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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Lyrical Asset Management 2026 Q1 Investor Letter | Buyside Digest

Back to Fund Profile (Lyrical Asset Management)

Primary Source Intelligence • Q1 2026 Letter Analysis

Lyrical Asset Management Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Lyrical Asset Management. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-6.7%

YTD-6.7%

Annualized+10.3%

Positioning StanceCONSTRUCTIVE

Market CapLarge Cap

GeographyUS

Digest Analysis

Quick Take

"Lyrical's value strategy underperformed in 1Q26 despite strong earnings growth from 92% of holdings, as valuation compression offset fundamental gains."

Executive Summary

Lyrical Asset Management's U.S. Value Equity strategy underperformed in 1Q26, declining 6.7% net versus the S&P 500's 4.3% decline. Despite excellent fundamental performance with 92.4% of portfolio companies increasing next twelve months earnings per share by an average of 5.7%, the portfolio suffered from significant valuation compression affecting 75.5% of holdings. Sector allocation was a minor headwind as the portfolio was underweight the best performing sectors. The manager emphasizes that if valuations had remained unchanged, returns would have been 11 percentage points higher. Portfolio positioning appears attractive going forward with a 11.3x NTM P/E ratio that declined 7% during the quarter, combined with average historical growth rates of 10.9% that exceed the S&P 500 by over 4 percentage points. Additionally, the portfolio's earnings are characterized as less economically sensitive than the broader market, providing potential defensive characteristics.

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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

70%

CautiousHigh

Moderate (70%)

A structured and disciplined methodology with fixed composites. While the portfolio is somewhat diversified across approximately 30+ holdings, the manager demonstrates clear conviction in the value-growth thesis, showing detailed EPS historical compound rates that far exceed the S&P 500 benchmark.

Growth Outlook

70%

BearishBullish

Bullish (70%)

Lyrical maintains a constructive market outlook, scoring 0.70, as they view the recent valuation compression as a temporary setback that has created an even more attractive setup. They emphasize that their portfolio's forward P/E of 11.3x is highly discounted despite showing earnings growth that is faster than the S&P 500. They do not express systemic macro fears, expecting normalization of valuation spreads.

Risk Appetite

75%

DefensiveAggressive

Aggressive (75%)

The fund maintains a risk appetite score of 0.75, reflecting its fully invested long-only equity posture across CS and EQ models. There is no evidence of hedging or cash-hoarding; assets are fully deployed in value equities.

Capital Deployment

50%

De-riskingDeploying

Net Neutral (50%)

The capital deployment index is set to 0.50 as the update does not provide data on active cash changes, net inflows/outflows, or a shift in cash levels. The portfolio appears to remain fully invested in line with its static models.

Forward Guidance

50%

CautiousExpansionary

Neutral (50%)

Forward guidance is scored at 0.50, as the presentation focuses on retrospective performance and static portfolio metrics rather than signaling major changes in deployment or portfolio turnover. The manager suggests that current holdings are well-positioned and should simply be held to realize their value.

Language Signal

65%

BearishBullish

Bullish (65%)

The language signal is scored at 0.65, leaning moderately positive. The presentation uses constructive descriptors such as 'excellent quarter for earnings growth' and 'portfolio positioning looks attractive,' while objectively outlining the 'valuation compression' and 'underperformance' experienced during the quarter.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Moderate risk awareness. The manager highlights that their portfolio is 'less economically sensitive than the S&P 500,' suggesting they perceive low to moderate risk of macro-driven fundamental impairment to their holdings.

Opportunity Density

75%

ScarceAbundant

Abundant (75%)

Opportunity density scores 0.75 because the widening valuation spread between the S&P 500 (19.2x) and Lyrical's composite (11.1x) signals an abundant environment for value-driven stock selection. The manager views the current market as ripe with undervalued, high-growth opportunities.

Time Horizon

85%

Short-TermLong-Term

Decade+ (85%)

A strong long-term orientation. The update illustrates performance and earnings growth trends dating back to 2007 and stresses that value investing requires enduring short-term periods of valuation compression to capture multi-year compounding benefits.