| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Q4 2025 delivered modest but respectable gains despite elevated volatility, with AI remaining the dominant investment theme driving exceptional returns in Communication and IT sectors. The S&P 500 returned nearly 18% for the year, outpaced by Emerging Markets at 34% and Asia at 33%. Major hyperscalers are projected to increase AI-related capex to $500bn in 2026, over three times pre-ChatGPT levels, creating enormous energy infrastructure demands. Global data centers currently consume 1.5-3% of total electricity, with AI workloads representing 5-15% of that usage. However, structural risks are emerging around sticky services inflation, particularly in food costs, while energy prices face upward pressure from AI infrastructure demands. The yield curve presents concerning dynamics with the long-end anchored to outdated pre-covid assumptions inconsistent with higher debt levels and neutral rates. Markets must navigate the balance between AI-driven growth opportunities and inflationary pressures that could force painful adjustments in bond markets and economic policy assumptions.
AI infrastructure investment is driving a structural shift in global capital allocation, but energy constraints and sticky services inflation pose risks to the sustainability of current market dynamics and yield curve assumptions.
Markets will watch carefully for equilibrium between full employment and stable inflation. AI-related capex spending could become an increasingly important global driver of business investment. Energy production challenges may create upward pressure on costs, potentially feeding back into services inflation.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 30 2026 | 2025 Q4 | AMZN, GOOGL, META, MSFT, ORCL | AI, Capex, Data centers, energy, Hyperscalers, inflation, rates, yield curve | - | AI remained the dominant theme driving US and global returns, with Communication and IT sectors delivering exceptional performance. The worldwide adoption of GenAI is already… |
| Jul 16 2025 | 2025 Q2 | - | Europe equities, gold, inflation, sovereign debt, US Dollar | - | Q2 2025 combined resilient equity performance with rising structural concerns around sovereign Debt sustainability and the long-term impact of Tariffs. An effective US tariff rate… |
| Apr 10 2025 | 2025 Q1 | - | asset allocation, fixed income, Global Equities, interest rates, risk management | - | The letter emphasizes global asset allocation and diversification across equities, fixed income, and alternatives in response to macro uncertainty and rate volatility. Portfolio construction focuses… |
| Jan 17 2025 | 2024 Q4 | - | inflation, interest rates, tariffs, technology, US Equities | - | Q4 2024 performance reflected a decisive repricing of Rates expectations, with fewer anticipated cuts and structurally higher bond yields reshaping cross-asset returns. US Growth and… |
| Oct 10 2024 | 2024 Q3 | - | Bond Yields, inflation, Japan, sector rotation, technology | - | Global Growth equities continued to outperform despite rising yields, driven by technology concentration and resilient consumer demand across developed markets. Japanese equities stood out amid… |
| Jul 15 2024 | 2024 Q2 | - | Artificial Intelligence, geopolitics, inflation, large cap, Short Duration | - | The letter describes a renewed "goldilocks" equity rally in Q2 as rate hike fears subsided and inflation trended lower, supporting large-cap growth stocks. AI remains… |
| Apr 15 2024 | 2024 Q1 | - | AI, energy, inflation, interest rates, valuation | - | The letter highlights persistent inflation pressures and shifting rate cut expectations as central banks reassess the timing of policy easing. Sticky services inflation, rising energy… |
| Jan 17 2024 | 2023 Q4 | - | Energy Prices, Interest Rate Uncertainty, Quality stocks, Short Duration Bonds, US Dollar Strength | - | The Q3 review notes a shift toward "risk-off" as Developed Market equities softened, fixed income came under stress, and volatility rose amid uncertainty on the… |
| Oct 10 2023 | 2023 Q3 | - | Growth Equities, Inflation Moderation, Japan Outperformance, Peak Interest Rates, valuation dispersion | - | The Q2 review highlights a "risk-on" rebound led by Growth and Technology as headline inflation eased and rate expectations became more tempered, while consumers and… |
| Jul 28 2023 | 2023 Q2 | - | growth, inflation, interest rates, Japan Equities, US Equities | - | A pronounced risk-on rotation defined Q2 2023 as growth equities, led by US technology, materially outperformed amid moderating headline inflation and resilient Developed Market consumers.… |
| Apr 17 2023 | 2023 Q1 | - | Banking Crisis, Bonds, inflation, Mega Caps, US Dollar | - | Q1 2023 combined a risk-on rally with acute banking stress following the collapse of Silicon Valley Bank, highlighting the fragility created by rapid rate hikes.… |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
Data CentersSupply constraints curtailing infrastructure buildout rate, but compute capacity is being used immediately upon coming online. This differs from dot-com bubble when dark fiber was installed ahead of need. Labor, power and land shortages creating bottlenecks. |
Supply Constraints Utilization Bottlenecks Infrastructure | |
EnergyEnergy plays a critical role in AI infrastructure economics, with data centers becoming major electricity consumers. Rising power costs compress margins while grid constraints and regulatory scrutiny influence deployment timelines. The manager emphasizes that unlike software-driven growth, AI compute cannot be scaled independently of physical energy reality. |
