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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Positioned defensively in high-quality, cash-generative global small- and mid-caps with low leverage, avoiding commoditized AI infrastructure hardware while capitalizing on the historical valuation convergence between top-tier and low-grade companies."
During the third quarter of 2026, the Grandeur Peak Global Contrarian Fund (Institutional Class: GPGCX) returned 7.02% net of fees, bringing its year-to-date net return to 15.44% and annualized since-inception return to 15.23% net of fees. The fund outperformed its primary benchmark, the MSCI ACWI Small Cap Index, which fell 3.17% in the quarter and gained 12.43% year to date. Portfolio holdings entered the third quarter trading at an attractive starting price-to-earnings multiple of 13.1x and demonstrated solid reported earnings growth of 20.7%, reflecting disciplined capital allocation across global small- and mid-cap markets. The investment team emphasizes an economic environment characterized by rising borrowing costs, with the U.S. 10-year Treasury yield closing September at 5.27%. As central banks transition away from prolonged monetary easing, management expects higher debt costs to penalize capital-dependent and highly leveraged businesses, particularly among small caps where nearly a third of debt is floating rate. Concurrently, the historical valuation premium commanded by high-quality companies over lower-quality peers has compressed to just 0.8 multiple points, offering an asymmetric margin of safety for profitable enterprises capable of internally funding growth. On the portfolio and research front, analysts evaluated semiconductor and supply-chain dynamics following on-the-ground due diligence in Taiwan, emphasizing mission-critical niches such as thermal management and server control chips while avoiding single-design-win obsolescence risk and excessive artificial intelligence infrastructure exposure. In firm updates, Spencer Hackett stepped down as Guardian Portfolio Manager of the Global Contrarian Fund to launch an independent venture, while the broader investment team maintains its Quality, Valuation, and Momentum framework across holdings.
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