Team's High-Conviction Approach Delivers Strong Long-Term Results

Baird’s Chautauqua International Growth Fund (CCWIX) and Chautauqua Global Growth Fund (CCGIX) recently marked their five-year anniversary with strong results for clients.  This important milestone highlights the team’s priority of delivering outperformance relative to each fund's passive benchmarks and peer groups.

Annualized Returns as of 4/30/2021
Institutional Class
1 Year 3 Years 5 Years Since Inception  Morningstar
RatingTM
(Overall)
Chautauqua International Growth Fund (CCWIX) 59.44%  15.06% 15.10% 14.67%
(4/16/2016)
 
(Out of 383 funds)
MSCI ACWI ex US Index 42.98%  6.98%  9.83%  9.92% 

Chautauqua Global Growth Fund (CCGIX) 54.62% 17.89%  18.49%  17.67%
(4/16/2016)
 
(Out of 302 funds)
MSCI ACWI Index 45.75% 13.32%  13.85% 13.74% 


The Morningstar Ratings are based on risk-adjusted returns as of April 30, 2021, and are as follows: Chautauqua International Growth Fund (institutional): 4 stars out of 383 foreign large growth funds (overall); 4 stars out of 383 foreign large growth funds (3 years); 4 stars out of 322 foreign large growth funds (5 years). Chautauqua Global Growth Fund (institutional): 3 stars out of 302 world large-stock funds (overall); 3 stars out of 302 world large-stock funds (3 years); and 3 stars out of 252 world large-stock funds (5 years).

On this milestone, the Chautauqua team provided a Q&A on the importance of active management in worldwide investing, their view on emerging markets and what enables Chautauqua to deliver strong results for clients.

WHY DOES CHAUTAUQUA CAPITAL MANAGEMENT BELIEVE THAT ACTIVE MANAGEMENT IS PARTICULARLY IMPORTANT IN THE INTERNATIONAL EQUITY MARKETS? 

Worldwide investing offers an expanded opportunity set. Approximately 95% of the global population and about 3/4 of the world’s economic activity (based on nominal GDP) occurs outside the United States. Given elevated growth rates in many of these non-U.S. countries, active managers simply have more opportunities to find advantaged, high-quality growth investments.

ONE OF THE KEY PILLARS OF YOUR INVESTMENT PHILOSOPHY IS HAVING A LONG-TERM FOCUS. TALK ABOUT WHY THAT IS MORE IMPORTANT THAN EVER AND WHAT THAT REALLY MEANS TO YOUR INVESTMENT TEAM IN A SOMEWHAT SHORT-TERM MINDED WORLD.

Chautauqua’s collaborative research approach is organized to identify great wealth-generating businesses that benefit from long-term trends, possess sustainable competitive advantages to exploit those trends and can be purchased at reasonable valuations. Many of our companies are potential beneficiaries of long-term growth trends such as: e-payments, rapid drug discovery, software-as-a-service, industrial automation, computer processing, 5G, renewable energy and on-line education.

We seek to understand the enduring nature of a company’s advantages and what will enable it to grow faster and be more profitable than the overall market and competition over time. Obtaining this “understanding advantage” is the bedrock for our conviction to make long-term investments in holdings. On average we hold our companies for five years. However, many have been in our portfolios since the inception of our institutional strategies 15 years ago.

We conviction-weight the portfolios based on our assessment of growth, profitability and valuation. This allows us to drive returns when the market provides valuation opportunities or protect gains when valuations get stretched. Being focused, yet nimble, in a short-term minded world helps us deliver on our investment goals over a normalized investment cycle.

WHAT DO YOU MAKE OF THE MORE RECENT ROTATION AWAY FROM GROWTH STOCKS {TOWARD VALUE STOCKS}?

