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 |
|---|---|---|---|---|---|---|
Riverwater Partners' Small Cap strategy underperformed the Russell 2000's 21% surge in Q2 2026, as the market rewarded lower-quality, high-beta stocks while the manager's quality bias and healthcare positioning created headwinds. The quarter was defined by an accelerating AI buildout and a geopolitical oil and gas supply shock, though a mid-quarter ceasefire announcement reversed energy and materials weakness. Energy was the best-performing sector through deliberate positioning toward gas compression and services rather than commodity producers, with holdings gaining 12% versus a 10% benchmark decline. Top contributors included StoneX (up 47%), PDF Solutions (up 52%), and Digi International (up 55%). Healthcare was the largest detractor as speculative biotechnology surged 25% while the manager's profitable holdings declined modestly, reflecting the cost of avoiding pre-revenue biotech. The manager initiated seven new positions including NetScout Systems, Middleby, Lifeway Foods, Werner Enterprises, Oceaneering International, Kaiser Aluminum, and Stevanato Group, while trimming winners and exiting Perella Weinberg, Talkspace, and others. Looking forward, the manager is cautiously optimistic, anticipating a rotation into higher-quality businesses as speculative AI trades unwind, while increasing consumer staples exposure and positioning for a broader healthcare sector rotation.
Riverwater Partners maintains a disciplined quality-focused approach to small cap investing, owning superior businesses with superior management teams at attractive valuations, a process that does not bend to whatever the market happens to reward in a given quarter.
The manager characterizes their stance as cautiously optimistic. They are less bearish on the consumer than three months ago, given stronger year-over-year tax refunds and consumer resilience. As speculative AI-related trades continue to unwind, they anticipate a rotation into higher-quality businesses that lagged the broader market earlier in the year, a dynamic they believe plays to the strength of their core investment philosophy. They continue to see durable value in picks-and-shovels businesses underneath the AI trade and would add opportunistically on weakness. They are increasing exposure to consumer staples for defensive positioning and intend to position for a broader rotation into healthcare. On energy, they believe the recent sell-off has overshot to the downside but would prefer greater clarity and fuller valuation resets before committing additional capital.
As of Jul 17, 2026
Founded in 2016 by Adam Peck, CFA, and Matt Drvaric, Riverwater Partners is an independent, employee-owned registered investment advisor based in Milwaukee, Wisconsin. The firm manages approximately $245 million in discretionary assets and $600 million in total assets under management across three distinct strategies. As Milwaukee's first registered B Corporation in financial services and a woman-owned company, Riverwater Partners differentiates itself through responsible investing practices and ESG integration. The firm serves institutional and individual investors with minimum account requirements of $1 million for full-service accounts, charging fees ranging from 1.60% annually for smaller accounts to negotiable rates for larger relationships. With 11 employees and 190 client accounts, the firm has demonstrated consistent organic growth since inception.
Riverwater Partners employs a proprietary Three Pillar Approach® focusing on Exceptional Management Teams, Superior Business Models, and Attractive Valuations. The firm emphasizes responsible investing with ESG integration across all strategies, maintaining long-term investment horizons with typical holding periods of three years or more. The Small Cap Strategy specifically targets companies with market capitalizations between $250 million and $5 billion, maintaining a concentrated portfolio of 25-45 companies while focusing on profitable businesses with strong cash flows and explicitly excluding unprofitable biotech companies. The firm operates as a fiduciary with the mission 'to make the world a better place by growing wealth through responsible investing' and maintains B Corporation certification, emphasizing measurable impact alongside financial returns.
Lead Portfolio Manager
Moderate Conviction Bullish
Market Conviction
The manager names and discusses approximately 20 individual positions with specific return figures, position sizing language ('among our largest holdings,' 'expanded into one of our largest holdings,' 'trimmed back to a standard weight'), and clear catalysts. The letter includes a detailed deep-dive on PDF Solutions with founder-led management, financial projections (20% revenue growth, 20-25% earnings growth), and specific valuation metrics (25X earnings, 6X revenue). However, the portfolio appears diversified across multiple sectors with many positions, and the manager repeatedly trims winners for 'sizing discipline' rather than concentrating further. The hedged language around deployment ('opportunistically,' 'would prefer greater clarity') and the emphasis on maintaining 'appropriately sized' exposures suggests moderate rather than extreme conviction. This is a high-quality generalist fund with clear views but not a concentrated, single-thesis vehicle.
