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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
As of Oct 14, 2026
The FPA Queens Road Small Cap Value Fund returned -7.62% net of fees in the third quarter of 2026, trailing the Russell 2000 Value Index return of -4.91%. Year-to-date through September 30, 2026, the Fund returned 17.35% net of fees, outpacing the benchmark's 16.96% net return. Fund underperformance during the third quarter was primarily driven by zero exposure to energy and biotech-heavy healthcare, alongside cyclical weakness across consumer discretionary holdings in apparel and automotive retail. Cash and short-term Treasury ETF reserves stood at 10.3% of the portfolio at quarter-end. The investment team maintains a disciplined, fundamental framework amid broader market froth, arguing that recent small-cap index strength represents a speculative lottery driven by unprofitable companies, biotech momentum, and artificial intelligence hype rather than a broad-based valuation rerating. In contrast, profitable, high-quality small businesses continue to trade at significant valuation discounts to large caps and private equity transactions, presenting attractive long-term entry points for patient capital. Portfolio activity during the quarter centered on rotating proceeds from highly appreciated technology suppliers exposed to the AI trade into unloved, economically sound compounders. The Fund initiated five new positions: Hayward Holdings, Teleflex, Simpson Manufacturing, FTI Consulting, and Flowco, while completely exiting Everus Construction on valuation. In addition, the managers trimmed appreciated holdings in TD Synnex, Arrow Electronics, Vishay Intertechnology, and Littelfuse following substantial cyclical run-ups.
Disciplined investing in high-quality, profitable, and durable small-cap businesses trading at attractive valuations generates superior risk-adjusted returns and downside protection across full market cycles.
The managers anticipate that current market dynamics favoring speculation and story stocks over fundamentals represent a temporary aberration. They expect their patient, disciplined approach focused on high-quality, profitable small caps at reasonable valuations to deliver superior long-term results over a complete market cycle, particularly when market froth subsides.
Moderate Conviction Bullish
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