| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 21.3% | - | 3.6% |
Bonsai Partners returned 7.5% net in 2H 2025, underperforming the S&P 500's 11.0% return. The letter explores the concept of hidden moats built from capability stacks—many small, interlocking competitive advantages that are difficult to see individually but powerful in combination. Manager Andrew Rosenblum argues these diffuse advantages create investment friction because they are hard to explain, but that friction is precisely where mispricing opportunity lies. The letter uses Wise, one of the fund's largest positions, as a case study. Wise has built a hidden moat through vertically integrated payment infrastructure, a pricing model that shares scale economies with customers, and extensive back-office automation. The manager views this capability stack as exceptionally difficult to replicate, particularly given Wise's scale as the largest non-bank cross-border payments provider. The letter also assesses stablecoins as a potential risk, concluding they could commoditize one layer of Wise's stack but are not clearly superior to Wise's existing infrastructure. The manager continues to monitor this development while maintaining conviction in Wise's structural advantages.
Hidden moats built from capability stacks—many small, interlocking advantages—create powerful competitive positions that are difficult to replicate and often underappreciated by markets, generating mispricing opportunities for patient investors willing to understand complex, diffuse sources of advantage.
The manager expresses confidence in Wise's durability as a core holding, viewing its capability stack as exceptionally difficult to replicate. While monitoring stablecoin developments as a potential risk, the outlook on Wise remains constructive given its scale, structural cost leadership, and ability to adapt new technologies into its existing infrastructure.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 13 2026 | 2026 Q2 | WISE.L | Capability Stack, competitive moats, Fintech, Hidden Value, payments, value | WISE.L | Bonsai underperformed in 2H 2025 but maintains conviction in hidden moats built from capability stacks. Wise, a top holding, exemplifies this thesis with vertically integrated infrastructure, customer-aligned pricing, and automation creating a difficult-to-replicate advantage. Stablecoins pose a potential risk to one layer but aren't clearly superior to Wise's existing rails. The fund sees mispricing opportunity in diffuse, hard-to-explain competitive advantages. |
| Aug 18 2025 | 2025 Q2 | AMZN, CELH, FEVR.L, KO, MNST, TAP, WISE.L | Beverages, Customer Focus, Distribution, Enduring Economics, Partnerships, Quality | FEVR.L | Bonsai outperformed with 7.3% net returns, driven by the Enduring Economics framework combining competitive and customer advantages. The major focus is Fever-Tree's transformative Molson Coors partnership, providing guaranteed royalties through 2030 and massive U.S. distribution expansion. Despite market skepticism, the manager substantially increased the position at attractive valuations, expecting EBITDA to double over three years. |
| Sep 4 2024 | 2024 Q2 | AAPL, COST, CSCO, UI | Capital Allocation, hardware, Networking, Operational Float, Quality, value | UI | Bonsai Partners introduced 'operational float' as an investment framework, exemplified by new holding Ubiquiti. The networking hardware company achieves 32% operating margins while selling at one-third competitor prices through customer-subsidized operations. Founder-controlled with aggressive capital allocation, Ubiquiti was acquired at low valuations despite governance risks, offering potential for attractive long-term compounded growth. |
| Feb 19 2024 | 2023 Q4 | ESTC | long-term, Portfolio Management, software, technology, value | ESTC | Bonsai Partners outperformed in Q4 2023 while transitioning to a more stable, process-driven approach. The fund sold Elastic despite strong fundamentals, reflecting an evolved philosophy favoring adaptable companies over those requiring specific future outcomes. New technological tools and frameworks position the fund for improved decision-making and reduced operational friction going forward. |
| Dec 26 2023 | 2023 Q3 | ACN, CTSH, DAVA, EPAM, G, GLOB, NA9.DE, QCOM, TSM, TWKS, WIT | AI, IT Services, Robustness, semiconductors, technology, Value Investing | - | Bonsai Partners seeks robust businesses that spread risks across value chains, avoiding fragile single-point-of-failure companies. New investment in IT services company Nagarro exemplifies this approach - technology enablers that benefit from digitization without technology risk. Despite macro headwinds and AI uncertainty, the industry's adaptability and high success rate make it attractive at current valuations. |
| Feb 14 2023 | 2022 Q4 | FERG | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
Competitive MoatsThe letter explores hidden moats built from capability stacks—many small, interlocking advantages that are difficult to replicate. Examples include Toyota's production system, TSMC's accumulated process knowledge, and Costco's operational model. These diffuse advantages create investment friction because they are hard to explain, but that friction is where mispricing opportunity lies. |
Moats Competitive Advantage Capability Stack Hidden Value |
PaymentsWise is described as one of the fund's largest positions, with a hidden moat built on vertically integrated infrastructure, scale economies shared with customers, and back-office automation. The manager views Wise's capability stack as exceptionally difficult to replicate, particularly given its scale as the largest non-bank cross-border payments provider and structural cost leadership. |
Cross-border Payments FinTech Infrastructure Cost Leadership | |
CryptoThe letter assesses stablecoins as a potential risk to Wise's treasury function in cross-border payments. While stablecoins could commoditize one layer of the payment stack, the manager concludes they are not clearly faster or more efficient than Wise's existing infrastructure. Wise is positioned to adopt stablecoins as a component rather than a replacement if they become dominant. |
Stablecoins Cross-border Payments Treasury Blockchain | |
| 2025 Q2 |
BeveragesFever-Tree demonstrates the power of premium positioning in the mixer industry, capitalizing on Schweppes' fragmented ownership structure. The company's partnership with Molson Coors provides guaranteed minimum royalty payments through 2030, offering strong earnings visibility and resolving margin issues through domestic manufacturing. |
Premium Mixers Distribution Partnerships Margins |
