the index's 5.89%. The fund benefits from positive sector allocation, particularly overweights in Utilities and Materials and underweights in Energy and Technology. Top contributors included NextEra Energy, which benefited from its renewable energy positioning and lower rates, Oracle with accelerating cloud demand, and Progressive with strong auto market performance. Key detractors were Alphabet facing DOJ antitrust concerns, Eli Lilly despite strong diabetes-obesity market fundamentals, and Qualcomm on AI PC timing concerns. The managers added Keysight Technologies and Charles Schwab while selling Nestle, Nike, and Pepsi. Looking forward, they remain cautious given elevated valuations at 21x 2025 earnings and high growth expectations amid economic slowing. However, they see potential tailwinds from Fed rate cuts and plan to use volatility to add to attractively valued, high-quality companies with strong sustainability practices and long-term growth prospects.

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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 33 total holdings and 49.9% in top 10 positions. Managers provide detailed, specific commentary on individual holdings with clear rationales for additions and sales. They express strong views on company fundamentals and positioning, though maintain some hedging language around market conditions.

Growth Outlook

38%

BearishBullish

Neutral (38%)

The managers express caution about elevated valuations at 21x 2025 earnings and skepticism about 15% earnings growth expectations given economic slowing. However, they acknowledge positive factors like Fed rate cuts and declining inflation, resulting in a mildly cautious but not bearish outlook.

Risk Appetite

0%

DefensiveAggressive

Defensive (0%)

The fund maintains balanced positioning with selective additions (Keysight, Schwab) and sales (Nestle, Nike, Pepsi). No significant cash changes or major exposure shifts are indicated, suggesting neutral risk appetite despite market concerns.

Capital Deployment

5%

De-riskingDeploying

De-risking (5%)

The letter describes rotation activity with three new additions (Keysight, Schwab) funded by three sales (Nestle, Nike, Pepsi). This represents capital rotation rather than net deployment or de-risking, as no cash level changes are mentioned.

Forward Guidance

38%

CautiousExpansionary

Neutral (38%)

Managers plan to 'redouble efforts' in stock selection and 'use volatility' to add positions, but emphasize being 'somewhat cautious' entering Q4. This suggests a wait-and-see approach rather than aggressive deployment, with selective opportunistic activity.

Language Signal

45%

BearishBullish

Balanced (45%)

Language is balanced with both positive elements (rate cuts, inflation progress, strong company fundamentals) and cautious elements (elevated valuations, economic slowing, geopolitical risks). Slightly more cautious language overall but not predominantly negative.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

Managers identify multiple specific risks including elevated valuations at 21x earnings, economic slowing, softening job market, geopolitical escalation, and tight election race. They express skepticism about high earnings growth expectations, indicating meaningful risk awareness without alarm.

Opportunity Density

45%

ScarceAbundant

Selective (45%)

Managers describe 'redoubling efforts' in stock selection and note that 'if you look more broadly, there are still opportunities at attractive valuations' beyond mega caps. This suggests selective opportunities requiring more work to identify, indicating moderate scarcity.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The fund focuses on 'high quality companies with strong long-term growth prospects' and sustainable business practices, suggesting a multi-year investment horizon. However, they also discuss using near-term volatility tactically, indicating a medium-to-long-term approach rather than permanent capital mentality.