| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | 0.04% |
The Arnott Opportunities Strategy returned 0.04% net for the six months ending June 30, 2026, with 32% net long exposure. Samsung Electronics and SK Hynix drove strong performance across both the AI memory theme (+511 bps) and Korean Corporate Reform (+518 bps), capitalising on abrupt tightening in AI memory supply as models evolved from chatbots to complex task-performing agents. UK homebuilders detracted 549 bps following Middle East conflict, energy price spikes and a 137 bps repricing in UK rate expectations over 20 days. The manager reshaped homebuilder exposure for the next upswing given 0.65x book valuations versus 1.5x midcycle. March losses exposed concentrated commodity and rate exposures that broad index hedges failed to offset, prompting process refinements. Looking forward, the manager sees compelling opportunities across AI infrastructure, Korean reform and a multi-year physical capital cycle driven by underinvestment in mining, construction and energy infrastructure. Hyperscaler capex now exceeds $1 trillion but amber flags emerge around debt funding and Chinese AI competition. Oil remains tight through year-end under intermittent Hormuz disruption.
The Strategy pursues asymmetric opportunities across three distinct but complementary themes: capitalising on the AI infrastructure build-out and memory cycle while monitoring emerging risks from debt-funded capex and Chinese competition; exploiting Korean corporate governance reform and NAV discounts; and positioning for a multi-year physical capital cycle driven by a decade of underinvestment colliding with rising demand from AI, energy security, defense and infrastructure replacement.
Market dispersion remains high, presenting a compelling opportunity set across AI infrastructure, corporate reform and the physical capital cycle. The manager expects greater dispersion between companies in the AI ecosystem as the next phase requires evidence that rising capex produces durable cash flow. Oil markets are expected to remain tight and volatile through the remainder of 2026 under an uneven normalisation regime, though the medium-term outlook could shift to surplus if Gulf production normalises in 2027. The physical capital cycle is expected to benefit from sustained demand driven by AI build-out, energy security, defense spending and infrastructure replacement, with price serving as the principal release valve until new capacity arrives.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 13 2026 | 2026 Q2 | 000660 KS, 005930 KS, AMZN, GOOG, META, MSFT, ORCL, TSLA | AI, Capital Cycle, Homebuilders, infrastructure, Korea, Mining, oil, semiconductors | - | Arnott Capital returned flat in H1 2026 despite strong gains from AI memory and Korean reform offset by UK homebuilder losses and hedge costs. March commodity shock exposed concentrated oil and rate exposures across seemingly diversified positions. The manager has repositioned toward underappreciated AI beneficiaries, Korean governance plays and physical infrastructure benefiting from a decade of capital underinvestment colliding with AI, energy security and defense demand. |
| 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 |
|---|---|---|
| 2026 Q2 |
AIHyperscaler capex is forecast to exceed US$1 trillion in FY27, up from US$590 billion at the start of the year, driving semiconductor sector earnings growth. Demand continues to accelerate with capacity remaining tight through 2027-2028. However, amber flags are emerging: hyperscalers are approaching the point where they cannot fund spending from free cash flow alone and may need to access debt markets, with CDS spreads beginning to widen. Chinese AI models have rapidly moved to the frontier at lower cost despite export restrictions, potentially lowering the cost of frontier capability and creating greater dispersion between companies. |
Hyperscalers Semiconductors Capex China Memory |
Semiconductor CycleAI memory supply tightened abruptly during the period, driving Samsung Electronics and SK Hynix to forecast combined net profit of US$360 billion through 2026, exceeding the combined forecasts for Amazon, Apple, Meta and Tesla. As AI models evolved from chatbots to agents capable of complex tasks, memory required for inference substantially increased. With limited supply and exploding demand, prices rose sharply. The manager has reduced memory exposure and shifted capital towards underappreciated beneficiaries of AI adoption and businesses with durable exposure to rising token demand. |
Memory Samsung SK Hynix Supply Pricing | |
Korean Corporate ReformKorean holding companies benefited from earnings momentum at Samsung Electronics and SK Hynix, which helped narrow underlying discounts to NAV. The manager has exited positions where returns were primarily linked to these two companies and their NAV discounts. Capital has been reallocated towards companies expected to benefit more directly from tighter governance standards, exchange-led reform, and broader domestic spillover from rising memory profits. |
Korea Governance NAV Discount Reform | |
OilThe Strait of Hormuz disruption created a regime where access is intermittent, volumes recover only partially, and each period of normalisation remains vulnerable to renewed disruption. The market avoided outright shortage through emergency stock releases, higher US exports and lower Chinese demand, but inventories continue to be drawn through Q3. Refined products may remain tighter than crude because restarting refineries and rebuilding diesel and jet fuel inventories takes longer. The near-term outlook is tight and volatile through the remainder of 2026, with intermittent disruption creating recurring inflation risk. The medium-term outlook is different: if Gulf production normalises during 2027, the market could move quickly from deficit back into surplus. |
Hormuz Supply Inventories Refineries Inflation | |
