| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.8% | - | 41.5% |
| 2025 |
|---|
| 41.5% |
Distillate's International Fundamental Stability & Value strategy delivered exceptional performance in 2025, returning 41.53% net of fees and significantly outperforming the MSCI All Country Ex US benchmark's 32.48% gain. The strategy benefited from international stocks' broad outperformance of domestic markets, particularly in less expensive market segments. The manager emphasizes that while U.S. equities trade at historically rich valuations near record multiples, international stocks present compelling opportunities when approached with proper selectivity. The strategy systematically filters out highly leveraged and fundamentally unstable companies, focusing instead on businesses with strong cash flow stability and attractive valuations. Key contributors included SK Hynix, Samsung, and Aluminum Corp of China, while detractors included Kuaishou and Zhejiang Leapmotor. The portfolio maintains superior fundamental metrics compared to benchmarks, with higher free cash flow yields and lower leverage ratios. Looking forward, the manager believes international markets offer important diversification benefits and counterbalance to U.S. market richness, positioning the strategy well for sustainable long-term returns driven by fundamental growth rather than valuation expansion.
International stocks offer compelling value opportunities through systematic selection of high-quality, attractively valued companies that provide diversification benefits and counterbalance to expensive U.S. markets.
The manager believes international stocks offer significant opportunity with selectivity remaining key. They are optimistic about the strategy's prospects given its focus on fundamentals as the sustainable driver of returns and its significant rebalancing benefit that contributes to stronger underlying free cash flow growth.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 18 2026 | 2025 Q4 | 005930.KS, 066570.KS, 1024.HK, 2319.HK, 2618.HK, 267270.KS, 601600.SS, 6594.T, 9618.HK, AEM, AUTO.L, BATS.L, CX, FMX, GIB.TO, MC.PA, RHHBY, RIO.AX | cash flow, fundamentals, international, Quality, valuation, value | - | U.S. equities are historically expensive by any measure and at a valuation level that has typically been associated with much more subdued future returns. The… |
| Oct 16 2025 | 2025 Q3 | - | diversification, free cash flow, International Equities, Leverage, Valuation gap | CMCL LN | Distillate notes that international equities now trade at a steep discount to U.S. markets despite stronger relative performance year-to-date. The firm highlights improving fundamentals and… |
| Jun 30 2025 | 2025 Q2 | - | free cash flow, fundamentals, International Equities, Rotation, valuation | - | The letter focuses on attractive valuations outside the U.S., where international equities offer higher starting free cash flow yields. Management argues that global dispersion creates… |
| Mar 31 2025 | 2025 Q1 | - | - | - | - |
| Dec 31 2024 | 2024 Q4 | - | - | - | - |
| Oct 20 2024 | 2024 Q3 | - | - | - | - |
| Jul 25 2024 | 2024 Q2 | - | - | - | - |
| Apr 15 2024 | 2024 Q1 | JD, NVDA | - | - | - |
| Jan 24 2024 | 2023 Q4 | AAPL, MSFT | - | - | - |
| Nov 10 2023 | 2023 Q3 | - | - | - | - |
| Jul 13 2023 | 2023 Q2 | - | - | - | - |
| Apr 14 2023 | 2023 Q1 | - | - | - | - |
| Jan 30 2023 | 2022 Q4 | - | - | - | - |
| Oct 10 2022 | 2022 Q3 | - | - | - | - |
| Jul 30 2022 | 2022 Q2 | - | - | - | - |
| Apr 30 2022 | 2022 Q1 | ADBE | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
InternationalHigh-quality international businesses trade at fractions of US multiples, with the manager positioning clients to take advantage of this divergence. Despite US equity market dominating investor mindshare, the rest of the world returned 32.6% in dollar terms in 2025 versus SPY's 17.7%. |
Discount Opportunity Outperformance Quality Positioning |
QualityThe portfolio has shifted toward higher quality businesses with better profitability, lower leverage, and less volatile earnings. Quality stocks underperformed significantly in 2025, creating attractive entry points for value investors. The manager maintains price discipline while seeking quality companies trading at discounts to intrinsic value. |
Quality Profitability Leverage Earnings | |
ValuationAI-related companies continue to command premium valuations while other sectors remain reasonably priced. This valuation divide continues to guide investment activity, with the fund remaining wary of companies trading at exceedingly high valuations that imply exceptional multi-year earnings growth. |
Premium Divide Discipline Stretched Reasonable | |
| 2025 Q3 |
