| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.7% | - | - |
| 2025 |
|---|
| 8.0% |
Diameter Master Fund returned +0.3% net in Q4 2025 (+8.0% YTD) with 45% average net exposure. The quarter was dominated by AI infrastructure investments, including profitable positions in Meta's Beignet data center financing and xAI debt, as AI-related issuance reached $90 billion. However, significant losses in distressed investments, particularly the fraudulent First Brands auto parts company and Eye Care Partners, offset gains. The fund lost 123 bps from First Brands alone after the company collapsed despite initial successful short positioning. EchoStar remained the best performer as its spectrum assets gained value for AI applications. Looking ahead, the manager expects continued massive AI capital needs with OpenAI requiring ~$600 billion through 2029. The fund sees opportunities in capital solutions for PE-backed companies facing refinancing challenges and remains cautious on consumer-facing sectors given low-income wage pressure. Key risks include AI technology dispersion, Chinese chemical overcapacity, and asset-backed finance credit expansion. The manager emphasizes improved discipline in distressed underwriting after costly lessons in management assessment.
Diameter Capital Partners focuses on complex credit situations across AI infrastructure financing, distressed debt, and capital solutions for overleveraged companies, seeking to capitalize on market dislocations and structural changes.
The manager expects 2026 to bring continued AI infrastructure investment opportunities alongside increased dispersion between winners and losers. Capital solutions for stressed PE companies should provide attractive risk-adjusted returns. The consumer faces mixed dynamics with wealthy Americans having room to spend while low-income segments struggle.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 8 2026 | 2025 Q4 | AEP, AFRM, AMZN, DIGI, GOOGL, META, MSFT, NFLX, NI, NVDA, ORCL, PARA, PGY, PPL, SATS, SOFI, T, TALEN, UPST, WBD | AI, credit, distressed, energy, Fraud, healthcare, technology |
ORCL SATS NVDA |
The fund made significant investments in AI-related debt including Beignet Investor LLC (Meta's AI data center financing) and xAI corporate debt. The quarter saw massive… |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
Consumer FinanceAsian retail investors are shifting from traditional assets like gold and property toward equities through systematic investment plans. In India, retail investors are moving monthly savings to SIPs similar to US 401K plans. Chinese households are also shifting from property concentration toward equities as private pension products open new channels for capital market flows. |
SIPs Retail Investors Pension Products Asset Allocation Household Savings | |
Credit StressThe fund is responding to historically low credit spreads by reducing exposure to high yield and other lower-rated debt. They believe current spreads offer insufficient compensation for credit risk and increase the risk of permanent impairment of capital. The managers are downside-focused and do not share the market's optimism needed to justify such low spreads. |
Credit spreads High yield Credit risk Permanent impairment Risk compensation | |
DistressedThe cannabis industry is experiencing widespread distress driven by oversupply, falling prices, and capital scarcity. This creates opportunities for operators with cost advantages to acquire distressed assets and restart defunct facilities at substantially lower capital expenditures with materially higher returns on invested capital. |
Distressed Assets Oversupply Capital Scarcity Consolidation Returns | |
Energy TransitionThe portfolio maintains significant exposure to electrification themes through companies like Bloom Energy, which provides clean, reliable power solutions for AI data centers. The energy transition represents a structural opportunity as companies race to build power infrastructure to support growing electricity demands from AI workloads. |
Electrification Clean Energy Power Generation Fuel Cells Grid Infrastructure |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 8, 2026 | Fund Letters | Scott Goodwin | ORCL | Oracle Corporation | Information Technology | Application Software | Bull | New York Stock Exchange | cloud, Database, Financing, infrastructure, Issuance | Login |
| Jan 8, 2026 | Fund Letters | Scott Goodwin | SATS | EchoStar Corporation | Communication Services | Cable & Satellite | Bull | NASDAQ | inference, monetization, Regulation, Spectrum, Sumofparts | Login |
| Jan 8, 2026 | Fund Letters | Scott Goodwin | NVDA | NVIDIA Corporation | Information Technology | Semiconductors | Bear | NASDAQ | CapEx, GPUs, Productcycle, scaling, semiconductors | Login |
| TICKER | COMMENTARY |
|---|---|
| AEP | 3Q earnings were in line. AEP raised its annual EPS guidance to 9% through 2030, supported by an increased capital plan driven by 28 GW of incremental load from data centers and large-load customers. |
| AFRM | Positive returns from Affirm were not enough to offset the detractors |
