| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | 4% |
The Arnott Opportunities Strategy generated a 3.97% net return for the six months ended June 30, 2025, maintaining 33% net long exposure. Aerospace was the largest contributor as airline positions benefited from strong pricing and travel demand, with capital rotated into Airbus. The AI theme continues benefiting from surging data demand, with a new Softbank Group position targeting OpenAI exposure upside. Uranium gained momentum as Sprott's $200m physical purchase drove spot prices from $65 to $78 per pound. The GLP-1 theme was the largest detractor due to underestimating compounding pharmacy impact on Novo Nordisk and Eli Lilly, leading to position exits and rotation into shorting alcohol and snacking companies. A new Housing theme targets UK homebuilders, capitalizing on structural undersupply of 800,000+ homes and government policy supporting 300,000 annual builds. Key macro risks include rising US yields and fiscal deficit expansion, while catalysts include the September World Nuclear Association conference and Bank of England rate cuts. Since 2013, the Strategy has compounded at 18.39% annually net of fees.
The Strategy employs a thematic long/short approach targeting mispriced opportunities across global markets, with current focus on AI adoption acceleration, uranium supply dynamics, aerospace recovery, and structural housing opportunities in the UK, while managing risks through selective short positions in fading consumer trends.
The manager remains focused on long-term value creation despite modest six-month gains. They view current AI investment cycle as more like 1997 than 1999, suggesting continued structural opportunity. The team is energized by opportunities ahead while remaining dedicated to navigating challenges with clarity and confidence.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 31 2025 | 2025 Q2 | 8136.T, 9984.T, 9987.HK, AIR.PA, DIDIY, LLY, NVO | aerospace, AI, China, global, Housing, Long/Short, thematic, uranium |
DIDI 9992.HK |
Arnott's thematic long/short strategy delivered 3.97% in H1 2025, led by aerospace and AI themes while GLP-1 detracted. New UK housing theme capitalizes on structural undersupply and policy tailwinds. Strategy rotated from airlines to Airbus, exited GLP-1 longs for alcohol/snacking shorts, and added Softbank for OpenAI exposure. Macro risks center on rising US yields. |
| Mar 31 2025 | 2025 Q1 | - | Absolute return, Equity, Long/Short, thematic, US | - | Arnott returned -2.82% in March as markets questioned U.S. exceptionalism amid policy-induced economic slowdown. Fund maintains cautious positioning with 44% net exposure, expecting range-bound S&P 500 markets. Management focuses on trading orientation while prepared for swift portfolio restructuring if geopolitical tensions escalate. |
| Feb 13 2025 | 2024 Q4 | AIR.PA, BA, LSEG.L | aerospace, AI, China, Japan, Long/Short, Macro, Opportunities, value | AIR.PA | Arnott delivered modest 3.33% returns in 2024 due to capital allocation issues despite strong idea generation. Building material Airbus position to capitalize on aerospace disruption while maintaining Japan focus and tactical China exposure. Sees 2025 tailwinds from monetary easing and earnings growth but watches AI sustainability and valuation risks. |
| Oct 31 2024 | 2024 Q3 | - | China, Long/Short, policy, thematic, uranium, volatility | - | Arnott Opportunities gained 3.89% in September on China policy surprise and uranium strength. Despite 20%+ Chinese equity rally benefiting positions, fund reduced China exposure citing unfavorable trading setup. Expects US election volatility with Trump presidency risks including inflationary tariffs and fiscal deficit concerns potentially leading to higher rates contrary to market expectations. |
| Aug 5 2024 | 2024 Q2 | - | Absolute return, AI, Asymmetric, commodities, Long/Short, thematic, uranium | - | Arnott Opportunities delivered -0.61% in June with 5.02% YTD returns, maintaining 19.95% annualized performance since inception. AI theme drove positive contributions while Uranium and Commodities positions detracted. The fund operates with 27% net exposure and 139% gross exposure, pursuing asymmetric returns through thematic investing with disciplined risk management. |
| May 2 2024 | 2024 Q1 | AMZN, CCO | AI, Data centers, energy, nuclear, thematic, uranium | CCO | Arnott Opportunities returned 3.67% in March, driven by nuclear and data center themes. Amazon's nuclear-powered data center acquisition signals the AI-driven nuclear renaissance. The fund holds Cameco Corporation for its underappreciated nuclear fuel cycle business and is adding nuclear supply chain beneficiaries as energy demand accelerates. |
