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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Arnott Capital returned flat in H1 2026 despite strong gains from AI memory and Korean reform offset by UK homebuilder losses and hedge costs. March commodity shock exposed concentrated oil and rate exposures across seemingly diversified positions."
The Arnott Opportunities Strategy returned 0.04% net for the six months ending June 30, 2026, with 32% net long exposure. Samsung Electronics and SK Hynix drove strong performance across both the AI memory theme (+511 bps) and Korean Corporate Reform (+518 bps), capitalising on abrupt tightening in AI memory supply as models evolved from chatbots to complex task-performing agents. UK homebuilders detracted 549 bps following Middle East conflict, energy price spikes and a 137 bps repricing in UK rate expectations over 20 days. The manager reshaped homebuilder exposure for the next upswing given 0.65x book valuations versus 1.5x midcycle. March losses exposed concentrated commodity and rate exposures that broad index hedges failed to offset, prompting process refinements. Looking forward, the manager sees compelling opportunities across AI infrastructure, Korean reform and a multi-year physical capital cycle driven by underinvestment in mining, construction and energy infrastructure. Hyperscaler capex now exceeds $1 trillion but amber flags emerge around debt funding and Chinese AI competition. Oil remains tight through year-end under intermittent Hormuz disruption.
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