The curated database of hedge funds that publish investor letters. Research by geography, strategy, and schools of thought.
| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
As of Oct 15, 2026
The Ariel Small Cap Value Tax-Exempt Composite posted a return of -3.46% net of fees (-3.34% gross of fees) for the third quarter of 2026. This relative performance demonstrated resilience against small-cap benchmark selloffs, outpacing the Russell 2000 Value Index (-4.91%) and the core Russell 2000 Index (-7.23%), while trailing mega-cap dominated large-cap gauges such as the S&P 500 (+2.3%) and the Nasdaq (+2.6%). Long-term net annualized performance remained positive, generating +17.48%, +7.08%, and +10.02% over 1-, 5-, and 10-year horizons, respectively. The strategy continues to run a concentrated small-cap portfolio characterized by high active share across fewer sectors than primary benchmarks. Macroeconomic conditions reflected a bifurcated market regime characterized by persistent headline inflation, rising interest rates, elevated energy costs, and escalating geopolitical tensions. The Federal Reserve's September rate increase triggered sharp surges in Treasury yields, placing pronounced pressure on small- and mid-cap equity valuations. Despite macroeconomic resiliency propelled by corporate profits and artificial intelligence capital expenditures, Ariel emphasizes that elevated market concentration among a handful of tech leaders has created severe valuation disconnects across neglected fundamental value franchises. Portfolio activity was marked by disciplined capital redeployment and active spin-off participation. Top contributors included Zebra Technologies Corporation and Charles River Laboratories International, while Norwegian Cruise Line Holdings and Generac Holdings faced near-term execution and regulatory sentiment headwinds. The fund acquired shares of spin-off ADI Global Distribution following its separation from Resideo Technologies, and received shares of Midera Food Processing after its spin-off from The Middleby Corporation. Concurrently, the team fully liquidated Leslie's, Inc. due to deteriorating operational execution, excessive balance sheet leverage, and weakening liquidity.
Exploit severe market bifurcation and volatility by patiently investing in overlooked, durable small-cap businesses possessing sustainable competitive advantages, solid balance sheets, and compelling long-term cash generation when market euphoria disconnects valuations from underlying company fundamentals.
Ariel expects economic conditions to be dictated by the ongoing tension between underlying economic strength and a more restrictive cost of capital driven by elevated interest rates and lingering inflation. Market returns are anticipated to transition away from multiple expansion toward fundamental earnings growth and cash generation, driving sharp performance differentiation across equities. The firm views ongoing macro volatility as a tactical ally for patient investors to systematically acquire high-quality, durable businesses at substantial discounts to their intrinsic value.
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