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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Oakmark Fund International Small Cap 2023 Q2 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q2 2023 Letter Analysis

Oakmark Fund International Small Cap Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Oakmark Fund International Small Cap. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+3.8%

Annualized+8.76%

Positioning StanceConstructive

GeographyEurope

Digest Analysis

Quick Take

"Oakmark International Small Cap outperformed by 330bps in Q2 2023 as private equity interest validated portfolio company values, though bids were deemed below intrinsic value."

Executive Summary

The Oakmark International Small Cap Fund returned 3.8% in Q2 2023, outperforming its benchmark by 330 basis points. The quarter was marked by significant private equity interest in portfolio companies, with Software AG receiving a takeover bid from Silver Lake at EUR 32 per share, Applus attracting interest from three PE firms including Apollo, and SoftwareOne rejecting an unsolicited offer from Bain. While these bids validated the fund's value identification process, management viewed the offers as below intrinsic value estimates. The fund initiated three new positions: Adecco, a staffing company with new management and turnaround potential; Euronext, a pan-European exchange trading at record low multiples despite strong fundamentals; and Sapiens International, positioned to benefit from insurance industry modernization. Viaplay was the quarter's top detractor following a profit warning and CEO change, though management maintains confidence in the underlying Nordic business. The portfolio remains concentrated in Europe at 79.6% of holdings, reflecting the manager's focus on identifying undervalued quality businesses in the region.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

68%

CautiousHigh

Moderate (68%)

The fund demonstrates moderate-high conviction through concentrated positioning (specific position sizes mentioned), detailed company-specific analysis, and willingness to initiate new positions while selling others. Named holdings with clear investment theses, though some hedging language present.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The manager acknowledges a tough macro environment affecting some holdings like Viaplay but maintains constructive positioning and continues to find attractive opportunities. Mixed signals with some caution but overall constructive tone.

Risk Appetite

50%

DefensiveAggressive

Balanced (50%)

The fund actively deployed capital into three new positions while selling two others, indicating selective risk-taking. Portfolio remains concentrated with 79.6% in Europe, showing conviction in regional positioning.

Capital Deployment

20%

De-riskingDeploying

De-risking (20%)

The fund rotated capital by selling two positions to fund three new ones, indicating active portfolio management but no clear evidence of net cash deployment or reduction. This represents rotation rather than net deployment.

Forward Guidance

40%

CautiousExpansionary

Neutral (40%)

Manager expresses confidence in new positions and expects positive developments at Euronext and in the insurance software sector. Selective deployment bias with focus on attractive risk-reward opportunities.

Language Signal

30%

BearishBullish

Bearish (30%)

Language includes positive terms like 'attractive upside potential,' 'credible strategy,' and 'strong fundamentals' but balanced with acknowledgment of challenges and disappointments. More constructive than bearish overall.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Manager acknowledges macro headwinds affecting some holdings like Viaplay and notes cyclical challenges in staffing, but risk discussion is moderate and balanced with opportunity identification. Standard risk acknowledgment without alarm.

Opportunity Density

65%

ScarceAbundant

Abundant (65%)

The manager identified three new attractive investment opportunities during the quarter and continues to find companies trading below intrinsic value, suggesting a reasonably rich opportunity set in European small caps.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The fund demonstrates multi-year investment horizon with references to long-term value realization, decade-long improvement journeys at companies like Euronext, and willingness to hold through short-term volatility as evidenced by maintaining Viaplay position despite challenges.