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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Black Bear Value Fund returned +2.5% net in Q3 2026, driven by short portfolio performance and strong gains in Tidewater, while expanding credit short exposure to 34% to exploit mounting corporate refinancing pressures."
Black Bear Value Fund, LP generated a net return of +2.5% in the third quarter of 2026 and +4.1% year-to-date, trailing the S&P 500's net returns of +2.3% and +12.7% respectively, while outperforming the HFRI Index's -2.0% quarterly return. Portfolio performance exhibited heightened intra-quarter volatility, with strong gains achieved in July and August before declining -10.3% net in September. The fund maintained an active hedging posture, ending the period with gross equity long exposure at 98.5% (net equity 51.6%), fixed income/credit short exposure of -34.0%, and a substantial cash and Treasury bill balance of 48.7%, bringing total gross investment exposure to 179.4% and net investment exposure to 17.6%. The macroeconomic environment remains defined by widespread market enthusiasm for artificial intelligence, accessible corporate financing, and premium growth multiples, leaving capital-intensive sectors like housing, basic materials, and traditional commodities heavily discounted. Management views this bifurcated landscape as fertile ground for contrarian value investing, identifying an unsustainable divergence between high-expectations growth narratives and structurally constrained, cash-generative resource assets. Concurrently, elevated interest rates and wider credit spreads are creating refinancing pressures across overleveraged borrowers, directly validating the fund's short positioning across private credit, consumer bridge lending, and capital-intensive legacy data centers. Portfolio concentration remains exceptionally elevated, with the top five positions accounting for 68% of gross long exposure and the top ten representing 99%. Core long capital allocation is centered in housing supplier Builders FirstSource, metallurgical and thermal coal producer Core Natural Resources, Canadian royalty consolidator PrairieSky Royalty, offshore support vessel operator Tidewater, and low-cost coking coal producer Warrior Met Coal as it ramps the Blue Creek mine. Meanwhile, the fund's expanded credit short book targets fragile balance sheets, predatory consumer credit models, and speculative AI beneficiaries reliant on debt-fueled promotional expansions.
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