| AMZN | One company we own that we think has unique positioning to benefit from both the infrastructure and application layers is Amazon. Amazon's logistical prowess is one of the foremost moats in business today and it can and will be enhanced with AI. The company will do this in multiple ways, with better orchestration of its logistics assets and underlying cargo, as well as the buildout of more capable, sophisticated and robust robotics. Amazon is singularly well positioned to dominate the coordination layer, with AI's help, across its entire logistics network. |
| DIGI | We were also long DigitalBridge in the fourth quarter, before its announced acquisition by Softbank. |
| GOOGL | In the third quarter, Google, Kairos Power, and the Tennessee Valley Authority announced a major collaboration centered on a novel power purchase agreement. Google followed this announcement with another significant step forward. On October 27, Google and NextEra Energy announced plans to restart the Duane Arnold Energy Center. |
| META | On January 9, Meta Platforms unveiled a new agreement with Vistra—the largest generator of competitive electricity in the United States—as well as with TerraPower and Oklo. The announcement builds on Meta's agreement last year with Constellation Energy and positions the company to become one of the largest corporate purchasers of nuclear-generated electricity in the United States. |
| MSFT | MSFT was a detractor in 4Q25 following its fiscal first-quarter 2026 earnings report released on October 29. While results were better than expected operationally, investor reaction was driven by guidance and capital expenditure intensity rather than headline performance. Revenue grew 17% year-over-year, exceeding consensus expectations, and Azure revenue increased 39% year-over-year, also ahead of estimates. However, management guided to a sequential deceleration in Azure growth in fiscal Q2, signaling some moderation after a period of exceptional demand. |
| NFLX | NFLX was the portfolio's largest detractor in 4Q25 following investor concerns around near-term subscriber growth and rising content spending. While revenue grew approximately 10% year-over-year, management guided to slower net subscriber additions in North America and Europe after recent price increases, and margins were pressured by elevated investment in live sports and international content. |
| NVDA | AI bellwether NVIDIA's very strong set of earnings in late November helped the AI theme re-assert its dominance when investors breathed a sigh of relief following the results. |
| ORCL | Investor enthusiasm for Oracle's stock in calendar year 2025 was initially driven by several multi-billion-dollar contracts it signed with leading AI companies, including OpenAI and Meta. However, in Q4 sentiment for ORCL's growth prospects shifted to skepticism, as investors began to scrutinize the return profile of the substantial capital investments required to support the approximately $500 billion of contracts signed by Oracle. Given the widening range of potential outcomes associated with Oracle's elevated capital needs, we reduced our position in ORCL during Q4. |
| PARA | Paramount's high-profile hostile takeover bid to acquire Warner Brothers Discovery in December 2025 only fuels the comparisons between the current cycle and the late 1990s dot-com bubble. |
| PGY | Pagaya proved its economic model and took significant strides expanding its lending network. I added to my investments in Pagaya. |
| PPL | PPL reaffirmed its 6% to 8% EPS growth guidance. PPL is in its first rate case in PA since 2016. |
| SATS | December saw the GA-Courtenay Special Situations fund (USD I) appreciate by +6.3%, resulting in a return for 2025 of +6.5%. The positive result was primarily driven by price appreciation in Echostar and Filtronic, the fund's largest two positions, and both publically listed proxies for SpaceX. |
| SOFI | These firms have partnered with platforms like Polymarket and Kalshi. Together, they allow customers to trade simple YES or NO derivative contracts tied to a wide range of outcomes |
| T | Telecoms lagged on concerns that a new CEO at VZ (not held) will increase the competitive intensity within the industry. |
| UPST | I thought Upstart's AI day was a fantastic explanation of how the company is developing a unique competitive advantage in consumer lending. |
| WBD | Warner Bros Discovery (WBD) was the top contributor during the quarter. The U.S.-headquartered media company's stock price surged as multiple parties submitted offers to acquire all or part of the business. Following several rounds of bidding, WBD announced an agreement to sell its Streaming and Studios business to Netflix, while spinning the Global Networks business to shareholders. Paramount Skydance subsequently made a direct $30 per share offer to shareholders for the entire company. We are pleased with the steps the WBD board has taken thus far to unlock shareholder value. We will continue to closely monitor developments as this bidding war unfolds. |
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