| Jan 15 2024 | 2023 Q4 | - | Asymmetric, energy, Hedge Fund, Long/Short, thematic, uranium | - | Arnott Opportunities delivered 3.15% in December, driven by long Uranium and Energy themes while short Australian Banks detracted. The fund maintains 42% net long exposure through its asymmetric thematic strategy, achieving 4.84% for 2023 and 20.42% annualized since inception with minimal correlation to traditional markets. |
| Nov 22 2023 | 2023 Q3 | - | Battery, energy, Japan, Long/Short, Luxury, rates, thematic | - | Arnott Opportunities posted -2.72% in October amid mixed global conditions, with Energy and UK themes detracting. The fund reduced short positions in Luxury and Battery themes after significant declines. Key focus on Japan as potential end of ultra-loose monetary policy could eliminate decades-long liquidity backstop for Western assets, creating asymmetric opportunities. |
| Jan 20 2023 | 2022 Q4 | - | - | - | |
| Nov 23 2022 | 2022 Q3 | - | - | - | |
| Jan 7 2022 | 2022 Q2 | - | - | - | |
| Jan 4 2022 | 2022 Q1 | AGL AU | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q2 |
AIAI adoption is accelerating with corporate deployment moving from board discussions to implementation phase. Meta demonstrates strong returns from AI investment with customers deploying tools at scale. Corporate adoption shows 30-50% of internal work now handled by AI agents at major companies, suggesting we are in 1997 rather than 1999 bubble territory. |
OpenAI Corporate adoption AI agents Productivity Investment returns |
UraniumUranium came to life with Sprott Physical Uranium Trust raising $200m, driving spot prices from $65 to over $78 per pound. The World Nuclear Association conference in London this September represents a potential catalyst for increased contracting activity to revitalize the nuclear space. |
Sprott Spot price Nuclear Contracting Physical uranium | |
AerospaceAerospace was the largest performance contributor with long positions in global airline carriers benefiting from strong pricing environment and continued travel demand momentum. Capital has been rotated from airlines into Airbus, which is now the largest exposure within this theme. |
Airlines Travel demand Airbus Pricing environment Aviation | |
GLP1GLP-1 theme was the largest detractor due to underestimating impact of compounding pharmacies on the market. Significant user volume shifted to cheaper compounded alternatives, shrinking profit pool for incumbents Novo Nordisk and Eli Lilly. Strategy has shifted to shorting alcohol and snacking companies anticipating disproportionate impact from ongoing GLP-1 adoption. |
Compounding pharmacies Novo Nordisk Eli Lilly Alcohol Snacking | |
HomebuildersUK homebuilders represent alignment of cyclical and structural forces with Bank of England set to commence rate cutting cycle. Structural drivers include housing undersupply of 800,000+ homes and political sea change with government targeting 300,000 annual builds. Sector trades on depressed multiples despite potential for policy-driven recovery. |
UK housing Rate cuts Undersupply Planning reform Political change | |
| 2025 Q1 |
AIMarkets have shifted from concerns about AI capital expenditure to complete reversal on U.S. exceptionalism. The current earnings season is unlikely to provide clarity on outlook as tariff news is still recent. |
Artificial Intelligence Capital Expenditure Technology |
| 2024 Q4 |
AerospaceCommercial aviation industry disruption creates opportunities as Boeing faces production issues while demand recovers to pre-COVID levels. Airbus positioned to benefit from competitor weakness with strong order book and earnings growth potential. Aircraft leasing companies also benefit from increased demand and higher rates. |
Airbus Boeing Aircraft Leasing Aviation Commercial Aircraft |
JapanInterest rate normalization after two decades of zero rates brings reflation and reforms. Wage growth drives domestic inflation, exposing opportunities in domestic Japanese companies. Policy normalization creates structural tailwinds for Japanese equities. |
Interest Rates Reflation Wage Growth Domestic Reform | |
AIMega cap technology companies continue massive capital expenditures on AI infrastructure, but genuine use cases and returns on invested capital remain unclear. Market participants backing historical execution while waiting for killer applications to justify investments. |
Capital Expenditure Technology Use Cases Returns Infrastructure | |
ChinaStructurally challenging at country level with decades needed to unwind excesses, similar to Japan's experience. Strategy focuses on tactical trading opportunities rather than long-term investments, renting exposure to domestic economy and broader index. |
Tactical Trading Domestic Economy Structural Opportunities | |
| 2024 Q3 |
