Browse the world's most comprehensive database of hedge fund investor letters, sorted by recent quarter. Access primary source research from leading institutional managers.
| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Distillate Capital Long/Short Equity. This analysis is provided for institutional research purposes only and is not investment advice.
"The fund maintains a highly differentiated profile, trading at an 8.0% NTM FCF yield and 12.5x P/E with conservative balance sheet leverage (1.1x net debt to EBITDA), compared to the S&P 500's 3.3% FCF yield and 19.7x P/E."
In its 2026 Q3 Letter to Investors, Distillate Capital highlights mounting systemic vulnerabilities created by AI euphoria and rising interest rates while reviewing performance across its investment strategies. Year-to-date through September 30, 2026, the flagship U.S. FSV strategy returned 9.39% net of fees, lagging the S&P 500 (+12.73%) and Russell 1000 Value (+19.23%). Since its May 2017 inception, U.S. FSV has generated an annualized net return of 13.95%, outperforming the Russell 1000 Value by 2.82% annualized with an upside capture of 106.6% and downside capture of 95.2%. Across other strategies, U.S. SMID Quality & Value returned 18.46% YTD (vs. 13.87% for Russell 2000), Long/Short Equity returned 20.92% (vs. 12.73% for S&P 500), U.S. Free Cash Flow 500 returned 15.83%, and International FSV returned 8.57% (vs. 13.85% for MSCI ACWI ex-US). The commentary delivers a rigorous macro critique of market structure. Over the past three years, the Russell 1000 gained $32 trillion in market capitalization against only $400 billion in incremental NTM free cash flow. Hyperscalers (Alphabet, Amazon, Meta, Microsoft, Oracle, SpaceX) saw cumulative FCF collapse by roughly $450 billion due to soaring capex, while supplier profits (such as NVIDIA) merely recycled hyperscaler spending in a dynamic reminiscent of 1990s vendor financing. The market value of the S&P 500 relative to U.S. GDP ('Buffett Indicator') and global GDP has breached historical records, while 3-year market cap gains exceeded GDP gains by over 6x. Simultaneously, rising global bond yields pose an asymmetric threat to equity multiples that have historically moved in lockstep with fixed-income yields but recently decoupled. Portfolio positioning remains resolutely anchored in fundamental value and quality. During the recent quarterly rebalance, U.S. FSV initiated new positions in Lowe's Companies (1.4%), AppLovin (1.3%), and PACCAR (1.0%), while adding to UnitedHealth Group, Deckers Outdoor, and Booking Holdings. The strategy exited Abbott Laboratories (-1.3%), Workday (-1.2%), and Global Payments (-1.2%), while trimming Salesforce, Accenture, and Merck. Sector exposures reflect significant overweights to Health Care (22.5% vs. 9.3% in S&P 500) and Industrials (19.7% vs. 8.0%), and a marked underweight to Information Technology (17.6% vs. 39.7%), holding zero direct exposure to the mega-cap hyperscalers and Apple. The resulting portfolio exhibits an 8.0% FCF yield, 0.84 cash flow stability score, and zero exposure to unprofitable, cash-burning enterprises, positioning the strategy for resilience in an increasingly volatile, rate-sensitive market environment.
Sign in or create a free account to unlock full commentary, extracted equity pitches, and direct outbound manager source links with your 3 quarterly credits.
Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Growth Outlook
Risk Appetite
Capital Deployment
Forward Guidance
Language Signal
Perceived Risk
Opportunity Density
Time Horizon
