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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Milano's emerging markets value fund recovered from April's tariff-driven selloff, posting 6.5% YTD returns. Portfolio trades at 25% of estimated intrinsic value, anchored by high-dividend Asian banks and industrial conglomerates."
Diego Milano's Quercus Fund delivered 6.5% returns through April 2025 despite a challenging macro environment marked by tariff uncertainty that caused a 21% S&P 500 drawdown. The portfolio, curated for resilience, recovered from double-digit April losses to post slightly positive monthly returns. Milano believes the portfolio trades at approximately 25% of intrinsic value. Key positions include First Pacific, benefiting from subsidiary growth and an upcoming Maynilad IPO valued at $2.5bn; Sanjiang Fine Chemicals, positioned for petrochemical cycle recovery with new ethane transport capabilities; and Halyk Bank, Kazakhstan's market leader delivering 30%+ ROEs with 15%+ dividend yields. The manager emphasizes dividend-paying companies trading below book value in emerging markets, particularly Asia. Bolloré continues active buybacks with substantial cash deployment opportunities. Milano expects continued volatility but maintains conviction in the portfolio's fundamental value proposition and defensive characteristics during macro uncertainty.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High conviction evident in concentrated positions, detailed fundamental analysis, and strong valuation assertions (4x intrinsic value). Manager demonstrates deep knowledge of holdings and clear investment rationale, particularly with Halyk Bank detailed analysis.
Growth Outlook
Manager acknowledges substantial market disruption from tariff uncertainty and expects continued volatility, but maintains measured optimism about long-term fundamentals and positioning. Mixed signals with macro concerns balanced by confidence in portfolio resilience.
Risk Appetite
Portfolio maintained through market stress with defensive characteristics emphasized. Manager shows selective risk-taking in emerging markets while prioritizing resilience. Balanced approach with neither aggressive deployment nor defensive retreat.
Capital Deployment
Moderate deployment activity with dividends being redeployed into more shares, particularly Halyk Bank. No major cash level changes mentioned, but selective reinvestment suggests modest net deployment rather than defensive cash building.
Forward Guidance
Manager expresses confidence in portfolio value (4x current prices) and expects positive catalysts like Maynilad IPO. Constructive outlook on individual holdings despite acknowledging future volatility. Moderately optimistic about forward prospects.
Language Signal
Language balances opportunity recognition with risk acknowledgment. Positive terms around intrinsic value and dividend yields offset by volatility warnings and macro uncertainty. Net slightly positive directional bias in language choices.
Perceived Risk
Manager acknowledges significant macro risks from tariff uncertainty, market volatility, and paradigm shifts. Expects future double-digit losses and recognizes portfolio vulnerability to indirect impacts. Moderate to high risk perception with defensive positioning.
Opportunity Density
Manager sees substantial value opportunities with portfolio trading at 25% of intrinsic value. Specific catalysts identified across multiple holdings. Strong opportunity perception in emerging markets despite macro headwinds.
Time Horizon
Long-term focus evident in multi-year fundamental analysis, patient capital approach to undervalued positions, and willingness to endure volatility. Emphasis on compounding through dividend reinvestment suggests extended investment horizons.