ChinaChina was the biggest source of volatility and gains in September, with significant policy shifts supporting the economy leading to a 20%+ rally in Chinese equity indices. The fund benefited from recently established China positions but reduced exposure despite attractive valuations and resilient companies. |
China Policy Stimulus Equities Valuations |
UraniumUranium positions contributed positively to performance during September, generating +92 basis points of returns for the fund. |
Uranium Nuclear Energy | |
| 2024 Q2 |
AIThe fund maintained exposure to the Data is the new oil theme with continued underlying momentum of picks and shovels of the AI arms race. This theme was a key positive contributor to performance throughout June. |
Data Centers Semiconductors Cloud Technology Infrastructure |
UraniumThe portfolio held long positions in Uranium as part of demand and supply imbalance themes. However, this positioning was a detractor from performance during June. |
Nuclear Energy Commodities Supply Demand | |
CommoditiesThe fund maintained exposure to commodities as part of demand and supply imbalance themes, though this positioning detracted from performance during the period. |
Supply Demand Materials Resources Inflation | |
| 2024 Q1 |
Data CentersAmazon's acquisition of a 960 MW data center campus from Talen Energy, powered solely by nuclear energy at premium prices, signals the nuclear renaissance driven by AI demand for data center construction and power. This creates opportunities in the nuclear energy supply chain beyond traditional uranium mining. |
Nuclear Power AI Energy Demand Cloud Infrastructure Power Generation |
NuclearThe nuclear renaissance is accelerating as data center operators seek large amounts of nuclear-generated power. Cameco Corporation's nuclear fuel cycle business through Westinghouse is underappreciated, with dominant positions in fuel conversion and services to two-thirds of the world's operating nuclear fleet. |
Uranium Nuclear Fuel Cycle Westinghouse Power Generation Energy Supply Chain | |
UraniumRising energy demand and the nuclear renaissance create opportunities in uranium and the broader nuclear fuel cycle. The fund is leveraging existing nuclear knowledge to add companies that benefit from this emerging theme beyond traditional uranium miners. |
Nuclear Fuel Energy Transition Mining Power Generation Supply Chain | |
| 2023 Q4 |
UraniumUranium was identified as a key contributor to fund performance during December 2023, representing one of the fund's long themes that generated positive returns. |
Nuclear Energy Transition Commodities |
EnergyEnergy positions contributed positively to fund performance in December 2023, forming part of the fund's long thematic exposure strategy. |
Oil Natural Gas Energy Transition | |
| 2023 Q3 |
EnergyEnergy was identified as a key detractor to performance for the month. The fund has exposure to energy themes that negatively impacted returns during October. |
Oil Energy Trading Exploration & Production |
LuxuryLuxury names were mentioned as part of key short themes that have fallen significantly. The fund has recently reduced some of these short positions after they declined substantially. |
Luxury Consumer Finance Apparel | |
Battery Supply ChainBattery makers were identified as another key short theme that has fallen significantly. The fund has recently reduced exposure to this theme after substantial declines. |
Battery Manufacturers EV Batteries Battery Metals | |
RatesThe fund discusses peak interest rates as a tailwind supporting corporate profits. Higher rates are yet to take effect for many businesses, creating headwinds through higher costs and potential margin squeeze. |
Rates Inflation Liquidity | |
JapanJapan remains the last anchor for global duration with a new Governor at the BOJ, 20+ year lows in the Yen, and the likely end of the deflation era. The end of NIRP, ZIRP and YCC in Japan cannot be underestimated as it has been the liquidity backstop for Western assets for over 20 years. |
Japan Yen Liquidity Rates |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2025 | Fund Letters | Arnott Capital | DIDI | Didi Global | Communication Services | Interactive Media & Services | Bull | OTC Markets | China, duopoly, Hong Kong listing, Latin America, Mobility Platform, OTC Markets, Regulatory turnaround, ride-hailing, Special Situation | Login |
| Jun 30, 2025 | Fund Letters | Arnott Capital | 9992.HK | Pop Mart International Group | Consumer Discretionary | Leisure Products | Bear | Hong Kong Stock Exchange | Asia, Blind box, Celebrity endorsement, Collectible toys, Fad stock, Hype cycle, K-pop, Scalping, secondary market, Viral trend | Login |
| Dec 31, 2024 | Fund Letters | Arnott Capital | AIR.PA | Airbus SE | Industrials | Aerospace & Defense | Bull | Euronext Paris | Aerospace, Aircraft Manufacturing, Commercial Aviation, duopoly, Europe, Industrials, market share, operating leverage, Production Ramp | Login |
