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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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TimesSquare Capital Management U.S. Small Cap Growth Strategy 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (TimesSquare Capital Management U.S. Small Cap Growth Strategy)

Primary Source Intelligence • Q3 2026 Letter Analysis

TimesSquare Capital Management U.S. Small Cap Growth Strategy Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, TimesSquare Capital Management U.S. Small Cap Growth Strategy. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-7.77%

YTD+6.63%

Annualized+8.44%

Positioning StanceCONSTRUCTIVE

Market CapSmallCap

GeographyUS

Digest Analysis

Quick Take

"Positioned defensively in high-quality, cash-generative small-cap leaders with resilient balance sheets, initiating long positions in enterprise AI and regional banking while divesting fully valued cyclical positions amid rising interest rates."

Executive Summary

During the third quarter of 2026, the TimesSquare U.S. Small Cap Growth Strategy returned -7.77% net of fees (-7.53% gross), outperforming the benchmark Russell 2000 Growth Index net return of -9.39%. Year-to-date, the strategy has returned 6.63% net of fees compared to 10.71% for the benchmark. Strategy outperformance was driven by positive stock selection and favorable factor exposure in Information Technology, Financials, and Consumer Staples, whereas positioning within Industrials, Health Care, and Consumer Discretionary detracted from relative performance. The macroeconomic environment was characterized by renewed monetary tightening as the Federal Reserve raised the federal funds target range by 25 basis points to 3.75%-4.00% amid multi-decade highs in Treasury yields. In addition, an escalating U.S.-Iran conflict prompted a sharp rally in crude oil prices, dampening consumer confidence despite resilient manufacturing and service sectors. In this volatile backdrop, market breadth narrowed substantially, penalizing momentum-driven, highly leveraged equities and favoring profitable enterprises with conservative balance sheets. Portfolio activity reflected disciplined scenario analysis, with capital reallocated away from fully valued or cap-constrained holdings toward mispriced high-quality growth businesses. The team initiated new long positions in enterprise content provider Box, Inc. and Midwestern lender Old National Bancorp, while fully exiting Credo Technology following market cap appreciation and selling Fabrinet on elevated valuation. Sizable contributors included Repligen Corporation and Netskope, while Regal Rexnord and JBT Marel faced transient supply and integration headwinds.

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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

52%

CautiousHigh

Moderate (52%)

Position sizing across the diversified 75-100 stock portfolio is kept balanced, with individual active holdings capped around 1% to 2% weighting. While the manager decisively trims full valuations and exits names that exceed small-cap mandate thresholds, investment selections rely on scenario analysis rather than high-concentration bets.

Growth Outlook

42%

BearishBullish

Neutral (42%)

The manager expresses caution regarding macroeconomic crosscurrents, specifically highlighting Federal Reserve interest rate hikes, multi-decade high Treasury yields, and escalating oil prices from Middle Eastern tensions. Although economic activity remains in expansion territory, consumer sentiment has softened and small-cap valuations remain tightly tethered to the monetary path.

Risk Appetite

45%

DefensiveAggressive

Balanced (45%)

Portfolio capital is deliberately tilted toward defensive quality attributes, emphasizing businesses with low debt, steady profitability, and resilient balance sheets. Risk exposure to high-momentum and speculative growth assets has been curtailed in response to shifting factor performance.

Capital Deployment

50%

De-riskingDeploying

Net Neutral (50%)

Net capital deployment remains neutral, with capital generated from the complete liquidations of Credo Technology and Fabrinet redeployed directly into new holdings Box, Inc. and Old National Bancorp. Cash levels and overall equity exposure remained largely steady.

Forward Guidance

55%

CautiousExpansionary

Neutral (55%)

The manager displays an active yet selective posture, adding to promising long holdings like Box, Inc. and Mirum Pharmaceuticals on pullbacks while trimming positions where valuations reflect full expectations. Forward decisions remain contingent on rate trajectories and upcoming election outcomes.

Language Signal

48%

BearishBullish

Balanced (48%)

The tone strikes a neutral balance between constructive stock-level opportunities and prevalent macro headwinds such as inflation, tariffs, and tightening liquidity. Discussions of customer order momentum and valuation discounts are tempered by repeated references to margin pressure and earnings estimate revisions.

Perceived Risk

67%

Low RiskElevated

Elevated Risk (67%)

Macroeconomic and operational hazards are actively emphasized, including persistent interest rate increases, escalating geopolitical oil shocks, sticky supply-chain inflation, and tariff uncertainties. The upcoming legislative midterm elections are also explicitly cited as a regulatory wildcard.

Opportunity Density

56%

ScarceAbundant

Selective (56%)

Opportunities are selectively distributed rather than broadly dispersed across the small-cap spectrum, requiring rigorous bottom-up scrutiny. The team found compelling new entries in niche software and regional banking while observing limited breadth in broader indices.

Time Horizon

68%

Short-TermLong-Term

Multi-Year (68%)

Investment horizons are framed around multi-year fundamental compounding cycles, assessing sustained double-digit earnings growth and facility integration over multi-quarter periods. Short-term clinical delays and merger friction are tolerated when the multi-year thesis remains intact.