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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"VELA International underperformed by 700 basis points in Q2 2026 as AI mania drove semiconductors higher while the fund's value-oriented technology holdings suffered. The manager sold half of Infineon after it doubled to 64x P/E and refuses to chase AI stocks at current valuations."
The VELA International Fund returned 3.16% net in Q2 2026, underperforming the MSCI World Ex-US Index's 10.22% return by approximately 700 basis points, with 80% of the shortfall attributable to the Technology sector. Semiconductor and AI-related stocks doubled during the quarter while the fund's technology holdings suffered from either missing the AI rally or facing AI displacement fears. The manager cut the Infineon position in half after it doubled on AI enthusiasm, as valuation discipline prevented further participation at a 64x P/E multiple. The fund initiated three new positions in Philippine banking, European event ticketing, and Austrian airline catering, all trading at attractive valuations. Healthcare was the strongest performing sector with all four holdings contributing positively as companies emerged from post-pandemic challenges. The manager reduced cash from 8.4% to 6.0% but acknowledges the deployment was poorly timed. Despite the quarterly setback, the manager maintains conviction that technology holdings trading at wide discounts to intrinsic value can generate strong double-digit returns over five years as the AI mania cools and fundamentals reassert themselves.
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