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 13, 2026
VT Castlebay UK Equity Fund rebounded 18% net of fees from its March 30, 2026 nadir through the end of the third quarter of 2026, outperforming the broader UK equity market by 12%. The fund achieved this recovery while sustaining an attractive 5.8% free cash flow yield against the UK market's 4.4%. The strategy maintains lower debt leverage than the broader index, operating with net debt to equity of 80% compared to 96% for the market, underpinned by an exceptional 97% cash conversion rate and self-funded compounding. The manager outlines a cautionary macroeconomic thesis comparing the contemporary artificial intelligence compute build-out to the American railroad boom and subsequent Panic of 1893. While AI infrastructure capex across top hyperscalers is guided to reach $750 billion in 2026, aggregate free cash flow across these firms has collapsed into negative territory. This aggressive capital consumption coincides with rising debt issuance, higher benchmark bond yields (US 10-year Treasury yields surpassing 5.2% and UK 10-year gilts reaching 5.4%), and persistent sovereign debt crowding out, which elevates the hurdle rate across the global economy. In portfolio activity, Castlebay fully liquidated its holding in Accenture and redeployed the capital to expand its position in Spirax Group. The decision reflects rising uncertainty over Accenture's ability to capture value during enterprise AI migration, contrasted with Spirax Group's expanding profit margins and self-funding business model. Portfolio companies continue to exhibit superior fundamental health, generating a 33% return on equity and 21% operating profit margins.
Compound wealth across economic cycles by investing exclusively in high-quality, cash-generative businesses that self-fund their growth and achieve returns well above their cost of capital.
The manager expects the bond market to serve as the ultimate regulator of the artificial intelligence build-out as high borrowing costs and mounting corporate debt compel hyperscalers to exercise capital discipline. As earnings comparisons toughen into 2027 and non-cash equity marks decelerate, equity market leadership across US tech is expected to narrow. Castlebay anticipates that capital will increasingly rotate toward self-funding businesses possessing durable balance sheets, superior returns on capital, and attractive free cash flow yields.
Moderate Conviction Bullish
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