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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Hotchkis & Wiley's small cap value fund outperformed in Q1 2026 as geopolitical turmoil drove oil prices up 100%, benefiting their overweight energy position."
The Hotchkis & Wiley Small Cap Value Fund outperformed the Russell 2000 Value Index in Q1 2026, returning 9.06% versus the benchmark's 4.96%. The quarter was dominated by geopolitical turmoil as U.S.-Israel strikes on Iran led to closure of the Strait of Hormuz, driving Brent crude oil up over 100% to $127/bbl. The portfolio's overweight energy position provided an effective hedge, with positive stock selection in materials and energy being the largest performance contributors. Small caps outperformed large caps despite the disruption, with the Russell 2000 returning +0.9% versus -4.2% for the Russell 1000. The team notes that small cap valuations remain attractive, trading at just 85% of large cap P/E ratios versus historical parity. They observe nascent signs that markets are refocusing on fundamentals and valuation, which should create a more conducive environment for their disciplined value approach. The team believes global crude markets face structural undersupply risks supporting higher oil prices over time, while maintaining their long-term investment focus.
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