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 |
|---|---|---|---|---|---|---|
Distillate Capital's International FSV strategy returned 3.89% YTD net of fees in Q2 2026, lagging the MSCI ACWI Ex-US benchmark's 14.69% gain, driven primarily by the strategy's underweight to semiconductors and banks which dominated international returns. AI enthusiasm drove massive market moves with AI-related names gaining over $25 trillion in value since early 2023, yet next-twelve-month free cash flow estimates rose by only $300 billion, meaning share prices moved over 80x fundamental improvement. Momentum dominated with the S&P 500 Momentum index outperforming equal weight by a record 30 percentage points, reminiscent of the tech bubble. The manager is not bearish on AI as technology but worries profit generation needed to satisfy current valuations will be difficult in an extremely competitive industry. Outside of AI and mega-caps, tremendous value opportunities remain with numerous high-quality stocks trading at double-digit FCF yields. The strategy's 8.5% FCF/EV yield versus the benchmark's 4.6% represents the widest valuation advantage since inception. The manager focuses on fundamentals over sentiment, rotating into cheaper stocks where each dollar buys more underlying free cash flow, believing this approach will prevail as it did post-2000 when cheaper stocks significantly outperformed despite initial underperformance during the bubble.
Distillate Capital focuses on distilling large universes of stocks into only those where quality and value overlap using proprietary free cash flow-based definitions, seeking superior compounded long-term returns by limiting downside in periods of market stress while providing strong performance in up markets.
The manager believes fundamentals are the only real driver of returns in the long-term and expects that focusing on consistency of cash generation while rotating out of stocks whose valuations have increased will continue to grow underlying free cash flow at rates well above benchmarks. While the overall market looks expensive due to a small handful of very large and rich stocks, much of the rest of the market looks quite attractive with several high-quality names appearing extremely appealing. The manager sees tremendous opportunity ahead even despite the broader market's richness and concentration, both domestically and abroad. The tone is cautiously optimistic, with conviction that cheaper stocks on normalized free cash flow will outperform significantly when market multiples contract or hold flat, as fundamentals and accounting ultimately matter and will come to bear again.
As of Jul 17, 2026
Founded in 2017 by three CFA charterholder veterans with investment experience dating back to the 1980s, Distillate Capital Partners represents deep industry expertise in value investing evolution. Thomas M. Cole brings experience as former Chief Investment Officer at Institutional Capital, LLC and head of U.S. Equities at UBS Global Asset Management, with educational credentials from University of Wisconsin - Madison's Applied Security Analysis Program. Jacob A. Beidler contributes over a decade of quantitative analysis and macroeconomic research expertise, while Matthew T. Swanson provides 18 years of portfolio management experience in U.S. and international value strategies.
Distillate Capital Partners employs an updated approach to value investing specifically designed for today's asset-light economy. The firm recognizes that traditional valuation metrics have become outdated due to the shift from physical to intellectual capital and accounting distortions. Their investment philosophy emphasizes free cash flow-based metrics as superior measures of corporate risk and value compared to price volatility. The approach is largely quantitative, focusing on fundamental company metrics while exploiting behavioral biases and accounting distortions that create investment opportunities in modern markets.
Lead Portfolio Manager
Moderate Conviction Bullish
Market Conviction
The letter demonstrates high conviction through specific position sizing and clear thesis articulation. Accenture is named as a largest holding with specific valuation metrics (7.3x FCF vs historical 20x) and explicit upside case including share buyback math. The rebalancing summary shows meaningful position changes with specific weights and the manager states the current valuation advantage is 'by far the widest since inception.' The strategy holds 40-60 positions based on sector weights shown, which is moderately concentrated. However, conviction is somewhat tempered by the diversified nature of the portfolio across sectors and the acknowledgment of multiple scenarios. The manager uses declarative language about their approach and expected outcomes, citing historical precedent from the post-2000 period. The explanation cites specific portfolio behavior (rotation from semis to financials, adding to Accenture) and falsifiable metrics (FCF yields, valuation gaps), supporting a score in the high-moderate to high conviction range.