QualityThe investment philosophy centers on identifying businesses with Enduring Economics - combining competitive advantage with customer advantage. Companies that deliver superior value to customers while maintaining defensive moats are more likely to sustain profitable growth over long periods. |
Enduring Economics Customer Advantage Competitive Advantage Durability Returns | |
| 2024 Q2 |
NetworkingUbiquiti operates in the networking technology hardware space, providing products like routing, switching, wireless access points, VoIP phones, and security cameras. The company competes against enterprise-grade networking equipment providers like Cisco's Meraki, Aruba Networks, and Ruckus Networks, but offers products at roughly one-third the price while maintaining higher profitability through operational efficiency. |
Hardware Infrastructure Enterprise Wireless Equipment |
QualityThe letter emphasizes Ubiquiti's focus on creating better-designed and priced versions of industry standards rather than radically new product categories. The company's outlier price-to-quality ratio is described as its greatest innovation and long-term competitive advantage, with products that are approximately 70% as functional as enterprise-grade equipment but at significantly lower prices. |
Design Value Competitive Advantage Innovation Products | |
| 2023 Q3 |
RobustnessManager emphasizes seeking robust businesses that spread risks across value chains or own key processes outright, avoiding fragile companies with single points of failure. Robust companies with pragmatic leadership are purpose-built to survive difficult terrain and act as hedges against unknowable risks. |
Diversification Adaptability Risk Management Value Chain Resilience |
IT ServicesDetailed analysis of IT services industry as technology enablers that benefit from digitization without technology risk. Industry has high base rate of success with most companies growing revenues and profits at 10%+ CAGR for decades, adapting through multiple paradigm shifts from custom development to cloud to AI. |
Technology Enablers Digitization Outsourcing Engineering Talent Adaptability | |
AIDiscussion of artificial intelligence impact on IT services industry, with bulls arguing AI will create more projects and bears fearing commoditization. Manager believes reality lies between extremes and industry will adapt as it has through previous technological shifts, with potential for higher billable rates offsetting reduced hours per project. |
Automation Software Development Technology Disruption Industry Adaptation Productivity |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Aug 13, 2026 | Fund Letters | Bonsai Partners | WISE.L | Wise | Other | Transaction & Payment Processing Services | Bull | - | Automation, Capability stack, Cost leadership, Cross Border Payments, Fintech, Hidden moat, network infrastructure, Non-bank provider, payment processing, Scale economies, stablecoins, vertical integration | Login |
| Aug 18, 2025 | Fund Letters | Bonsai Partners | FEVR.L | Fever-Tree Drinks | Consumer Staples | Soft Drinks | Bull | London Stock Exchange | asset-light, Beverage, Brand, consumer staples, Distribution Partnership, Margin recovery, Premium Mixers, royalty model, supply chain, turnaround, UK | Login |
| Sep 4, 2024 | Fund Letters | Bonsai Partners | UI | Ubiquiti Inc. | Information Technology | Communications Equipment | Bull | NYSE | asset-light, capital allocation, Counter-positioning, founder-led, Hardware, networking equipment, Operational Float, Prosumer, Share Buybacks, SMB | Login |
| Feb 19, 2024 | Fund Letters | Bonsai Partners | ESTC | Elastic N.V. | Information Technology | Systems Software | Bear | NYSE | AI, Database Software, network effects, Open Source, SaaS, Search Technology, Systems Software, Technology Disruption | Login |
| TICKER | COMMENTARY |
|---|---|
| WISE.L | Wise is one of our largest positions and a classic example of a hidden moat. Its competitive advantage is notoriously hard to explain because there is no single 'killer feature' to point to. Instead, over the past decade, Wise has built a capability stack optimized for speed, transparency, and price, all working toward a singular radical mission: making cross-border payments instant and nearly free. It's the combination of capabilities, not any one element, that competitors struggle to match. If we peel back the layers of Wise's stack, three capabilities stand out: Vertically integrated infrastructure: Rather than 'renting' rails from large banks, Wise connects directly to local payment systems and, when possible, central banks. This eliminates middleman tolls and reduces handoffs, which improves both speed and reliability. Scale Economies Shared: Most financial services price services based on what customers will tolerate. Wise prices bottom-up: underlying cost plus a small, fixed margin. As Wise gains efficiency through scale or operational improvements, it passes the savings back to customers through reduced prices rather than expanding profit margins. This self-imposed cap on profitability is difficult for legacy incumbents, optimized for quarterly earnings, to compete with. Lower prices attract more volume, and more volume improves unit economics, creating a virtuous cycle. Back-office automation: Wise's 'full speed, min fees' promise is powered by proprietary tooling built from the ground up across dozens of back-office processes. By replacing manual work with purpose-built software across the payment journey, Wise has pushed its cost-to-serve structurally lower than peers. It is also not obvious that stablecoins outperform Wise even within treasury. Consider the 'stablecoin sandwich,' a common way stablecoins mimic a cross-border transfer. A user converts fiat (USD) into a stablecoin (USDC), transfers the stablecoin, and then converts back into fiat (GBP). That requires two conversions. Wise, by contrast, typically only needs to source the destination currency. Eliminating an extra conversion step should, all else being equal, be faster and cheaper. This explains why many payments companies remain excited about stablecoins while Wise is relatively indifferent. For much of the industry, stablecoins can be faster than existing rails. For Wise, they are not clearly faster or more efficient than what it already built. If stablecoins become a dominant standard, Wise is well-positioned to adopt them as another component inside its existing stack rather than as a replacement for it. We continue to monitor this closely. Wise's strength comes from its capability stack: many small, interlocking advantages that add up to a formidable whole. In our view, that system is exceptionally difficult to replicate, particularly given Wise's scale as the largest non-bank cross-border payments provider and its structural cost leadership. |
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