| Mar 1, 2024 | Fund Letters | Arnott Capital | CCO | Cameco Corporation | Energy | Uranium | Bull | NYSE | AI infrastructure, data centers, energy, Fuel Conversion, Mining, Nuclear, Oem, uranium, vertical integration, Westinghouse | Login |
| TICKER | COMMENTARY |
|---|---|
| NVO | Coming into 2025, we were of the view that GLP-1 demand would continue to rise, allowing the market to feel comfortable with the duopoly position of Novo Nordisk and Eli Lilly in this rapidly growing market. On 15x forward earnings, and double digital EPS growth, the numbers didn't align. On reflection, we underestimated the impact of compounding pharmacies on the overall GLP-1 market. A significant volume of users and potential users shifted away from prescribed medications toward significantly cheaper compounded alternatives, seeing the profit pool shrink for the incumbents Novo Nordisk and Eli Lilly. Subsequently, we have exited this position. |
| LLY | Coming into 2025, we were of the view that GLP-1 demand would continue to rise, allowing the market to feel comfortable with the duopoly position of Novo Nordisk and Eli Lilly in this rapidly growing market. On reflection, we underestimated the impact of compounding pharmacies on the overall GLP-1 market. A significant volume of users and potential users shifted away from prescribed medications toward significantly cheaper compounded alternatives, seeing the profit pool shrink for the incumbents Novo Nordisk and Eli Lilly. |
| AIR.PA | With the rally in these share prices, we have monetised these positions and rotated capital into Airbus, which is currently the largest exposure within this theme. |
| 9984.T | We recently increased our gross exposure to this thematic, with the initiation of a long position in Softbank Group. We believe their material discount to its current net asset value has a potential to contract as the market begins to consider what their 10% ownership stake in OpenAI could ultimately be worth. |
| DIDIY | Didi is China's dominant ride hailing app, with global operations in Latin America, Australia and Japan. The company came to listed markets in 2021, hitting the board at a US$67 billion valuation and hitting a US$80 billion valuation in the days following. However, just as swiftly as it listed, came a tidal wave of regulatory scrutiny via the Cyberspace Administration of China resulting in the Didi app being banned for new users in China. After a fall of more than 70% in the share price, Didi was de-listed from the main board of the New York Stock Exchange and left to trade on the Over-the-Counter Market. Three and a half years on, Didi is in a starkly different position than where it was in December 2021: They were given a clean bill of health in 2023 from Chinese regulatory authorities. They have gotten fit and refocused on profitable growth, a significant improvement from the CNY 43 billion EBITDA losses recorded in 2021. Are operating an effective duopoly with Uber in key LATAM jurisdictions, in rapidly digitising consumer economies. We believe the tides are turning for Didi, with the company poised to relist on the main boards in Hong Kong. |
| 9987.HK | Enter the Labubu doll. In the space of a year, the Labubu doll has become a viral sensation with the blind box openings and character engagement flooding TikTok feeds, driving a surge in demand. So much so, that Labubu dolls trade at hundreds of percentage point premiums in the secondary market. This has catapulted Pop Mart to be one of Asia's darlings, seeing the share price rise by over 600% in the past year. Given the unique blind box structure, the surge in profitability has been even more startling than in the case of Sanrio, with Pop Mart's semi-annual net profit forecast to rise nearly 800% in the space of two years. We have been following the secondary pricing of Labubu dolls across a range of platforms and in June the re-sale prices of Labubus peaked and continued their trajectory downwards. We believe this will put a significant portion of the demand seen in the second half of 2024 and the first half of 2025 at risk, potentially resulting in loss-making inventory and an oversupply that floods the market. |
| 8136.T | This is not the first and it will not be the last time a trend like this has occurred with an Asian originated IP company. Fortunately, this exact hype cycle for unique IP has played out before in Asia with the Hello Kitty craze back in the early teens, driving a blistering 700% share price rally for the parent company, Sanrio, as sales of the beloved Hello Kitty merchandise skyrocketed globally after Paris Hilton was seen wearing Hello Kitty merchandise. |
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