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Small Cap Fund Beats Market Amidst Middle East Peace Hopes
20 Jul
Summary
- Madison Small Cap Fund returned 12.7% in Q2 2026, underperforming market indices.
- Despite market strength, fund's software investments led to recent underperformance.
- Fund acquired Madison Air Solutions Corporation, a new indoor air quality manufacturer.
The Madison Small Cap Fund experienced a 12.7% return in the second quarter of 2026, trailing the market's robust performance. Anticipation of Middle East peace fueled a broad rally, particularly benefiting Information Technology, Health Care, and Industrials sectors, with the Russell 2000 Index surging 21.5%.
Despite overall market strength, the fund's recent investments in underperforming software companies negatively impacted its quarterly results. However, the fund manager maintains strong conviction in the long-term prospects of these software holdings and remains optimistic about the small-cap sector.
A key development highlighted was the fund's acquisition of Madison Air Solutions Corporation (MAIR). This newly public company, specializing in indoor air quality products, showed a mixed performance post-IPO, with a one-month return of -11.83% as of July 17, 2026.
Madison Industries Holdings LLC's subsidiary, Madison Air Solutions Corporation, is recognized for leading positions in HVAC across commercial and residential markets, strong margins, and cash flow. The fund values MAIR at $50 per share, citing potential upside in its broader HVAC operations and service business, beyond the current market optimism surrounding its data center cooling capabilities.