Growth Outlook
The manager maintains a cautious outlook on the broader market, scoring 0.25, because of historically expensive valuations in U.S. equities, especially among mega-cap stocks. They warn that such high valuations are typically followed by much more subdued future returns.
Risk Appetite
The score of 0.30 reflects a defensive risk appetite focused on capital preservation. The fund systematically avoids highly levered and unprofitable businesses, keeping its holdings concentrated in highly stable, cash-flow-generative, and lower-valuation areas.
Capital Deployment
The letter describes active rebalancing with specific purchases and sales, including adding FedEx, Intuit, and Intercontinental Exchange while selling QUALCOMM, ON Semiconductor, and Jabil. The manager increased positions in Accenture, Comcast, and Salesforce while trimming AbbVie and ICON. This represents capital rotation rather than net deployment or de-risking, as there is no mention of cash level changes. The phrase 'utilizing market swings to capture opportunities' suggests tactical activity but not aggressive net deployment. The strategy remains fully invested in equities with no indication of raising cash or reducing exposure. The planning of new long/short vehicles suggests preparation for deployment in a different structure rather than immediate capital deployment in existing strategies. This activity represents moderate rotation and selective adding, scoring in the low-positive range.
Forward Guidance
The score of 0.50 represents a systematic, monitoring posture without any sudden tactical shifts. The manager continues to execute their standard quarterly rebalancing strategy, systematically rotating from expensive to cheaper securities without attempting to time the broader market cycles.
Language Signal
The letter contains substantial bearish language around AI valuations, momentum extremes, accounting issues, circular financing, and comparisons to the tech bubble. Terms like 'extraordinary levels,' 'difficult to generate,' 'extremely competitive,' 'distort,' 'risky,' and 'polluted' dominate discussions of current market leaders. However, this is balanced by bullish language around value opportunities, with terms like 'tremendous value opportunities,' 'extremely appealing,' 'attractive valuations,' 'compelling,' and 'significant upside.' The manager describes their own portfolio as having 'better quality characteristics' and seeing 'tremendous opportunity ahead.' The net balance tilts slightly bearish given the weight of concern about market concentration and valuations, but the bullish language around selectivity prevents this from being strongly negative.
Perceived Risk
A score of 0.85 indicates that the manager perceives the current market environment as highly risky. They identify extreme valuation concentration in mega-cap stocks as a major risk and draw direct parallels to the 2000 tech bubble, warning of severe downside when multiples contract.
Opportunity Density
The manager sees abundant opportunities in specific areas despite overall market richness. The letter states 'tremendous value opportunities remain across sectors' and 'numerous stocks now trade at double-digit FCF yields against enterprise value while still delivering mid-teens revenue growth.' Accenture is highlighted as one example among many. The manager describes finding 'opportunities to invest in high quality stocks at unusually attractive valuations across a variety of sectors' and sees 'tremendous opportunity ahead' both domestically and abroad. Small-cap and international markets are described as offering attractive valuations with proper selectivity. However, opportunity is characterized as requiring selectivity and discipline rather than being broad-based, with the manager emphasizing the need to avoid unprofitable names and concentrated risks. This represents a selective but rich opportunity set in defined areas.
Time Horizon
The manager explicitly references the post-2000 period when cheaper stocks outperformed over a 7+ year timeframe, suggesting they expect their thesis to play out over multiple years. The letter states 'we believe it is much more sustainable to generate returns in line with fundamentals' and emphasizes 'compounded long-term returns,' indicating a multi-year perspective. However, the strategy rebalances quarterly and discusses near-term catalysts like Accenture's ability to repurchase 8% of shares annually. The manager watches quarterly results and makes tactical adjustments based on valuation changes. There is no mention of permanent capital structure or decade-plus horizons. The focus on free cash flow and fundamental growth suggests a 2-4 year thesis for individual positions, with the overall strategy designed for long-term compounding through disciplined rebalancing. This represents a medium to longer-term horizon typical of fundamental value strategies.
Top Conviction Themes
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