Growth Outlook
Market outlook remains high conviction: The Small Cap Strategy faced temporary headwinds from a low-quality market rally in 2025, but is well-positioned for a 2026 rotation back to high-quality fundamentals as interest r...
Risk Appetite
Risk appetite posture is moderate conviction: The Small Cap Strategy faced temporary headwinds from a low-quality market rally in 2025, but is well-positioned for a 2026 rotation back to high-quality fundamentals as interest r...
Capital Deployment
The manager initiated seven new positions during the quarter (NetScout, Middleby, Lifeway, Werner, Oceaneering, Kaiser Aluminum, Stevanato) and added to PDF Solutions, indicating meaningful deployment activity. However, this was largely funded by trimming or exiting existing positions (Veeco, Adeia, StoneX, Digi, Modine, Kodiak, Atmus, Perella Weinberg, Talkspace, BioHarvest, Warby Parker, Canada Goose, CNX). The letter describes this as 'redeploying capital' and maintaining 'sizing discipline' rather than net new cash deployment. No cash level changes are disclosed. This represents capital rotation with selective net deployment, scoring in the moderate deployment range but not aggressive given the offsetting sales.
Forward Guidance
Forward guidance signal: The Small Cap Strategy faced temporary headwinds from a low-quality market rally in 2025, but is well-positioned for a 2026 rotation back to high-quality fundamentals as interest r...
Language Signal
The letter contains balanced directional language. Bullish terms include 'cautiously optimistic,' 'durable value,' 'attractive entry points,' 'opportunistically,' and descriptions of positions with 'staying power.' Bearish language includes 'later-cycle signals,' 'speculative,' 'overshot,' references to 'M&A drought,' and multiple instances of trimming or exiting positions due to valuation concerns. The manager also notes their quality bias 'created a performance headwind' and describes the market as rewarding 'beta and speculation.' The language is more cautious than bullish overall, with opportunity framed conditionally.
Perceived Risk
Perceived risk level is evaluated as moderate conviction. The Small Cap Strategy faced temporary headwinds from a low-quality market rally in 2025, but is well-positioned for a 2026 rotation back to high-quality fundamentals as interest r...
Opportunity Density
The manager initiated seven new positions during the quarter and describes seeing 'attractive entry points in select businesses' in consumer discretionary, 'durable value in picks-and-shovels businesses' in technology, and 'potential value emerging' in energy. The letter references specific opportunities across multiple sectors (energy services, consumer staples, healthcare rotation, trucking consolidation, aluminum supply disruption). However, the manager also emphasizes selectivity, notes they are waiting for 'greater clarity' in energy, and describes the need to be 'disciplined' about valuations. This suggests a selective but not abundant opportunity set, with good ideas available but requiring patience and specificity.
Time Horizon
The manager describes StoneX as 'an unusually durable compounder across market environments,' discusses PDF Solutions' long-term TAM expansion and operating model improvement, and references LeMaitre's 'niche leadership, pricing power, and consistent execution' as unchanged despite short-term weakness. The letter emphasizes that 'our process of owning superior businesses with superior management teams at attractive valuations does not bend to whatever the market happens to reward in a given quarter,' explicitly framing a multi-quarter perspective. However, the manager also discusses near-term catalysts (Middleby spin-off on July 6, healthcare rotation 'over the coming quarter') and trims positions after 'sharp runs' for valuation discipline. This reflects a multi-year thesis orientation with some catalyst awareness, typical of a public equities small cap fund with quarterly reporting but a fundamental, quality-focused approach.
Top Conviction Themes
Key Catalysts
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