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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Forager International Shares Fund 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Forager International Shares Fund)

Primary Source Intelligence • Q3 2026 Letter Analysis

Forager International Shares Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Forager International Shares Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+8.3%

Annualized+12.3%

Positioning StanceCAUTIOUS

Market CapSMID Cap

GeographyGlobal, US, APAC, Europe

Digest Analysis

Quick Take

"Driven by a rebound in out-of-favor software holdings and surging Japanese IT consultancies, while liquidating US consumer and housing exposures to lift cash reserves to 14.7%."

Executive Summary

The Forager International Shares Fund gained 8.3% net of fees for the September 2026 quarter, outpacing the benchmark MSCI World SMID Net Index (in AUD), which declined 3.2%. The fund's annualized net return since inception stands at 12.3%. Outperformance was propelled by a sharp rebound in heavily sold-off software holdings and idiosyncratic strength across international small-and-mid-cap positions, particularly in Japan. Reflecting increased macro prudence amid escalating bond yields, the manager trimmed rallying positions and exited vulnerable holdings, driving cash balances up from 6.0% at the end of June to 14.7% by September 30, 2026. The manager's macro framework highlights growing fragility in developed markets driven by large sovereign debt deficits, resurgent inflation, and the return of bond vigilantes pushing US 10-year Treasury yields up to 5.3%. Higher benchmark borrowing costs have pressured asset valuations and triggered a sharp retrenchment in interest-sensitive sectors, especially residential housing construction and consumer discretionary spending. In response, the strategy is pivoting away from popular US mega-cap technology names and interest-rate-sensitive assets, refocusing on attractively priced international SMID-cap equities exhibiting pricing power and strong balance sheets. Key portfolio actions included the complete divestment of all US-based consumer discretionary holdings (such as Crocs and Yeti) and the liquidation of the fund's position in building products distributor Builders FirstSource as surging mortgage rates impaired its outlook. Software exposure remains a central pillar, featuring Wix.com, which rallied 45% post-investment following robust top-line execution and margin expansion at Base44. Top performers included Japanese IT modernization consultancy Northsand, which surged 90% over the quarter, alongside top portfolio allocations in Sage Group (5.7%), MTU Aero Engines (4.6%), and ING Groep (4.5%).

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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

68%

CautiousHigh

Moderate (68%)

The fund runs a concentrated portfolio targeting 20 to 40 holdings, disclosing its top positions with portfolio weights between 4.0% and 5.7% (with cash at 14.7%). Conviction is demonstrated by taking large contrarian swings into beaten-down software and Japanese IT consultancies, though balanced by hedged language and active profit-taking across rallied positions.

Growth Outlook

40%

BearishBullish

Neutral (40%)

The manager expresses pronounced caution regarding broader equity markets, pointing to surging sovereign debt yields, high long-term interest rates, and vulnerable consumer and housing sectors. While finding idiosyncratic upside in international SMID-caps, the overall tone toward major benchmarks and expensive mega-cap valuations is decidedly wary.

Risk Appetite

35%

DefensiveAggressive

Defensive (35%)

Positioning has become significantly more defensive, characterized by the complete divestment of US consumer discretionary and residential construction holdings. Cash was deliberately increased from 6% at the end of June to nearly 15% at the end of September to provide downside protection.

Capital Deployment

8%

De-riskingDeploying

De-risking (8%)

Capital was aggressively de-risked and pulled back during the quarter, with cash reserves increasing by 8.7 percentage points from 6% to 14.7% as multiple equity positions were liquidated.

Forward Guidance

45%

CautiousExpansionary

Neutral (45%)

The team has raised the return hurdle required for new investments and signaled an intention to keep cash elevated until broader market pessimism creates compelling entry prices. Capital deployment is being paused until more attractive risk-adjusted setups emerge.

Language Signal

52%

BearishBullish

Balanced (52%)

Directional language is closely balanced between enthusiastic discussion of idiosyncratic software opportunities, Japanese pricing power, and tripling revenues, against heavy risk-oriented rhetoric covering surging debt yields, crushed consumer confidence, and multiple compression.

Perceived Risk

72%

Low RiskElevated

Elevated Risk (72%)

The manager identifies explicit macro and systemic risks, emphasizing uncontained government budget deficits, the return of bond vigilantes pushing US yields to 5.3%, and mortgage rates above 7% depressing real economic activity.

Opportunity Density

58%

ScarceAbundant

Selective (58%)

The manager notes that the team is discovering plenty of interesting idiosyncratic small-cap opportunities outside the mega-cap indices. However, high valuation hurdles and broad macro concerns constrain the universe of actionable, high-conviction ideas.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The investment strategy focuses on multi-year structural transitions, explicitly targeting rolling 5-year outperformance cycles and highlighting secular shifts such as corporate Japan's IT overhaul and full-cycle business compounding.