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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Hotchkis & Wiley Mid-Cap Value Fund. This analysis is provided for institutional research purposes only and is not investment advice.
"Constructive on disciplined mid-cap value and mission-critical enterprise software, leveraging energy overweight gains while maintaining conviction in underearning cyclicals with robust capital return profiles."
The Hotchkis & Wiley Mid-Cap Value Fund (I Shares) advanced +5.36% net of fees in the third quarter of 2026, bringing its year-to-date net return to +17.71%. The strategy generated meaningful relative alpha against the benchmark Russell Midcap Value Index, which declined -1.98% in Q3 and gained +15.25% YTD, as well as the broader Russell Midcap Index (-3.0% in Q3). Relative outperformance was primarily driven by positive stock selection across industrials, technology, and communication services, alongside a beneficial overweight position in the energy sector (+11% benchmark sector return), which overcame headwinds stemming from benchmark reconstitution and biotechnology rallies. Macroeconomic crosscurrents defined the quarter as the Federal Reserve resumed monetary tightening with a 25 basis point rate hike to 4.00% amid persistent inflation (CPI at 3.4% year-over-year). Long-term interest rates surged, with 10-year Treasury yields reaching 5.3% and 30-year yields climbing to 5.6%, prompting weakness in rate-sensitive and consumer discretionary sectors. Meanwhile, geopolitical turmoil in the Middle East and tanker disruptions in the Strait of Hormuz drove physical Dated Brent crude up 68% to $120 per barrel. At the same time, speculative momentum behind artificial intelligence infrastructure paused amid financing concerns, enabling disciplined value and high-quality fundamentals to reassert market leadership over high-beta momentum. Portfolio activity was marked by a partial trim in Workday following strong price performance and takeover reports, while maintaining high conviction in its enterprise software economics. In energy, top holding APA Corp. generated strong free cash flow and Permian operational efficiency. Other high-conviction positions highlighted include student loan originator SLM Corp, chlor-alkali producer Olin, and integrated power producer NRG Energy, whose respective share repurchases and earnings normalization profiles remain sound despite near-term idiosyncratic headwinds.
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