Data Centers Grid Power Infrastructure Utilities | |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through | |
RatesFederal Reserve resumed rate-cutting cycle with first cut since December 2024, signaling resumption of easing. Expected three cuts of 25bps between now and first quarter 2026 as Fed responds to signs of weakness in US labor market. |
Fed Monetary Policy Labor Market Easing Liquidity | |
| 2025 Q2 |
Debt |
|
Tariffs |
||
| 2025 Q1 |
DiversificationThe Fund remains purposefully diversified despite market leadership being narrow and focused on AI. This discipline reflects commitment to effective risk management and appropriate diversification, which weighed on relative performance but positions the Fund well for various market scenarios. |
Risk Management Portfolio Construction Concentration |
| 2024 Q4 |
RatesFed cut rates by 25bps on December 10 while describing growth as moderate and inflation as still somewhat elevated. Markets took message as cut now, likely pause soon. The opportunity set was less about calling one Fed meeting and more about trading the path via rates and FX. |
Fed Easing Policy Duration Curve |
Technology |
||
| 2024 Q3 |
Growth |
|
| 2024 Q2 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
| 2024 Q1 |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through |
| 2023 Q4 |
EnergyBHE operates regulated utilities serving 5.4 million customers and natural gas pipelines. The business faces significant investment needs driven by AI computing demand and wildfire risk mitigation, particularly in the Western U.S. |
Regulated Utilities Natural Gas Renewable Energy Grid Infrastructure |
RatesFed cut rates by 25bps on December 10 while describing growth as moderate and inflation as still somewhat elevated. Markets took message as cut now, likely pause soon. The opportunity set was less about calling one Fed meeting and more about trading the path via rates and FX. |
Fed Easing Policy Duration Curve | |
VolatilityManager emphasizes volatility as a structural feature of markets, noting that rare events occur far more frequently than expected. April's volatility event validated their convexity approach, with systematic monetization during stress periods. December saw compressed volatility with VIX hitting year lows, creating buying opportunities despite short-term costs. |
VIX Implied Volatility Realized Volatility Convexity Options | |
| 2023 Q3 |
Growth |
|
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through | |
RatesFed cut rates by 25bps on December 10 while describing growth as moderate and inflation as still somewhat elevated. Markets took message as cut now, likely pause soon. The opportunity set was less about calling one Fed meeting and more about trading the path via rates and FX. |
Fed Easing Policy Duration Curve | |
| 2023 Q2 |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through |
Risk |
||
| 2023 Q1 |
Stability |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| AMZN | One company we own that we think has unique positioning to benefit from both the infrastructure and application layers is Amazon. Amazon's logistical prowess is one of the foremost moats in business today and it can and will be enhanced with AI. The company will do this in multiple ways, with better orchestration of its logistics assets and underlying cargo, as well as the buildout of more capable, sophisticated and robust robotics. Amazon is singularly well positioned to dominate the coordination layer, with AI's help, across its entire logistics network. |
| GOOGL | In the third quarter, Google, Kairos Power, and the Tennessee Valley Authority announced a major collaboration centered on a novel power purchase agreement. Google followed this announcement with another significant step forward. On October 27, Google and NextEra Energy announced plans to restart the Duane Arnold Energy Center. |
| META | On January 9, Meta Platforms unveiled a new agreement with Vistra—the largest generator of competitive electricity in the United States—as well as with TerraPower and Oklo. The announcement builds on Meta's agreement last year with Constellation Energy and positions the company to become one of the largest corporate purchasers of nuclear-generated electricity in the United States. |
| MSFT | MSFT was a detractor in 4Q25 following its fiscal first-quarter 2026 earnings report released on October 29. While results were better than expected operationally, investor reaction was driven by guidance and capital expenditure intensity rather than headline performance. Revenue grew 17% year-over-year, exceeding consensus expectations, and Azure revenue increased 39% year-over-year, also ahead of estimates. However, management guided to a sequential deceleration in Azure growth in fiscal Q2, signaling some moderation after a period of exceptional demand. |
| ORCL | Investor enthusiasm for Oracle's stock in calendar year 2025 was initially driven by several multi-billion-dollar contracts it signed with leading AI companies, including OpenAI and Meta. However, in Q4 sentiment for ORCL's growth prospects shifted to skepticism, as investors began to scrutinize the return profile of the substantial capital investments required to support the approximately $500 billion of contracts signed by Oracle. Given the widening range of potential outcomes associated with Oracle's elevated capital needs, we reduced our position in ORCL during Q4. |
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