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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Fawkes delivered 2.4% in June on AI supply chain strength but reduced exposure ahead of a 40-65% sector correction, preserving capital. The manager established oil positions on tightening inventories and Iran conflict escalation risk."
Fawkes Capital delivered 2.4% in June 2026, driven by five core AI supply chain holdings including SK Hynix, Kingboard Laminates, and Murata. The Fund has compounded at 30.4% annually over three years. The manager has grown increasingly concerned about renewed Iran conflict tensions, viewing the temporary MOU ceasefire as unlikely to endure given fundamentally incompatible positions on Strait of Hormuz control. Global oil inventories have fallen to decade-low levels with only six to eight weeks remaining, and combined disruptions could widen the supply shortfall to 12.5% of daily global supply. The manager established an oil position while materially reducing AI exposure due to demanding valuations and overstretched positioning. Many AI stocks subsequently declined 40-65% in July, but the Fund preserved capital with only a low single-digit drawdown. The manager views this as satisfactory and sees opportunities to rebuild positions at more attractive valuations. If the US accommodates Iran before mid-term elections, equity exposure would be increased.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
The manager names five specific core holdings (SK Hynix, Kingboard Laminates, Ampoc Far East, Kioxia, Murata) that drove performance and discusses them as concentrated positions. The letter demonstrates strong conviction in the AI supply chain theme with clear thesis articulation. However, the manager also shows tactical flexibility by materially reducing exposure when conditions changed, and does not provide explicit position sizing or discuss holding through volatility indefinitely. The combination of named concentrated holdings with tactical risk management places this in the high-moderate conviction range. Score: 0.72.
Growth Outlook
The manager expresses significant concern about the macro environment, particularly regarding Iran conflict escalation and its impact on oil prices and interest rates. The letter warns that if oil shocks push the 10-year Treasury toward 5%, 'it becomes difficult to envisage meaningful further upside movements of equity markets.' However, the manager also acknowledges a competing scenario where Trump accommodates Iran, which would support rebuilding equity exposure. The outlook is cautious with identifiable downside scenarios dominating, but not apocalyptic. Score: -0.35.
Risk Appetite
The manager materially reduced net equity exposure, particularly in AI holdings, and established an oil position as a macro hedge. This represents a defensive tilt from previous positioning. However, the manager is not in full capital preservation mode and maintains core holdings while expressing willingness to rebuild positions at better valuations. The positioning reflects selective caution rather than aggressive de-risking. Score: -0.25.
Capital Deployment
The manager explicitly states 'we have reduced our net equity exposure materially, particularly across AI-related holdings.' While an oil position was established, this appears to be a hedge rather than aggressive deployment. The letter describes trimming the portfolio and raising defensive positioning. No specific cash percentages are provided, but the language clearly indicates net de-risking. The manager is not aggressively pulling back (no mention of moving to majority cash), but is clearly in reduction mode. Score: -0.50.
Forward Guidance
The manager's forward guidance is explicitly cautious with conditional deployment bias. The letter states the manager is 'encouraged by the prospect of rebuilding positions in selected holdings at materially more attractive valuations' but only 'should that outcome begin to materialise' regarding a US-Iran accommodation would they 'expect to rebuild our equity exposure.' This is classic wait-and-see language with no immediate deployment plans. The manager is watching for specific conditions before acting. Score: -0.40.
Language Signal
The language balance tilts bearish with extensive discussion of risks: 'increasingly concerned,' 'unlikely to prove durable,' 'fundamentally incompatible,' 'structural challenges,' 'supply cliff,' and detailed warnings about conflict escalation. Bullish language appears primarily in retrospective performance discussion ('performed strongly,' 'validating our conviction') and conditional future opportunities ('encouraged by the prospect'). The net directional language across the full letter leans cautious. Score: -0.30.
Perceived Risk
The manager devotes extensive discussion to specific, named macro risks with detailed analysis. The Iran conflict is described as having 'fundamentally incompatible' positions between parties, with Iran viewing Strait control as 'existential for regime survival.' The manager quantifies the oil supply risk at 12.5% of global daily supply and warns of a 'supply cliff' with only one month of inventory remaining under certain scenarios. Interest rate risk is explicitly tied to equity market upside limitations. These are not passing mentions but central analytical themes with specific downside scenarios. Score: 0.75.
Opportunity Density
The manager sees selective opportunities in specific areas. The letter expresses being 'encouraged by the prospect of rebuilding positions in selected holdings at materially more attractive valuations' following the AI drawdown. However, the manager also reduced exposure materially due to 'demanding valuations' and is waiting for specific conditions before deploying. The opportunity set is characterized as selective rather than broad, with clear areas of interest (AI at lower prices, oil) but requiring patience. Score: 0.55.
Time Horizon
The manager demonstrates a medium-term orientation with some catalyst dependency. The letter discusses the US mid-term elections as a key timeline for potential resolution of the Iran situation. The AI thesis is described as a multi-quarter theme that has 'continued to perform strongly' over time, suggesting a multi-year view. However, the manager also shows tactical awareness by reducing exposure ahead of near-term volatility and watching specific events. The combination of multi-year thematic conviction with tactical positioning around quarterly events places this in the medium-term range. Score: 0.60.