InternationalHigh-quality international businesses trade at fractions of US multiples, with the manager positioning clients to take advantage of this divergence. Despite US equity market dominating investor mindshare, the rest of the world returned 32.6% in dollar terms in 2025 versus SPY's 17.7%. |
Discount Opportunity Outperformance Quality Positioning |
ValueThe manager continues to find attractive value opportunities despite expensive markets, purchasing undervalued companies like Centene, GlaxoSmithKline, Carrefour and PayPal trading at low multiples with strong fundamentals. |
Undervalued Low Multiples Contrarian Opportunistic | |
| 2025 Q2 |
ValuationAI-related companies continue to command premium valuations while other sectors remain reasonably priced. This valuation divide continues to guide investment activity, with the fund remaining wary of companies trading at exceedingly high valuations that imply exceptional multi-year earnings growth. |
Premium Divide Discipline Stretched Reasonable |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 16, 2025 | Fund Letters | Thomas Cole | CMCL LN | Gold Fields Ltd. | Materials | Gold Mining | Bull | NYSE | balance sheet, dividends, FCF, Gold, inflation hedge, Mining, stability, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| 005930.KS | Selected technology-related companies held across several of our funds contributed for the quarter, particularly established franchises such as Samsung Electronics and Alphabet (Google). While the shares of both companies soared upward in price during the year, we believe they remain reasonably valued relative to their near-term growth prospects. |
| 066570.KS | SK HYNIX INC 1.85% top contributor to relative performance |
| 1024.HK | our Chinese e-commerce and internet stalwarts – Kuaishou saw their share prices soften as the market focused on more direct AI beneficiaries |
| 2319.HK | ZHEJIANG LEAPM-H -0.26% detractor from relative performance |
| 267270.KS | HD Hyundai Electric was up nearly 30% for the quarter, capitalizing on increased demand to expand/upgrade power infrastructure. The company will complete the construction of a new Korean power distribution equipment plant by the end of 2025. |
| 601600.SS | ALUMINUM CORP-H 0.55% contributor to relative performance |
| 6594.T | NIDEC CORP -0.15% detractor from relative performance |
| 9618.HK | JD-SW -0.25% detractor from relative performance |
| AEM | We initiated Agnico Eagle Mines to diversify our gold miner exposure alongside AngloGold Ashanti. Given the operational complexity of mining, spreading exposure across high-quality operators helps mitigate single-company risk. |
| AUTO.L | Auto Trader, a UK-listed automotive classifieds platform, was the Fund's largest detractor. This reflected a combination of short-term factors unrelated to its half-year earnings release in November, which was a positive surprise. These included the rollout of its new Deal Builder product in late 2025, which triggered backlash from a small but vocal portion of its UK dealer base and threats of coordinated cancellations. While actual cancellations were well under 1% of its customer base, and management undertook rapid and extensive outreach efforts with dealers, this episode likely weighed on investor sentiment. |
| BATS.L | BAT's cornered resource is rooted in the intersection of brands, regulation and distribution. While tobacco branding is often dismissed as a legacy advantage, in reality BAT's global brand portfolio operates within one of the most tightly controlled consumer markets in the world. Regulatory barriers, licensing regimes and advertising restrictions make it extraordinarily difficult for new entrants to emerge, while incumbents retain the right to distribute, price and innovate within defined boundaries. Over time, these constraints have transformed brand equity from a marketing asset into a scarce economic one. The result is a market structure where share is defended less by spend and more by structural exclusion, giving BAT a cornered resource that continues to support cash generation well beyond the industry's tobacco volume peak. |
| CX | Meanwhile, construction materials firm Cemex advanced on robust construction activity and a favorable currency backdrop. |
| MC.PA | The holdings in Applied Materials, Elevance Health, LVMH and Anheuser-Busch InBev were exited |
| RHHBY | Roche (RHHBY) was another positive performer in 2025, driven by a robust pipeline of new and innovative drugs making it to market and favorable regulatory approvals. |
| RIO.AX | Miners like BHP, Rio Tinto and Fortescue saw their shares rise as demand for metals like copper pushed prices to record highs. |
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