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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
As of Aug 6, 2026
The Hennessy Equity and Income Fund focuses on owning high-quality businesses at reasonable prices across both equity and fixed income allocations. In the first half of 2026, U.S. equities rallied 10.2% driven by AI infrastructure spending and better-than-expected earnings, though much of the return came from a narrow set of speculative names. The managers used this environment to add quality companies left behind by the rally at attractive valuations. The portfolio held businesses with 23.0% pre-tax return on invested capital versus 16.1% for the S&P 500, at a slight valuation discount. Key contributors included Entegris, benefiting from AI-driven semiconductor demand, while new positions like Dominion Energy offer regulated utility exposure to data center power demand growth. On fixed income, the U.S.-Iran war reignited inflation, pushing CPI from 2.4% to 4.2%, causing the market to price in potential Fed hikes rather than cuts. The managers extended duration opportunistically as yields backed up, maintaining a neutral 3.78 duration while emphasizing high-quality corporate bonds. Looking ahead, they expect market returns to increasingly depend on fundamentals rather than multiple expansion, favoring their quality-focused positioning.
The fund invests in high-quality companies with durable competitive advantages, strong returns on invested capital, healthy free cash flow, and conservative balance sheets at reasonable valuations, while maintaining a balanced equity and fixed income allocation that emphasizes income generation and capital preservation through market cycles.
The managers expect the current environment of narrow market leadership to not persist indefinitely, with a reversion in the high-beta trade and a broadening of the market as fundamentals begin to matter again. They anticipate more muted returns following the strong run of recent years, with returns increasingly earned through fundamentals rather than multiple expansion. High-quality companies with sustainable cash flows and shareholder-friendly capital returns should do well as this dynamic unfolds. On the fixed income side, the single most important variable is how durable the inflation spike proves to be and how the Fed responds. The managers intend to stay close to neutral on duration and emphasize high-quality income, remaining ready to extend duration or add credit if the data provide a clearer opportunity.
High Conviction Bullish
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