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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Disciplined value focus capitalizing on factor dispersion and valuation disconnects, initiating a new position in Carrier Global while harvesting Oshkosh after catalyst fulfillment."
During the third quarter of 2026, the Aristotle Value Equity WM Composite returned -0.09% net of fees (+0.41% pure gross), underperforming the 2.61% gain of the Russell 1000 Value Index and the 2.30% advance of the S&P 500 Index. On a year-to-date basis, the strategy gained 1.24% net of fees (+2.75% pure gross) compared to 19.27% for the value benchmark. Relative underperformance was primarily driven by negative security selection across Information Technology, Materials, and Communication Services, while positive selection in Financials and an underweight in Consumer Discretionary offered modest offsetting tailwinds. Management highlighted significant structural distortion in the benchmark environment following the June Russell reconstitution, where mega-cap technology entries expanded Information Technology from 12% to 21% of the index while Communication Services shrank to 3%. Furthermore, extreme factor dispersion characterized the market, with the highest-beta quintile of the Russell 1000 Value advancing roughly 53% over the prior six months while the lowest-beta quintile retreated 2%. Aristotle maintains that market leadership has been excessively concentrated, with the top twenty contributors generating 76% of the benchmark's year-to-date return, masking underlying market fragility. Portfolio turnover remained disciplined and focused on capital reallocation toward businesses exhibiting widening gaps between operational fundamentals and compressed multiples. The strategy initiated a new high-conviction position in HVAC manufacturer Carrier Global, financed through the complete sale of specialty vehicle producer Oshkosh following thesis realization. Top relative detractors included Martin Marietta Materials and Microchip Technology, while biopharma giant Amgen and integrated energy leader Chevron served as key positive contributors during the period.
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