Madison Small Cap Fund, managed by Madison Funds, released its Q2 2026 investor letter. A copy of the letter can be downloaded here. The small-cap market showed exceptional strength in Q2, largely due to anticipated peace in the Middle East. The Russell 2000 Index began to rally, propelled by Information Technology, Health Care, and Industrials. The Madison Small Cap Fund (Class I) returned 12.7% in the quarter, underperforming the Russell 2000's 21.5% and Russell 2500's 20.2%. While strong gains were seen in Info Tech investments, recent investments in underperforming software companies negatively impacted overall performance. Nevertheless, confidence in the long-term potential of these software investments remains high. The firm is optimistic about small caps, noting their recent outperformance over large caps, recovery in certain software sectors, and improvements in some housing stocks toward the end of the second quarter. Please review the Fund's top five holdings to gain insights into their key selections for 2026.
In its Q2 2026 investor letter, Madison Small Cap Fund highlighted its latest purchase, Madison Air Solutions Corporation (NYSE:MAIR). Madison Air Solutions Corporation (NYSE:MAIR), a subsidiary of Madison Industries Holdings LLC, is an indoor air quality products and solutions manufacturer. Madison Air Solutions Corporation (NYSE:MAIR) went public in April 2026. On July 17, 2026, Madison Air Solutions Corporation (NYSE:MAIR) closed at $34.00 per share, reflecting a market capitalization of $17.05 billion. Madison Air Solutions Corporation (NYSE:MAIR) posted a one-month return of -11.83%, while its shares gained 1.01% over the past three months.
Madison Small Cap Fund stated the following regarding Madison Air Solutions Corporation (NYSE:MAIR) in its Q2 2026 investor update:
"Madison Air Solutions Corporation (NYSE:MAIR) is a diversified industrial company focused on HVAC, with roughly two-thirds of its revenue from commercial markets and one-third from residential. The company has established leading positions across multiple well-known brands and is recognized for strong operating margins and cash flow generation. Following a strong public market debut, the valuation reflects significant optimism around the company's data center cooling business. However, we believe its broader HVAC operations, service business, and residential opportunities also offer upside. The company also benefits from an experienced leadership team and a differentiated market approach. Our intrinsic value estimate is $50."
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