The Madison Small Cap Fund experienced a difficult concluding quarter in 2025, lagging behind its benchmark, the Russell 2000. Despite a 2.2% rise in the Russell 2000, the fund's value decreased by 0.4%. A significant factor contributing to this shortfall was the fund's allocation in consumer staples, where investment choices negatively impacted performance. This period marked a disappointing end to the year for the fund.
Amidst a bull market for small-cap stocks, the fund's strategy diverged from the broader trend. The information technology sector also proved to be a challenging area, consistently representing a substantial portion of the fund's portfolio. In light of these market conditions, the fund capitalized on undervalued opportunities by making new investments in application software companies, Gitlab and Amplitude, during the fourth quarter.
Ultimately, the fund's management emphasizes the importance of rigorous fundamental research. The focus remains on identifying high-quality businesses with sustainable models and strong competitive advantages, irrespective of short-term market fluctuations. This disciplined approach is crucial for long-term value creation and navigating volatile market environments, ensuring resilience and potential for future growth.
