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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Hosking Partners maintains a contrarian, small-to-mid-cap bias, warning that debt-fueled AI infrastructure is commoditising while capital cycles favor neglected energy refiners, deep-value Japanese equities, and idiosyncratic UK turnarounds."
The Hosking Partners strategy rose +3.5% net of fees in the third quarter of 2026, bringing year-to-date net returns to +19.3% and outperforming the MSCI ACWI Index by 1.9% and 6.3%, respectively. The fund maintains a highly diversified, cyclically sensitive, small-to-mid-cap biased portfolio with a 12% allocation to energy and a deliberate underweight in US mega-cap technology. Benchmark outperformance across trailing one, three, five, and ten-year periods occurred against significant headwinds from narrow, AI-concentrated indices and the US 10-year Treasury yield closing at its highest mark since 2007. Macro commentary centered on a capital cycle critique of the generative AI infrastructure boom, comparing today's $7 trillion data center buildout to the late 19th-century US railway expansion. Hyperscaler capital expenditure has transformed previously capital-light businesses into capital-intensive entities, driving AI-related debt to over 20% of US investment-grade bond issuance and causing reverse crowding-out in sovereign borrowing markets. The manager cautions that data centers function essentially as factories producing commoditised compute, where high fixed operating costs will compress pricing and return on capital toward marginal cost. Portfolio activity reflected disciplined rebalancing and profit-taking across multi-year winners. The fund reduced exposure to energy shipping holdings Hafnia, DHT, and International Seaways following major multi-bagger gains, trimmed positions in memory semiconductors, and recycled capital into deep-value Japanese small caps, beaten-down precious metals baskets, and supply-constrained office real estate providers Vornado and Great Portland Estates.
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