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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Constructive on high-quality value equities and mission-critical enterprise software, trimming Workday into strength while deploying into cyclical leaders like Aptiv and maintaining overweight exposure to cash-generative energy producers."
The Hotchkis & Wiley Large Cap Disciplined Value Fund (I Shares) returned +4.75% net of fees in the third quarter of 2026, outperforming the Russell 1000 Value Index return of +2.61% and bringing year-to-date net performance to +10.92% net of fees compared to +12.7% for the broad S&P 500 Index. Stock selection in information technology drove positive relative performance, supported by substantial gains in enterprise software, while an overweight allocation to the energy sector and favorable selection in industrials provided incremental alpha. Conversely, index reconstitution effects and benchmark-only mega-cap holdings, specifically Apple and an underweight stance in Microsoft, served as the primary performance detractors during the period. The macroeconomic environment was shaped by persistent inflationary pressures, with headline CPI rising 3.4% year-over-year and prompting the Federal Reserve to implement a 25 basis point rate hike to 4.0%. Concurrently, long-term interest rates surged, with 10-year Treasury yields reaching 5.3% and 30-year mortgages crossing 7%, exerting sharp pressure on rate-sensitive utilities and real estate. Meanwhile, geopolitical unrest in the Middle East sparked a surge in Brent crude to $104 per barrel. Against this backdrop, equity market leadership shifted meaningfully as earlier speculative momentum in artificial intelligence infrastructure moderated, paving the way for a rotation back into high-quality, fundamentally sound value equities. Portfolio activity reflected disciplined opportunistic positioning, as the manager capitalized on temporary market dislocations while trimming winners into strength. Exposure to enterprise software leader Workday was trimmed following sharp share price appreciation, though it remains the fund's largest position, while the fund maintained significant conviction in Salesforce and independent E&P operator APA Corp. On pullbacks, capital was selectively deployed into high-quality franchise cyclical assets, including adding to automotive technology supplier Aptiv, while maintaining high long-term conviction across undervalued core holdings such as Ericsson and PPG Industries.
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