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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Hotchkis & Wiley Small Cap Value Fund 2024 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Hotchkis & Wiley Small Cap Value Fund)

Primary Source Intelligence • Q3 2024 Letter Analysis

Hotchkis & Wiley Small Cap Value Fund Quarterly Analysis

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

Fund Returns

Annualized+11.16%

Digest Analysis

Quick Take

"Small cap value fund underperformed in Q3 despite strong small cap market performance, hurt by stock selection and energy overweight. Maintains technology overweight and financials focus while avoiding high-leverage names."

Executive Summary

The Hotchkis & Wiley Small Cap Value Fund underperformed the Russell 2000 Value Index in Q3 2024, returning 5.57% versus the benchmark's 10.15%. Small caps delivered strong performance with the Russell 2000 up 9.3%, driven by easing inflationary pressures and lower interest rates that benefited rate-sensitive sectors. Stock selection and energy overweight detracted from relative performance, while technology stock selection was a positive contributor. The fund maintains its largest overweight in technology despite quarterly underperformance, viewing portfolio companies as less cyclical than generally understood. Financials remains the largest sector weight, though underweight the benchmark by 7 percentage points. The managers underweight high-leverage companies to focus on better risk-adjusted returns. Looking forward, they remain committed to identifying businesses with durable balance sheets, sustainable return on equity, stable free cash flow, and attractive valuations. The investment strategy centered on undervalued assets and effective risk management is positioned to generate consistent long-term returns as economic conditions evolve.

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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

45%

CautiousHigh

Moderate (45%)

The letter demonstrates moderate conviction through clear articulation of investment philosophy and sector positioning, but lacks specific position sizing or individual holdings discussion. The managers express confidence in their approach but hedge with risk management language throughout.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The managers express cautious optimism about markets, noting that lower interest rates are typically favorable for small caps and that they anticipate improved performance as the economic landscape evolves. However, they acknowledge potential for economic slowdown and maintain focus on risk management.

Risk Appetite

10%

DefensiveAggressive

Defensive (10%)

The fund maintains selective positioning with underweights in high-leverage companies and rate-sensitive sectors, reflecting a cautious risk appetite. While they maintain overweights in technology and financials, the overall positioning suggests measured risk-taking rather than aggressive deployment.

Capital Deployment

0%

De-riskingDeploying

De-risking (0%)

No specific information provided about cash level changes or capital deployment activity during the quarter. The letter focuses on sector positioning and attribution analysis without discussing net deployment or cash management.

Forward Guidance

15%

CautiousExpansionary

Cautious (15%)

The managers express commitment to their investment strategy and confidence in their holdings, particularly technology companies. However, the guidance is measured and focused on long-term positioning rather than aggressive near-term deployment.

Language Signal

20%

BearishBullish

Bearish (20%)

The letter contains balanced language with terms like 'attractive diversification,' 'confident,' and 'positioned to generate consistent returns,' but also includes cautious phrases about risk management and selective positioning. The net balance leans slightly positive.

Perceived Risk

35%

Low RiskElevated

Moderate Risk (35%)

The managers acknowledge moderate risks including potential economic slowdown affecting technology and leverage exposure in rate-sensitive sectors. Risk discussion is present but not dominant, with emphasis on risk management rather than systemic concerns.

Opportunity Density

55%

ScarceAbundant

Selective (55%)

The managers express confidence in finding attractive opportunities within their investment universe, particularly in technology and undervalued assets. The selective approach suggests moderate opportunity density rather than abundant or scarce conditions.

Time Horizon

65%

Short-TermLong-Term

Multi-Year (65%)

The letter emphasizes long-term trends over short-term fluctuations and commitment to generating consistent long-term returns. The focus on durable business characteristics and fundamental analysis suggests a multi-year investment horizon.