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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Madison Mid Cap Fund 2023 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Madison Mid Cap Fund)

Primary Source Intelligence • Q3 2023 Letter Analysis

Madison Mid Cap Fund Quarterly Analysis

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

Fund Returns

QTD-1.8%

YTD+10.68%

Annualized+10.18%

Positioning StanceConstructive

Market CapMid Cap

GeographyUS

Digest Analysis

Quick Take

"Madison Mid Cap outperformed in Q3 with insurance and cloud infrastructure driving returns. The fund opportunistically added to Dollar Tree during retail weakness, viewing margin pressures as cyclical."

Executive Summary

The Madison Mid Cap Fund declined 1.8% in Q3 2023, outperforming the Russell Midcap Index's 4.7% decline. Top contributors included Arch Capital Group, which benefited from firming pricing in P&C and reinsurance markets expected to continue for several years, and Arista Networks, which saw robust growth from Cloud Titan customers and AI infrastructure investment. The fund added to Dollar Tree following weakness, viewing current retail margin pressures as cyclical headwinds that create opportunity. While the new management team's investments are pressuring near-term margins, early signs of progress include strong traffic growth and market share gains. Key detractors included MKS Instruments, which continues battling tough semiconductor conditions, and Floor & Décor, affected by housing market headwinds. The managers maintain a concentrated approach with 31 holdings, focusing on high-quality companies trading at discounts. Portfolio activity was limited, with the fund selling small spin-off positions while opportunistically adding to existing holdings during periods of weakness.

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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

72%

CautiousHigh

High Conviction (72%)

The fund demonstrates high conviction through concentrated positioning with 31 holdings, specific position sizing decisions like adding to Dollar Tree during weakness, and detailed thesis explanations for individual holdings. The managers provide clear rationale for their positions and willingness to add during volatility.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The managers express cautious optimism with specific positive views on insurance market conditions continuing for a couple more years and AI infrastructure investment, but acknowledge challenging conditions in semiconductors, retail, and housing markets.

Risk Appetite

15%

DefensiveAggressive

Defensive (15%)

The fund maintains concentrated positioning with limited trading activity, selectively adding to Dollar Tree during weakness while selling small spin-off positions, indicating measured risk appetite rather than aggressive deployment.

Capital Deployment

5%

De-riskingDeploying

De-risking (5%)

Portfolio activity was limited with one addition to Dollar Tree and three small spin-off sales. This represents modest net activity with no significant cash level changes mentioned, indicating capital rotation rather than meaningful deployment or de-risking.

Forward Guidance

10%

CautiousExpansionary

Cautious (10%)

The managers indicate selective deployment bias by adding to Dollar Tree opportunistically but overall portfolio activity was limited, suggesting a monitoring stance with selective action rather than broad deployment.

Language Signal

20%

BearishBullish

Bearish (20%)

Language is balanced with positive terms like 'attractive market conditions,' 'well positioned,' and 'opportunistically add' offset by risk language including 'challenging retail environment,' 'tough semiconductor market,' and 'headwinds.'

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

The managers acknowledge multiple sector-specific risks including challenging retail environment, tough semiconductor conditions, housing market headwinds, and weak used car market, but frame these as cyclical rather than systemic concerns.

Opportunity Density

55%

ScarceAbundant

Selective (55%)

The managers see selective opportunities, particularly in insurance markets and during cyclical weakness in retail, but overall activity was limited suggesting a moderately selective environment rather than abundant opportunities.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The fund demonstrates multi-year thinking with expectations for insurance market conditions to continue for 'a couple more years' and viewing retail headwinds as cyclical aspects that 'won't be sustained forever,' indicating a 2-3 year investment horizon.