| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | -13% | -13% |
The Church House Human Capital Fund experienced a challenging start to 2026 with a -13.0% quarterly return, as Middle East tensions created harsh conditions for small and medium-sized businesses globally. Despite short-term market volatility, the underlying portfolio demonstrates strong fundamentals with portfolio earnings growing 19% in 2025 and expected to increase 12% to 4.24p in 2026. The manager added two new positions during the quarter: Next Generation Technology Group, a Japanese acquirer of small businesses capitalizing on generational ownership transitions, and Nemetschek, a German construction software company acquired at attractive valuations following the broad software sell-off. The fund maintains discipline in its investment process, recognizing that market themes cycle in and out of favor. With acquisition activity from portfolio companies expected to accelerate, the manager anticipates earnings growth could exceed 15% as 2026 progresses. The portfolio remains focused on quality growth businesses despite current market headwinds affecting the small-cap segment.
Focus on exciting and innovative small and medium-sized businesses globally that demonstrate strong earnings growth, with portfolio companies showing 19% earnings growth in 2025 and expected 12% growth in 2026.
The market will go through periods when certain themes are in or out of favour and it is our responsibility to be disciplined with our process and not let outside noise distract from this. We cannot say when this will happen, but it will. Portfolio earnings are expected to increase by 12% to 4.24p in 2026, with acquisition activity from portfolio companies expected to increase this to more than 15% as 2026 progresses.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 1 2026 | 2026 Q1 | NEM.DE, NGTG.T | AI, defense, global, growth, Japan, small caps, software | - | Human Capital Fund down 13% in Q1 2026 as Middle East conflict pressured small-cap growth stocks. Despite volatility, portfolio companies show strong fundamentals with 19% earnings growth in 2025 and 12% expected in 2026. Added Japanese business acquirer NGTG and German software firm Nemetschek at attractive valuations during market weakness. |
| Oct 30 2025 | 2025 Q3 | 9424.T, BERG-B.ST, CHAP.DE, CICN.SW, CSU.TO, DPLM.L, INDU.ST, JDG.L, KPG.AX, LAGR-B.ST, LIFCO-B.ST, LMN.TO, MGRP.ST, PMS, SIS.TO, TOI.TO | Acquisitive, Decentralised, global, Mid-cap, small caps, value | - | Church House Human Capital fell 4.6% in Q3 despite adding four promising global investments. Weakness driven by Judges Scientific funding cuts, Constellation Software CEO retirement impact, and mid-cap derating. Manager actively buying quality businesses at attractive levels, maintaining conviction in entrepreneurial acquirers overlooked by Magnificent Seven-focused markets. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
DefenseThe Middle East conflict has created harsh conditions for small and medium-sized businesses globally, which is the focus area of the Human Capital Fund. Defense companies have been beneficiaries of escalating hostilities, with demand sadly high and unlikely to abate soon. |
Defense Geopolitical Conflict |
AIConcerns around AI capabilities from Anthropic continued to weigh on software-as-a-service stocks. The broad software sell-off at the start of the year provided opportunities to revisit businesses like Nemetschek at more attractive valuations after previously being too expensive at 40x earnings. |
AI Software Valuation | |
Small CapsThese conditions have proven particularly harsh for small and medium sized businesses worldwide, which is the area where the Human Capital Fund is focused. The market will go through periods when certain themes are in or out of favour, similar to 2022 when quality-growth came under pressure. |
Small Caps Quality Growth | |
| 2025 Q3 |
Small CapsThe fund focuses on entrepreneurial, acquisitive, decentralised businesses that are being overlooked as markets remain fixated on the Magnificent Seven. The manager sees this as creating opportunities in smaller companies with strong fundamentals. |
Mid-cap Decentralised Entrepreneurial Acquisitive Overlooked |
Defense SpendingThe fund added exposure to increased European defence spending through Cicor's acquisition of defence assets. The manager notes this is sadly a big growth area given current geopolitical tensions. |
European Defence Growth Geopolitical Assets |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| NGTG.T | Next Generation Technology Group is a Japanese company that specialises in the acquisition of small and mid-sized local businesses typically in manufacturing, aerospace components, industrials, and technology sectors. Japan has a generational challenge with thousands of niche businesses founded during the 1980s boom years still being under family ownership and looking for long-term owners now that their founders are typically at or past retirement age. NGTG presents an attractive home for these businesses as proven perpetual owners located onshore. It is a buyers' market for private businesses in Japan and NGTG is a fantastic way to access this opportunity through a listed holding company. |
| NEM.DE | Nemetschek is a German company which develops and distributes software used in architecture, engineering and construction. It was founded in the 1970s by Georg Nemetschek, whose family still owns around 45% of the business. The company helps customers with construction planning, computer aided design and product visualisation. We first met Nemetschek in February 2024 and were very impressed but felt that at 40x earnings their valuation was too high. We took advantage of the broad software sell-off at the start of this year to revisit the business and initiated a position in early March. |
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