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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Higher benchmark Treasury yields have improved intermediate return asymmetry, prompting duration extension into seven-year government debt and select high-grade hyperscaler bonds passing rigorous rising-rate breakeven tests."
The strategy posted net returns of -1.46% for the third quarter of 2026 and -0.93% year-to-date, outperforming the Bloomberg U.S. Aggregate benchmark quarterly decline of -3.51%. Portfolio yield-to-worst increased from 4.35% to 5.11%, while effective duration stood at 3.26 years and spread duration ended at 1.80 years. Capital allocation remains heavily anchored in capital preservation, with High Quality assets comprising 97% of the portfolio, Credit exposure limited to 3%, and cash and equivalents ending the quarter at 5.5%. Management operates without macro rate forecasting, instead applying a disciplined 100-basis-point 12-month stress test to identify duration value where bonds deliver at least breakeven total returns against rising yields. Benchmark Treasury yields climbed 60 to 90 basis points across the yield curve during the quarter, leaving yields 80 to 150 basis points higher year-to-date. Elevated yields expanded return asymmetry on intermediate-term debt, triggering an active extension in portfolio duration while overall credit spreads across investment-grade and high-yield sectors remained near historically tight levels. Portfolio activity centered on deploying capital into cheaper longer-duration paper, including purchases of 7-year U.S. Treasuries, 5-year TIPS, prime auto loan ABS, and equipment-backed securities. Within credit, the fund initiated selective exposure to investment-grade hyperscaler corporate debt following spread widening driven by data center financing concerns, while maintaining zero exposure to lower-rated sub-investment grade credit.
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