We cannot predict whether the market rotation away from growth stocks and toward value stocks will persist or to what extent. However, we take a great deal of comfort investing in what we believe are advantaged businesses that benefit from long-lived trends such as digitalization, e-commerce, electronic payments, factory automation, and disease therapies just to name a few. These businesses often have leading market shares and a wide growth path ahead of them. Therefore, their ability to continue growing and compounding returns over the long-term is ultimately what proves them to be so valuable to portfolios, irrespective of the market environment or the economic cycle. Furthermore, the market rotation has caused many dislocations among the stock prices of great growth businesses, as has been the case in the past, we are most excited in times such as this because we believe periods of dislocations often present the most compelling opportunities for new investments in the portfolios.

DUE TO THE CURRENT CLIMATE OF ULTRA-ACCOMMODATIVE POLICIES AND ECONOMIC REOPENING, MUCH ATTENTION HAS BEEN PLACED ON INFLATION. HOW DO YOU MANAGE THE FUNDS IN RESPONSE TO THAT ENVIRONMENT?

With respect to managing the portfolios in a potential inflationary environment, we have taken great care to emphasize companies that we believe have pricing power because of the mission-critical or value-add nature of their products and services. Because of these features, these companies are able to transmit price in inflationary environments, and therefore protect their profit margins. Furthermore, we have made some incremental adjustments to portfolios to emphasize companies with more attractive valuations in light of higher market discount rates. These measures should help protect portfolios from deleterious inflationary pressures.

DO YOU INVEST IN EMERGING MARKETS?

We invest in both Emerging and Developed Markets, but how you measure them is a complicated question. Most investors characterize a company as emerging or developed based on where the company is domiciled, yet often these companies have revenue exposure in one or the other that might surprise people. So, we conduct research to understand where the company derives its revenue.

For example, one of the world’s largest and most dominant semiconductor manufacturing and design company is located in Taiwan (an emerging market). However, less than 15% of their revenues come from their home country and instead they do the dominant amount of their business in the U.S. Therefore, it is important to recognize that a company’s country of incorporation might not be the best gauge of the drivers of that company’s performance. Headquarter locations matter a whole lot less in our analysis than where the revenue is being generated.

ESG CONSIDERATIONS HAVE BECOME MORE IMPORTANT TO U.S INVESTORS. HOW DOES YOUR TEAM APPROACH ESG? 

We believe that environmental, social and governance factors can have a material effect on investment returns, and ESG factors have been part of our investment process since the inception of our strategies. Examples include, but are not limited to, corporate governance, climate change, supply chain integrity, labor practices and human resource management. While our primary focus is on delivering superior risk-adjusted returns, it has been our core belief that well-run companies tend to be good corporate citizens.

WHAT MAKES CHAUTAUQUA UNIQUE FROM OTHER GLOBAL INVESTORS?

There is no one single advantage. Our culture, ability to think independently and our recipe contribute to our ability to successfully execute our time-tested investment approach.

  • Culture - We are organized as a collegial and collaborative group of diverse individuals who are steeped in our approach. Each possesses a different area of expertise but has also been groomed as a generalist, so everyone brings both specific skills and broad investment understanding to the task of investment analysis. Our culture of humility and curiosity enables us to be comprehensive, focused, and nimble.
  • Independent Thinking - Being in a thoughtful but remote location such as Boulder, Colorado allows us to think long-term and focus on the signal not the noise. We will not outperform by investing in the same crowded ideas as everyone else. Our goal is to add value through differentiated alpha.
  • Recipe - Fads come and go but the enduring nature of our approach is as valid today as it was when it was initially employed in 1987. Our recipe is straight forward and requires careful precise work by talented professionals with a dedication to consistent implementation.

Additionally, we are backed and supported, in non-investment functions by Baird. This allows us to focus on deploying our investment process and taking care of our clients. Further, our concentrated portfolio and long-only investment style aligns our team structure for success. With 30-40 names portfolio companies and an average hold period of five years, our team of can do the in-depth work required to successfully deploy our process.

