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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Kathmandu Capital suffered a severe -32.68% net loss in Q1 2026 due to overtrading during Middle East geopolitical escalation, but remains fully invested in Asia-centric AI hardware and advanced semiconductor supply chain enablers, particularly in Taiwan."
Kathmandu Capital seeks to capture structural tailwinds in the global AI hardware supercycle and technology supply chains by combining deep local expertise, primary research, and disciplined long-term value investing. In the first quarter of 2026, the fund suffered a significant drawdown of -32.68% net of fees, heavily underperforming its benchmarks due to costly overtrading and reactive stop-loss decisions during an unexpected military conflict escalation involving the U.S., Israel, and Iran. Despite these severe execution mistakes, the manager maintains high conviction in the secular AI theme and has kept the portfolio fully invested in key hardware supply chain enablers, particularly in Taiwan and China. Kathmandu is focusing on high-precision advanced semiconductor and PCB manufacturing equipment providers, where on-the-ground channel checks reveal demand and booking backlogs running well ahead of sell-side expectations. The manager expects a strong recovery as hyperscaler capex continues to grow and geopolitical supply-chain shifts highlight Taiwan's indispensable role as a technology transit hub.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
The score is set to 0.85, reflecting high conviction. The portfolio is highly concentrated with named high-conviction ideas like Ta Liang (3167.TT), and the manager provides deep, granular details from proprietary primary research, including specific competitor and customer demand estimates that diverge widely from sell-side consensus.
Growth Outlook
The manager rates the market outlook at 0.75 (Constructive). While they acknowledge the massive disruption from the sudden Middle East conflict in Q1, they stress that the macroeconomy remains resilient, indices have recovered to new highs, and hyperscaler capex continues to expand strongly.
Risk Appetite
The fund ended the quarter fully invested in names deemed core beneficiaries of the AI supercycle. Despite a major Q1 drawdown, they did not reduce net exposure or build cash, preferring to stay fully committed to their technology thesis.
Capital Deployment
Kathmandu Capital finished the quarter fully invested, suggesting no major net shift in cash levels other than rebuilding positions after execution stop-outs, leading to a net neutral score of 0.50.
Forward Guidance
The manager intends to hold core positions, avoid reactive overtrading, and keep exploring opportunities in Taiwan and China based on supply chain channel checks, rather than trading into volatility.
Language Signal
The language is highly bifurcated; the first half of the letter is dominated by words of failure, error, and regret regarding overtrading during geopolitical stress, while the second half uses strongly bullish language describing massive order books, superior technology, and broken consensus estimates in the hardware supply chain.
Perceived Risk
The manager identifies significant risk factors including escalations in Middle East conflict, U.S.-China trade friction, and semiconductor materials flow restrictions. However, they view these as near-term volatility rather than systemic threats to the structural AI supercycle.
Opportunity Density
The opportunity set is presented as very dense within advanced Asian technology and hardware manufacturing niches, specifically where sell-side estimates are 'broken' and demand is vastly outstripping available capacity.
Time Horizon
The investment horizon is long-term, with a focus on structural trends playing out through 2028 based on current order books and multi-year tech cycles, explicitly warning against short-term, daily reactive trading.
