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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Baird Small/Mid Cap Growth Equity Fund. This analysis is provided for institutional research purposes only and is not investment advice.
"Constructive on resilient SMID-cap compounders while maintaining strict valuation discipline amid rate hikes and energy inflation, selectively initiating longs in $GWRE, $TYL, and $BF-B while exiting thesis-impaired holdings like $BOOT and $WAY."
The Baird Small/Mid Cap Growth strategy declined -11.47% net of fees (-11.5% as reported in letter commentary) during the third quarter of 2026, underperforming its benchmark, the Russell 2500 Growth Index, which fell -10.35%. Year-to-date, the strategy declined -0.72% net of fees versus a +7.28% return for the benchmark. In contrast to large-cap equities, where the S&P 500 rose approximately 2% led by mega-cap technology and AI beneficiaries, small- and mid-cap equities faced significant headwinds. Although the strategy's broader factor backdrop proved favorable, results were hindered by stock-specific weakness heavily concentrated in the industrials and consumer discretionary sectors. Macroeconomic conditions grew increasingly complex as higher interest rates, elevated oil prices, and the Federal Reserve's first rate hike in three years raised acute concerns regarding persistent inflation and the sustainability of economic expansion. Market leadership narrowed considerably, and market factor patterns experienced sharp reversals from month to month. Within the portfolio, healthcare was the strongest relative contributor behind life sciences tools and AI-driven tailwinds, while industrial holdings and restaurant-heavy discretionary positions faced sharp pressure from cost inflation and shifting consumer sentiment. Portfolio management actively adjusted exposures across key sectors. The team established new positions in software providers Guidewire and Tyler Technologies to capture multi-year expansion with minimal AI displacement risk, and initiated a position in Brown-Forman citing asymmetric upside potential. Conversely, the strategy completely divested positions in Boot Barn, Waystar, Houlihan Lokey, Alignment Healthcare, and Jabil due to growth downgrades, quality concerns, or cyclical de-risking, while harvesting gains by trimming Twist Bioscience following a 90% rally.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Growth Outlook
Risk Appetite
Capital Deployment
Forward Guidance
Language Signal
Perceived Risk
Opportunity Density
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