Mairs & Power Small Cap Fund’s Q4 2025 Investor Letter

Mairs & Power, an investment advisor, released the fourth-quarter 2025 investor letter for the “Mairs & Power Small Cap Fund.” In 2025, artificial intelligence (AI) and market concentration dominated the market. Increased investment in technology and AI infrastructure drove rising valuations and corporate spending, leading to bubble-like tendencies. However, easing inflation, a Federal Reserve rate cut in Q4, and resilient corporate earnings provided some optimism. In this environment, the Fund returned 3.98% in 2025, trailing the Russell 2000 Total Return (TR) Index’s 12.81% gain, the S&P Small Cap 600 TR’s 6.02% return, and the Morningstar U.S. Fund Small Blend’s 7.68% gain. Macro headwinds affected smaller companies in 2025, but the second half of the year saw small-cap stocks gain as the labor market softened. Stock selection notably impacted performance, especially in Health Care, Information Technology, and Materials. While sector allocation positively contributed. Looking ahead to 2026, the Fund remains optimistic about small-cap stocks, which are expected to grow at or above the S&P 500’s rate. In addition, please check the Fund’s top five holdings to know its best picks in 2025.

A copy of Mairs & Power Small Cap Fund’s Q4 2025 investor letter can be downloaded here.