Consistent leadership, investment process delivers strong long-term results for clients
MILWAUKEE, WI, January 14, 2021 /24-7PressRelease/ — Baird Equity Asset Management is proud to celebrate the 20th anniversary of the Baird MidCap Fund (BMDIX), one of the longest running mid cap growth mutual funds with the same Portfolio Manager since inception.
Chuck Severson, CFA, founding PM, and Ken Hemauer, CFA, comanage the fund and have worked together for twenty years. The Fund was recently named to Morningstar’s Thrilling 36 list for the second consecutive year. The list recognizes funds that have low costs, strong corporate culture, skilled managers, and strong performance.
“Baird’s MidCap Fund has always been managed with the same consistent and repeatable process and its risk-controlled approach has helped investors through tougher market environments,” said Reik Read, Managing Director, Director of Baird Equity Asset Management. “Chuck and Ken have demonstrated the ability to add value for clients throughout their careers by investing in high-quality mid cap growth companies.”
We took the opportunity to ask Severson and Hemauer a few questions on this milestone.
What is unique about the mid cap asset class and how does your team approach it?
We all agree that mid cap is a unique asset class; there are a lot of exciting companies with distinctive traits and compelling stories. Looking back over the years, and this surprises many, mid-cap stocks have outperformed large- and small-cap stocks by a meaningful margin and they have done so in a consistent manner. There are fundamental factors that have driven these impressive results. Mid caps maintain almost all the growth rate of small caps but are not as volatile and are able to grow 2-3x faster than large caps. We also feel that it is an underappreciated asset class. Many asset allocation models and investors tend to combine the small- and large-cap asset classes believing this adequately covers mid-cap exposure which, in our view, by doing this they are accepting lower returns and greater risk.
Our team’s approach is to maintain a true mid-cap, traditional growth portfolio with high conviction (50-60 names) and high active share. We do rigorous research to ensure a high quality portfolio which to us means companies that have clear advantages – more profitable, faster growing and better financed than their peers – and we stay true to our investment principals regardless of the environment.
Chuck, for the past 20 years, this management team has been consistently led by you, describe the structure and why it works?
We have a focused, stable, and experienced investment team with all resources and effort dedicated to a singular investment style, high-quality growth. Our team is composed of industry veterans that have deep institutional knowledge of small- and mid-cap companies, as well as having spent the majority of their careers in the sectors they currently cover. Given the strong historical presence in each of their areas, our Portfolio Managers/Analysts have developed a strong network of industry contacts and expertise that lead to high conviction recommendations. Our investment team also has significant history together. We work incredibly hard to foster a team structure and culture that promotes collaboration, robust dialogue, and efficient decision-making.
Historically, describe the types of market environments this Fund outperformed and underperformed?
We are pleased with how our mid cap growth portfolio has performed in varying market environments. The strategy has outperformed in broad based up-market years and has had particularly strong relative performance in more challenging market environments. In the 20-year history of the Baird MidCap Fund, the benchmark has had six negative calendar years of performance and Baird has significantly outperformed the benchmark in all but one of those years.
We have typically underperformed the market during speculative, more narrow, and momentum type environments when lower quality, high-debt and/or unprofitable stocks are in favor.
You expanded your growth offerings five years ago to include the Baird Small/Mid Cap Growth strategy and the mutual fund vehicle will have a three-year track record later this year. What is the story behind the launch of this Strategy and what differentiates it from peers?
Launching the Small/Mid Cap Growth Strategy was a natural extension for the team. We were already researching smaller companies as we looked for those that might grow into the mid cap range. This asset class gives us the ability to invest in those companies sooner. The Strategy is also style pure with true exposure to both small- and mid-cap stocks, with high conviction (60-70 holdings) and high active share. Similar to our mid cap growth strategy, we strongly believe in our ability to drive outperformance in the SMID asset class.
About Baird Equity Asset Management
Baird Equity Asset Management offers a broad array of independently managed equity investment strategies including Growth, Value and Global/International. As one of Pensions & Investments’ “Best Places to Work in Money Management,” Baird Equity Asset Management has talented investment teams working to ensure long-term quality and continuity for clients. Baird Equity Asset Management is a division of Baird, a global financial services firm that has ranked among the Fortune 100 Best Companies to Work For® since 2004. For more information, please visit www.bairdequityassetmanagement.com.
Investors should consider the investment objectives, risks, charges and expenses of the fund carefully before investing. This and other information can be found in the prospectus or summary prospectus. A prospectus or summary prospectus may be obtained by visiting bairdfunds.com. Please read the prospectus or summary prospectus carefully before investing. This also provides information about performance information to the most recent quarter.
Performance data quoted represents past performance, which is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, maybe worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For performance data current to the most recent month-end, please visit www.bairdassetmanagement.com and the Baird MidCap Fund page.
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