Happy Holidays!
In this week’s letters,
– CDT Capital Management on the funds Walls of Worry;
– Manole Capital Management on the biggest story of 2026;
– Confluence Investment Mngt. on the stock market outlook;
– Elevator pitches for CPH CN; AVGO; CVNA;
Quarter in progress: 77 fund letters of Q4 are live on our database!
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Q4 2025 INVESTOR LETTER SUMMARIES
- Wall of Worry #1: Private Credit Accounting: Similarly to the way our partners compensate us for a job well done with performance fees, private credit fund LPs pay their managers based on their return performance as well. The assets we buy are public securities, meaning their value is widely known. Private assets, however, have no market value available at all and are subject to manager input which can result in massive distortions in the reported value of assets.
- Wall of Worry #2: Artificial Intelligence Growth Constraints: Resource limitations – such as land availability, electricity capacity, and skilled labor- could slow the pace of data center construction, thereby constraining the growth of AI companies. More severe financial constraints could potentially halt this expansion altogether.
- Biggest story of 2026: President Trump will nominate a new Fed Chair to replace Jerome Powell when his term ends in June. We believe President Trump will make this important announcement in January, giving his selection ample time to influence expectations, shape market behavior, and impact asset prices well ahead of the formal transition.
- Our economy: Looking ahead to 2026, we are focused on two important questions about the state of the US economy. The first is whether the job and labor market is fundamentally broken. The second area of focus is economic growth and the timing of fiscal tailwinds.
- Predictive markets: If you want to “place some action” on a college football game or an NFL team, you can do so legally in 38 states through online sportsbooks such as DraftKings, FanDuel, or Hard Rock. But what if you want to “express your opinion” on who becomes the next head of the Fed?
- Stock market outlook: Against this backdrop, market dynamics are being increasingly shaped by flows rather than fundamentals. The dominance of passive investment vehicles continues to benefit large cap equities and momentum-driven sectors, compressing dispersion and concentrating US market leadership.
- A combination of policy changes and macroeconomic trends is likely to weaken the US dollar, enhancing the return potential of international assets for US-based investors.
- Bond market outlook: Monetary policy is likely to be accommodative over the coming year. With inflation stabilizing near 3% and growth normalizing, the Federal Reserve has signaled a willingness to ease monetary conditions. A leadership transition expected next spring is likely to reflect a more dovish posture.
Q4 2025 TICKER TREEMAP
This quarter’s treemap of mentioned tickers (by Count)
ELEVATOR PITCHES BY FUNDS
Cipher Pharmaceuticals (by HalvioCapital )
- There was nothing significant to report for Cipher’s quarter and the thesis remains the same. The business continues to generate cash flow (US$21m of free cash flow in the first 9 months this year) and uses it to pay down debt.
- It should be in a net cash position by their December 31 reporting period with most likely all of their debt paid off around that time. They will then have access of up to $90m in financing to be put to use if they wish.
- They also received a favourable litigation ruling against Sun Pharmaceuticals for over $4 million plus additional legal fees and have the ability to charge a 15% royalty on any of Sun’s acne product sold inside Canada.
Broadcom Inc. (by ClearBridge Investments)
- The company’s leadership as an ASICS chip provider positions it as one of a few potential competitors to Nvidia. While Nvidia continues to dominate the AI compute market, customers are flocking to Broadcom to diversify their supplier base.
- Because these ASICS chips are Broadcom’s core competency, these sales yield increasing profit margins and returns for the company. Broadcom shares could still disappoint investors if competition increases, pricing decreases or volumes underwhelm, but its overall risk is likely still lower than Oracle’s.
- Broadcom’s AI strategy plays to its core strengths and does not require substantial, incremental capital outlays.
Carvana Co. (Tapasya Investment)
- Carvana continues to exceed execution expectations, successfully gaining market share and delivering profitable revenue growth.
- The recent surge in December was largely attributed to its inclusion in the S&P 500, which also validates our initial investment thesis. Given the significant increase in its valuation, I may look to trim this position in 2026.
- This potential decision would be driven by seizing higher-return opportunities elsewhere (opportunity cost), rather than a lack of confidence in the company or its management team.
HIGHLIGHT OF THIS WEEK
MEDIA APPEARANCES BY BSDs
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- Commodities trader Pierre Andurand’s main hedge fund ended 2025 down 40%, paring much deeper losses earlier in the year after bets on a range of metals.
- The Andurand Commodities Discretionary Enhanced recovered from a mid-year loss of about 60% thanks in part to positions in copper, silver, gold, tin and carbon permits.
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- Billionaire investor Ken Griffin’s flagship hedge fund at Citadel climbed double digits in 2025, navigating a volatile year marked by sharp market swings, trade tensions and a late-year rebound in risk assets.
- Citadel’s flagship multistrategy Wellington fund, its largest, gained 10.2% in 2025, according to a person familiar with the firm’s returns who asked to remain anonymous as the information is private.
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- Billionaire investor Cliff Asness’s AQR Capital Management finished last year with double-digit returns across its funds, a person familiar with the matter said on Friday.
- The $189 billion hedge fund made annual gains of 19.6% in its multi-strategy Apex Strategy, 18.6% in its alternative trend following Helix Strategy and 16.8% in its stock trading AQR Delphi Long-Short Equity Strategy.
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