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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Madison Sustainable Equity Fund 2024 Q1 Investor Letter | Buyside Digest

Back to Fund Profile (Madison Sustainable Equity Fund)

Primary Source Intelligence • Q1 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

QTD+8.25%

Annualized+5.68%

Digest Analysis

Quick Take

"Madison Sustainable Equity Fund lagged the S&P 500 in Q1 despite solid economic growth. GLP-1 leader Eli Lilly and Target drove outperformance while Nike and UnitedHealth detracted."

Executive Summary

Madison Sustainable Equity Fund returned 8.25% in Q1 2024, lagging the S&P 500's 10.6% gain. The fund invests in high-quality companies integrating sustainability into their operations, maintaining 34 holdings with 72% active share. Top contributors included Eli Lilly, benefiting from strong GLP-1 therapy demand despite capacity constraints, and Target, which delivered better-than-expected earnings. Key detractors were Nike, facing delayed sales growth recovery, and UnitedHealth Group, impacted by regulatory headwinds. The managers initiated Amazon, believing retail profitability has reached an inflection point, while eliminating Becton Dickinson due to lost confidence in growth prospects. Portfolio companies continue advancing sustainability initiatives, including carbon capture investments and clean energy programs. Looking ahead, the team expects continued economic growth but remains cautious on stock selection given above-average valuations at 21x forward earnings. They anticipate fewer Fed rate cuts due to sticky inflation and will use market volatility to add to attractively valued positions.

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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 34 concentrated holdings, clear thesis explanations for individual positions, and specific sizing decisions. Managers provide detailed rationale for additions (Amazon) and eliminations (Becton Dickinson, Cisco), though some hedged language around timing and valuation concerns prevents a higher score.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The managers express cautious optimism about economic fundamentals with solid GDP growth and resilient consumer spending, but acknowledge concerns about sticky inflation affecting Fed policy timing and elevated market valuations at 21x forward earnings.

Risk Appetite

10%

DefensiveAggressive

Defensive (10%)

The fund maintains selective positioning with cautious stock selection due to above-average valuations. They initiated one new position (Amazon) while eliminating others, showing measured risk appetite rather than aggressive deployment.

Capital Deployment

5%

De-riskingDeploying

De-risking (5%)

Limited net deployment activity with one initiation (Amazon) offset by two eliminations (Becton Dickinson, Cisco). No cash level changes reported. The rotation of positions without significant net exposure changes suggests minimal capital deployment.

Forward Guidance

15%

CautiousExpansionary

Cautious (15%)

Managers plan to use volatility opportunistically to add to attractively valued positions but emphasize caution in stock selection. They are looking to add to Amazon at better prices, indicating selective rather than aggressive deployment bias.

Language Signal

20%

BearishBullish

Bearish (20%)

Language is balanced with positive terms like 'solid economic growth,' 'resilient consumer,' and 'strong demand' offset by cautionary language around 'sticky inflation,' 'above historical averages,' and 'cautious stock selection.'

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Managers acknowledge moderate risks including sticky inflation affecting Fed policy, elevated valuations at 21x forward earnings, and rising bond yields. Risks are discussed but not characterized as systemic or severe threats.

Opportunity Density

45%

ScarceAbundant

Selective (45%)

Mixed opportunity environment with managers finding selective opportunities but emphasizing the need for caution due to above-average valuations. They see specific opportunities like Amazon but note the challenging valuation backdrop requires selectivity.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The fund demonstrates a multi-year investment horizon with long-term sustainability focus and willingness to hold through short-term volatility. Managers discuss longer-term prospects for companies like Nestle and maintain positions through temporary headwinds, indicating patience beyond quarterly results.