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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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FMI All Cap Equity 2026 Q2 Investor Letter | Buyside Digest

Back to Fund Profile (FMI All Cap Equity)

Primary Source Intelligence • Q2 2026 Letter Analysis

FMI All Cap Equity Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, FMI All Cap Equity. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Annualized+9.58%

Positioning StanceNEUTRAL

Market CapSMID Cap

GeographyUS, Global, Europe

Digest Analysis

Quick Take

"FMI is positioned for AI bubble deflation."

Executive Summary

Fiduciary Management believes the market spent Q2 2026 pricing in an AI future that has not materialized while creating compelling value in overlooked quality businesses. Global markets surged on AI momentum, with semiconductors posting their best quarter ever and valuations reaching over four standard deviations above historical averages. The five largest hyperscalers are projected to spend over $725 billion on AI capex in 2026, yet only Amazon would generate positive returns under zero operating cost assumptions. The manager views this as circular, unsustainable spending reminiscent of the dot-com bubble. FMI's portfolios underperformed as expected but are positioned in businesses with durable competitive advantages, high returns on capital, and conservative balance sheets trading at meaningful discounts. These companies stand to benefit from AI on the cost side through productivity gains rather than selling into the AI investment cycle. The valuation gap between AI infrastructure and everything else now rivals dot-com peak levels. The manager sees compelling risk/reward on a 3-5 year horizon, with portfolio holdings offering adequate margin of safety whether AI productivity materializes or the bubble deflates.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

The manager demonstrates high conviction through clear, falsifiable thesis statements about AI capex unsustainability and valuation extremes. Three specific positions are named and sized with detailed investment theses: FTI Consulting (small cap), Capital One (large cap/all cap), and Fluidra (international). The letter includes specific catalysts, timeframes (3-5 year horizon), and willingness to hold through near-term underperformance. Language is declarative with minimal hedging on core views. However, the portfolio appears diversified across market caps and geographies rather than concentrated, and multiple additional holdings are mentioned but not detailed. Score: 0.72 reflects high conviction on thesis and named positions but not extreme concentration.

Growth Outlook

20%

BearishBullish

Bearish (20%)

The manager expresses strong caution about market conditions, characterizing AI momentum as investor euphoria with many hallmarks of a bubble. Language includes warnings about speculative excess marking major market peaks, comparisons to the dot-com bubble, and concerns about unsustainable concentration. The manager explicitly states that what the market reads as opportunity, they view as limitation, and describes the current environment as narrow, concentrated, and circular excess. Score: -0.60 reflects meaningfully bearish market outlook with specific systemic concerns.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

The portfolio is positioned defensively relative to market momentum, having underperformed in Q2 as expected by avoiding AI infrastructure at extreme valuations. However, the manager is not in capital preservation mode or heavily hedged. Instead, they are selectively positioned in quality businesses at discounts, with named positions in FTI Consulting, Capital One, and Fluidra. The positioning is constructive on specific value opportunities while avoiding the AI complex. Score: 0.40 reflects selective long positioning with defensive tilt away from market leadership.

Capital Deployment

45%

De-riskingDeploying

Net Neutral (45%)

No explicit cash level changes are stated in the letter. The manager describes underperformance in Q2 by not keeping pace with AI momentum, suggesting they did not chase the rally. Three positions are discussed (FCN, COF, Fluidra) with language suggesting existing holdings rather than aggressive new deployment. FTI Consulting is described as an entry point created by recent headwinds, and Capital One is discussed as a transformation thesis, but there is no indication of significant new capital deployment or cash reduction. Score: -0.10 reflects slight de-risking or cautious stance with limited net activity.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

The manager describes the long-term setup as the strongest in many years and expects the picture to look very bright on a 3-5 year horizon, but there is no indication of aggressive near-term deployment. The letter emphasizes patience, discipline, and capital preservation. The manager is positioned but not actively scaling or adding new exposure to the AI complex. They are watching for the market to reassess valuations rather than deploying into current conditions. Score: 0.30 reflects mild positive bias with emphasis on patience and waiting for the thesis to play out over time.

Language Signal

38%

BearishBullish

Balanced (38%)

The letter contains substantial bearish language around AI infrastructure: bubble, speculative excess, circular, unsustainable, euphoria, mania, severe earnings disappointments, overpriced, and comparisons to historic market peaks. However, this is balanced by bullish language around portfolio holdings: compelling value, attractive, meaningful discounts, durable competitive advantages, strong management, margin of safety, and bright long-term picture. The net balance tilts slightly bearish given the dominance of risk language in the macro discussion. Score: -0.25 reflects more bearish than bullish directional language overall.

Perceived Risk

75%

Low RiskElevated

Elevated Risk (75%)

The manager identifies multiple specific, named systemic risks with detailed analysis: AI capex spending generating inadequate returns with specific ROI calculations, semiconductor valuations at four standard deviations above historical averages, extreme market concentration with 42 stocks accounting for 76% of S&P 500 returns, tech investments representing over 90% of U.S. GDP growth versus 60% at dot-com peak, and rising AI token costs threatening demand sustainability. The letter devotes substantial space to risk analysis with comparisons to historic bubbles and warnings about circular dynamics. Score: 0.75 reflects meaningfully elevated perceived risk with specific, quantified concerns about systemic market conditions.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

The manager sees abundant opportunities in overlooked quality businesses trading at meaningful discounts to intrinsic value. The letter states the long-term setup is the strongest in many years and describes finding value across multiple areas including consulting (FTI), banking (Capital One, Schwab, PNC, Lloyds), and industrials (Fluidra). The manager characterizes the valuation gap as creating compelling opportunities for value-oriented investors. While opportunities are selective and concentrated in non-AI areas, the manager views the breadth as attractive. Score: 0.70 reflects good opportunity density in specific value-oriented segments despite expensive overall market conditions.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The manager explicitly states a 3-5 year time horizon for their thesis to play out, emphasizing long-term setup and patience. The letter references historical parallels to the five years following the March 2000 Nasdaq peak when their strategy outperformed by 127 percentage points cumulatively. Language emphasizes steadfast discipline, capital preservation, and willingness to underperform in the near term. No urgency is expressed around near-term catalysts, though some positions like Capital One have identifiable medium-term catalysts. Score: 0.75 reflects multi-year thesis with explicit timeframe and demonstrated patience, though not permanent capital structure.