Annualized Returns as of 3/31/2021
Institutional Class
1 Year 3 Years 5 Years Since Inception
Chautauqua International Growth Fund (CCWIX) 70.33% 13.44% N/A 14.38%
(4/16/2016)
MSCI ACWI ex US Index 49.41% 6.51% N/A 9.45%
Chautauqua Global Growth Fund (CCGIX) 65.06% 16.00% N/A 17.05%
(4/16/2016)
MSCI ACWI Index 54.60% 12.07% N/A 13.00%


Chautauqua Team

Performance data represents past performance and does not guarantee future results. The investment return and principal value of the investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance data may be lower or higher than the data quoted. To obtain the fund’s performance to the most recent month end, SEC 30-day yield information, any sales charges, maximum sales charges, loads, fees, total annual operating expense ratio, gross of any fee waivers or expense reimbursements as stated in the fee table, contact Baird directly at 866-442-2473 or www.bairdassetmanagement.com/baird-funds.

Investors should consider the investment objectives, risks, charges and expenses of each fund carefully before investing. This and other information is found in the prospectus and summary prospectus. For a prospectus or summary prospectus, contact Baird directly at 866-442-2473. Please read the prospectus or summary prospectus carefully before investing.

Past performance is not indicative of future results and diversification does not ensure a profit or protect against loss. All investments carry some level of risk, including loss of principal. Investments in international and emerging markets securities and ADRs include exposure to risks including currency fluctuations, foreign taxes and regulations, and the potential for illiquid markets and political instability.

The Funds may hold fewer securities than other diversified funds, which increases the risk and volatility because each investment has a greater effect on the overall performance. Foreign investments involve additional risks such as currency rate fluctuations and the potential for political and economic instability, and different and sometimes less strict financial reporting standards and regulations.

The gross/net expense ratios for the institutional share class of the Chautauqua International Growth Fund are 0.90%/0.80%. The gross/net expense ratios for the institutional share class of the Chautauqua Global Growth Fund are 1.04%/0.80%.

The Morningstar RatingTM for funds, or "star rating," is calculated for managed products with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) Morningstar Rating metrics. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent 3-year period actually has the greatest impact because it is included in all three rating periods.

© 2021 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Chautauqua International Growth Fund

A redemption Fee of 2.00% is assessed on shares held for 90 days or fewer, as a percentage of the amount redeemed.

The net expense ratio is the gross expense ratio minus any reimbursement from the Advisor. The Advisor has contractually agreed to waive its fees and/or reimburse expenses at least through April 30, 2022, to the extent necessary to ensure that the total operating expenses do not exceed 1.05% of the Investor Class's average daily net assets and 0.80% of the Institutional Class's average daily net assets. Investor Class expense ratios include a 0.25% 12b-1 fee.

The Fund may hold fewer securities than other diversified funds, which increases the risk and volatility because each investment has a greater effect on the overall performance. Foreign investments involve additional risks such as currency rate fluctuations and the potential for political and economic instability, and different and sometimes less strict financial reporting standards and regulations.

The MSCI ACWI ex-U.S. Index® is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets excluding the United States.

Chautauqua Global Growth Fund

A redemption Fee of 2.00% is assessed on shares held for 90 days or fewer, as a percentage of the amount redeemed.

The Net expense ratio is the Gross expense ratio minus any reimbursement from the Advisor. The Advisor has contractually agreed to waive its fees and/or reimburse expenses at least through April 30, 2022, to the extent necessary to ensure that the total operating expenses do not exceed 1.05% of the Investor Class's average daily net assets and 0.80% of the Institutional Class's average daily net assets. Investor Class expense ratios include a 0.25% 12b-1 fee.

The MSCI ACWI Index® is a free float-adjusted market capitalization weighted index that is designed to measure the equity performance of developed and emerging markets. The MSCI ACWI Index® consists of 44 country indices, including the United States, comprising 23 developed and 21 emerging market country indices.