Infrastructure SpendingA global capital cycle is emerging as a decade of underinvestment in physical infrastructure collides with material demand changes driven by AI compute build-out, energy security investment, higher defense spending, and aging infrastructure replacement. Physical supply cannot respond as quickly as software: mines require permits, transmission lines require approvals, factories require equipment. Until new capacity arrives, price is the principal release valve. The manager is identifying businesses where demand has duration, supply is difficult to replicate, and management remains disciplined, particularly second-order beneficiaries with scarce assets, distribution networks, or regulatory approvals. |
Capital Cycle Mining Construction Energy Defense | |
Mining ServicesThe majority of the 'Revenge of the Dinosaurs' theme exposure sits in Asia-Pacific businesses across mining, construction, mining services and waste management. The manager favours companies with scarce assets, embedded service networks and disciplined balance sheets that can benefit from rising utilisation and pricing as the capital cycle turns. Valuation provides asymmetry: many businesses required to supply the physical build-out continue to trade at material discounts while investors have assigned premium multiples to first-order AI beneficiaries. |
Asia-Pacific Capital Cycle Valuation Utilisation | |
HomebuildersUK homebuilders were a material detractor, falling approximately 30% following the Middle East war outbreak, rising energy prices, sharply higher interest rate expectations, and weakening economic backdrop. Over 20 calendar days, UK interest rate markets repriced from two rate cuts to 3.5 rate hikes (137 bps), weakening mortgage affordability, increasing build costs, and pressuring house prices and volumes. The manager believes the recovery has been pushed to the right rather than permanently impaired. Homebuilders now trade at approximately 0.65x book value versus midcycle valuations closer to 1.5x, discounting prolonged weak volumes and elevated costs while providing meaningful upside if energy risk premia normalise and rate expectations stabilise. The exposure was reshaped to maximise exposure for the next upswing. |
UK Rates Valuation Undersupply | |
Energy SecurityInvestment in energy security is one of four largely independent forces driving demand for physical infrastructure and capital goods. This demand is pulling on the same limited resources as AI compute build-out, defense spending, and infrastructure replacement. Australia is unusually exposed to these forces and must service rising external demand while investing in its own energy system, transport networks and strategic resilience. |
Australia Infrastructure Capital Expenditure | |
| 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 |
|---|---|
| 005930.KS | Samsung Electronics and SK Hynix were the primary drivers of return across both Data is the New Oil and Korean Corporate Reform themes. Both holdings capitalised on the same immediate earnings catalyst - an abrupt tightening in AI memory supply. Samsung Electronics and SK Hynix are forecast to generate a combined US$360 billion in net profit through 2026. Putting it in perspective, this exceeds the combined 2026 net profit forecasts for Amazon, Apple, Meta and Tesla. |
| 000660.KS | Samsung Electronics and SK Hynix were the primary drivers of return across both Data is the New Oil and Korean Corporate Reform themes. Both holdings capitalised on the same immediate earnings catalyst - an abrupt tightening in AI memory supply. Samsung Electronics and SK Hynix are forecast to generate a combined US$360 billion in net profit through 2026. Putting it in perspective, this exceeds the combined 2026 net profit forecasts for Amazon, Apple, Meta and Tesla. |
| AMZN | At the beginning of the calendar year, consensus expectations for FY27 capital expenditure from Amazon, Alphabet, Meta Platforms, Microsoft and Oracle, 'The Hyperscalers' was forecast to be US$590 billion. Currently midway through the year, this figure is now set to exceed US$1 trillion. Andy Jassy stated on Amazon Q2 Earnings Call: 'We will still not have enough capacity to meet all the demand we have in 2026... the demand we already have for 2028 is striking.' |
| GOOG | At the beginning of the calendar year, consensus expectations for FY27 capital expenditure from Amazon, Alphabet, Meta Platforms, Microsoft and Oracle, 'The Hyperscalers' was forecast to be US$590 billion. Currently midway through the year, this figure is now set to exceed US$1 trillion. Anat Ashkenazi stated on Alphabet Q2 Earnings Call: 'We continue to expect our CapEx to increase significantly in 2027... demand still outpaces that investment.' |
| META | At the beginning of the calendar year, consensus expectations for FY27 capital expenditure from Amazon, Alphabet, Meta Platforms, Microsoft and Oracle, 'The Hyperscalers' was forecast to be US$590 billion. Currently midway through the year, this figure is now set to exceed US$1 trillion. Susan Li stated on Meta Q2 Earnings Call: 'Our current plans are geared towards maximizing 2026 and 2027 capacity... overall industry capacity is going to remain tight for the foreseeable future.' |
| MSFT | At the beginning of the calendar year, consensus expectations for FY27 capital expenditure from Amazon, Alphabet, Meta Platforms, Microsoft and Oracle, 'The Hyperscalers' was forecast to be US$590 billion. Currently midway through the year, this figure is now set to exceed US$1 trillion and has been the core fundamental driver behind the hottest part of the market and the largest contributor to S&P earnings growth year to date - that is of course, the semiconductor sector. |
| ORCL | At the beginning of the calendar year, consensus expectations for FY27 capital expenditure from Amazon, Alphabet, Meta Platforms, Microsoft and Oracle, 'The Hyperscalers' was forecast to be US$590 billion. Currently midway through the year, this figure is now set to exceed US$1 trillion. Last August, Oracle announced a record backlog which resulted in a material widening of Credit Default Swaps spreads as debt markets began to reprice their cost of default. In recent months, a similar repricing has begun to emerge across the other hyperscalers as capex intentions continue to accelerate. |
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