Small-Cap Growth Investing in 2025: How CTSIX Leverages Company-Specific Momentum and Security Selection to Outperform

In 2025, small-cap growth investing has emerged as a compelling arena for active managers, with the Calamos Timpani Small Cap Growth Fund (CTSIX) standing out as a prime example of how disciplined security selection and company-specific momentum can drive exceptional returns. As of August 31, 2025, CTSIX delivered a year-to-date gain of 15.32%, outperforming the Russell 2000 Growth Index by over 800 basis points and the broader small-cap category averages [1]. This performance underscores a strategic focus on identifying undervalued small-cap companies with sustainable growth trajectories, even as macroeconomic volatility and sector-specific challenges persist.

A Strategy Rooted in Fundamental Momentum

CTSIX’s approach combines rigorous fundamental research with an analysis of market estimates to uncover companies with “underestimated growth differentials” [2]. According to a report by Calamos, the fund prioritizes firms operating in secular trends—such as alternative education, biotechnology, and digital services—where management teams consistently exceed earnings expectations [4]. For instance, holdings like Lincoln Educational Services (LINC) and Stride (LRN), both positioned in the education sector, have benefited from post-pandemic demand for flexible learning models and dissatisfaction with traditional systems [4]. Similarly, ADMA Biologics (ADMA) and GeneDx Holdings (WGS) have delivered strong returns through innovation in niche healthcare markets and favorable regulatory tailwinds [1].

This emphasis on company-specific fundamentals has allowed CTSIX to capitalize on earnings surprises and sectoral shifts. As stated by a July 2025 blog post from Calamos, “The fund’s outperformance in 2025 has been driven primarily by idiosyncratic strength, reflecting the market’s receptiveness to stocks with clear, actionable growth stories” [3]. This contrasts with broader market dynamics, where large-cap “Magnificent Seven” stocks dominated in 2024, leaving many small-cap funds struggling to match returns [4].

Navigating Volatility Through Active Management

While CTSIX’s 15.32% year-to-date return is impressive, it is important to contextualize the fund’s volatility. Over the past 12 months ending August 2025, the fund posted a -15.53% return, illustrating the inherent risks of small-cap investing [4]. However, the fund’s disciplined sell process and cohesive investment team have mitigated biases and enhanced decision-making efficiency [2]. Brandon Nelson, the fund’s lead manager, emphasizes a focus on “companies with unique services or products that allow for long-term growth,” often resulting in earnings surprises that drive momentum [4].

This active management approach has proven critical in 2025, as small-cap stocks trade at attractive valuations relative to large caps. Data from Seeking Alpha indicates that small-cap earnings acceleration is being fueled by favorable macroeconomic conditions and increased merger-and-acquisition activity [1]. CTSIX’s ability to diversify across sectors without excessive risk further strengthens its resilience in volatile markets [2].

The Road Ahead: Sustaining Outperformance

Looking forward, CTSIX’s strategy appears well-positioned for continued success. The fund’s 11.16% annualized return since inception in 2008—compared to 9.01% for the Russell 2000 Growth Index [2]—demonstrates its long-term efficacy. With a cohesive team and a focus on secular trends, the fund is likely to maintain its edge in a market where active management is increasingly vital [3].

However, investors should remain cognizant of the risks. Small-cap stocks are inherently more volatile, and CTSIX’s performance hinges on the continued execution of its holdings’ growth narratives. As Calamos notes, “The key to outperformance lies in the ability to identify and act on company-specific momentum before broader market recognition” [4].

Conclusion

The Calamos Timpani Small Cap Growth Fund exemplifies how a focused, active strategy can unlock value in the small-cap space. By leveraging fundamental momentum and strategic security selection, CTSIX has not only outperformed its benchmark but also highlighted the potential for skilled management in an asset class often overlooked in favor of large-cap dominance. For investors seeking to capitalize on the 2025 small-cap renaissance, CTSIX offers a compelling case study in disciplined, growth-oriented investing.

Source:
[1] Winning With CTSIX: 3 Potentially Powerful Drivers [https://seekingalpha.com/article/4820163-winning-with-ctsix-3-potentially-powerful-drivers]
[2] CTSIX - Timpani Small Cap Growth Mutual Fund [https://www.calamos.com/funds/mutual/timpani-small-cap-ctsix/]
[3] Company-Specific Sizzle Drives Returns in 2025 [https://www.calamos.com/blogs/voices/company-specific-sizzle-drives-returns-in-2025/]
[4] Stock Market Anomaly: Top Small Cap Growth Fund Wins Big [https://www.investors.com/etfs-and-funds/mutual-funds/stock-market-how-this-top-small-cap-growth-fund-wins-big/]