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 |
|---|---|---|---|---|---|---|
The Brandes Small Cap Value Fund returned 13.85% in Q2 2026, underperforming the Russell 2000 Index which rose 21.49%, but delivered 23.17% year-to-date, outperforming the benchmark's 22.57%. Performance was driven by industrials holdings, particularly aerospace and defense companies Moog, Park Aerospace, and Graham Corporation, which benefited from increased defense and space demand, and Orion Group, which capitalized on data center construction. The fund's significant underperformance came from underweight exposure to information technology, which accounted for over 35% of benchmark returns as AI infrastructure beneficiaries surged. The fund deliberately holds IT services and software companies like Globant, Amdocs, and NICE where AI disruption fears are elevated, believing the market has excessively discounted near-term risks. The manager increased consumer staples exposure by adding Campbell's and Conagra Brands, viewing these mature food businesses as attractively valued with margin recovery potential. The fund maintains a disciplined value approach, selling positions at intrinsic value to pursue opportunities with greater margin of safety, and remains optimistic about long-term positioning.
The Brandes Small Cap Value Fund pursues a disciplined value approach focused on small-cap companies trading at significant discounts to intrinsic value with strong balance sheets and durable free-cash-flow generation, actively avoiding expensive AI infrastructure beneficiaries while building positions in defensive consumer staples and industrial companies where the market has excessively discounted near-term risks.
The manager is optimistic about the potential of value stocks in general and believes the Brandes Small Cap Value Fund remains well positioned from a long-term risk/reward perspective. The fund's lower valuations compared to the Russell 2000 Index, combined with exposure to companies with strong balance sheets, compelling growth prospects, and durable free-cash-flow generation, are viewed as attractive characteristics. The manager sees the fund's differentiated positioning as making it an attractive complement to other small-cap offerings.
As of Jul 25, 2026
The Brandes Small Cap Value Fund is managed by the Small-Cap Investment Committee, which includes experienced professionals with over 17 years of experience at Brandes and extensive industry expertise. Key personnel include Mark Costa, CFA, who serves as Director and committee member, highlighting how small-cap stocks are currently undervalued with valuation ratios near 30-year lows. Luiz Sauerbronn serves as Director of the Investments Group with analyst responsibilities on the Industrials Research Team and membership on both International Large-Cap and Small-Cap Investment Committees. The management company, Brandes Investment Partners, was founded in 1974 by Charles Brandes after meeting Benjamin Graham, operating as a 100% employee-owned firm pioneering global value investing. The firm manages approximately $40.85 billion in total assets under management as of October 31, 2025. Brandes operates globally with offices in Dublin, Milwaukee, Singapore, and Toronto, in addition to its San Diego headquarters. The investment team brings collective expertise across various sectors and maintains a collaborative decision-making process. The fund's management demonstrates commitment to long-term value creation through low portfolio turnover of 23% and typical holding periods of two to five years.
The Brandes Small Cap Value Fund employs the Graham and Dodd value investing philosophy that has guided Brandes Investment Partners since 1974. The fund seeks long-term capital appreciation by investing predominantly in U.S. equity securities of small-capitalization companies that the investment team believes are undervalued relative to their financial strength and upside potential. The investment approach centers on identifying securities selling at a discount to their estimated intrinsic value, using fundamental analysis to assess companies based on earnings, cash flow generation, and asset values. This disciplined, bottom-up investing approach seeks to take advantage of market irrationality and short-term security mispricing. The firm believes the gap between purchase price and intrinsic value provides a margin of safety, with greater margins offering enhanced protection for investments. Securities are typically held for two to five years to allow time for the market to correct mispricings. The investment process involves screening over 5,000 companies based on valuation metrics, followed by in-depth fundamental analysis. Senior investment committees assess valuation reports, establish target prices, and make collaborative buy/sell decisions. The fund maintains at least 80% allocation to U.S. small-cap companies with market capitalizations of $7.5 billion or less at time of purchase.
Lead Portfolio Manager
Moderate Conviction Bullish
Market Conviction
The fund holds a concentrated portfolio with top 10 positions representing approximately 36% of assets and names specific holdings with clear theses. The detailed discussion of Campbell's with explicit valuation assumptions and risk factors demonstrates conviction. However, the portfolio appears to hold 20+ positions based on the breadth of companies mentioned, and some hedging language exists around Campbell's risks and AI disruption timing. The manager articulates clear views but maintains diversification across multiple sectors. This moderate-to-high conviction level with named, sized positions but some uncertainty acknowledged supports 0.68.
Growth Outlook
Market outlook remains above average conviction: Brandes Small Cap Value Fund outperformed significantly in Q1 2026 with 8.18% returns versus 0.89% for Russell 2000. Industrials and consumer staples drove performance while techno...
Risk Appetite
Risk appetite posture is moderate conviction: Brandes Small Cap Value Fund outperformed significantly in Q1 2026 with 8.18% returns versus 0.89% for Russell 2000. Industrials and consumer staples drove performance while techno...
Capital Deployment
The fund added three new positions (Campbell's, Conagra Brands, Fortune Brands Innovations) and exited two (Movado Group, National Bankshares), representing rotation rather than net deployment. No cash level changes are disclosed. The activity suggests selective redeployment of proceeds from appreciated positions into new opportunities, which is capital rotation scoring in the +0.20 to +0.30 range. Assigned 0.25 to reflect modest net activity without evidence of cash reduction.
Forward Guidance
Forward guidance signal: Brandes Small Cap Value Fund outperformed significantly in Q1 2026 with 8.18% returns versus 0.89% for Russell 2000. Industrials and consumer staples drove performance while techno...
Language Signal
The letter uses moderately bullish language around specific opportunities (attractive valuations, compelling setup, strong fundamentals, optimistic) but balances this with acknowledgment of underperformance, risks, and challenges. Phrases like 'excessively discounted,' 'attractive complement,' and 'well positioned' lean positive, but the extensive discussion of detractors and AI disruption concerns tempers the overall tone. Net balance is mildly positive at +0.25.
Perceived Risk
Perceived risk level is evaluated as moderate conviction. Brandes Small Cap Value Fund outperformed significantly in Q1 2026 with 8.18% returns versus 0.89% for Russell 2000. Industrials and consumer staples drove performance while techno...
Opportunity Density
The manager describes finding attractive opportunities in consumer staples and continues to identify value in specific areas like food products and companies where AI disruption fears are overdone. The ability to add three new positions while maintaining discipline suggests a selective but not scarce opportunity set. The characterization of the fund as 'well positioned' and the emphasis on lower valuations relative to benchmarks indicates opportunities exist but require selectivity. This supports 0.60.
Time Horizon
The manager emphasizes 'long-term capital appreciation' as the fund objective and describes being 'well positioned from a long-term risk/reward perspective.' The Campbell's thesis explicitly discusses 'long-term value accretion' and the willingness to hold through near-term AI disruption concerns suggests a multi-year outlook. However, the fund is a mutual fund with quarterly reporting and redemption capability, not permanent capital. The 2-4 year implicit horizon for value realization in positions like Campbell's supports 0.70.
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