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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Vela International Fund 2026 Q2 Investor Letter | Buyside Digest

Back to Fund Profile (Vela International Fund)

Primary Source Intelligence • Q2 2026 Letter Analysis

Vela International Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Vela International Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+3.16%

Annualized+9.56%

Positioning StanceNEUTRAL

GeographyGlobal

Digest Analysis

Quick Take

"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."

Executive Summary

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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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

68%

CautiousHigh

Moderate (68%)

The fund holds concentrated positions with 11 named tickers and detailed discussion of position sizing (Infineon as largest holding, Copa as higher-conviction holding). The manager provides specific valuation metrics (P/E ratios, ROIC, free cash flow yields) and intrinsic value estimates for multiple holdings. However, the letter describes starter positions being eased into and mindful risk management, with some hedging language around elevated risks in emerging markets. The manager demonstrates strong conviction in the value discipline and willingness to hold through volatility, but the diversified portfolio of 10+ positions and cautious language around new positions prevents a higher score.

Growth Outlook

38%

BearishBullish

Neutral (38%)

The manager expresses caution about the AI mania, describing it as unsustainable with valuations at extreme levels (64x P/E for semiconductors). Concerns about Middle East conflict escalation and ongoing macro uncertainty are explicitly stated. However, the manager sees selective opportunities in undervalued areas like Philippine banking and European entertainment, preventing a more negative score. The outlook is cautious with identified risks but not outright bearish on all markets.

Risk Appetite

15%

DefensiveAggressive

Defensive (15%)

The fund reduced cash from 8.4% to 6.0%, representing modest deployment, but the manager acknowledges this was poorly timed. Three new starter positions were initiated, indicating selective risk-taking, but these are described as easing in mindfully with elevated risks acknowledged. The manager cut Infineon in half after it doubled, demonstrating active risk management. The positioning is mildly constructive but cautious, with selective additions rather than aggressive deployment.

Capital Deployment

25%

De-riskingDeploying

De-risking (25%)

Cash was reduced from 8.4% to 6.0%, representing a 2.4 percentage point decline or approximately 29% reduction in cash levels. Three new positions were initiated, though described as starter positions. One position (WIX) was sold, and Infineon was cut in half, representing some harvesting activity. The net effect is moderate deployment with cash declining by 2-3%, but the manager acknowledges the deployment was poorly timed and expresses caution going forward, preventing a higher score.

Forward Guidance

10%

CautiousExpansionary

Cautious (10%)

The manager states confidence in clawing back lost ground but provides no timeline or specific deployment plans. The language is monitoring and evaluating rather than actively deploying. The manager explicitly states they will not change their investment process mid-stream to chase AI stocks, indicating a wait-and-see approach. The forward guidance is cautious with limited near-term action bias beyond maintaining current positions and watching for opportunities.

Language Signal

45%

BearishBullish

Balanced (45%)

The letter contains significant bearish language around AI mania, buzzsaw, carnage, obliterated, displacement fears, and demise. Risk language dominates the technology discussion. However, this is balanced by opportunity language around attractive valuations, wide discounts to intrinsic value, strong double-digit returns, and best-in-class for specific holdings. The net balance tilts slightly negative given the prominence of risk and mania language in describing the quarter's primary driver.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

The manager identifies multiple specific risks with meaningful discussion: AI mania creating valuation bubbles (Infineon at 64x P/E), Middle East conflict with potential escalation after midterm elections, regulatory risks in UK government procurement and European payment networks, tariff impacts on supply chains, and AI displacement fears affecting software valuations. The letter devotes substantial space to risk discussion across technology, geopolitical, and regulatory domains. However, the manager does not characterize these as systemic or tail risks, and maintains positions despite the risks, preventing a score above 0.70.

Opportunity Density

55%

ScarceAbundant

Selective (55%)

The manager sees selective opportunities in defined areas: Philippine banking trading at tangible book value, European ticketing at attractive valuations after earnings misses, Austrian catering below intrinsic value after Iran War fears, and technology holdings at wide discounts. However, the manager explicitly cannot participate in the AI sector due to valuation discipline and describes picking through carnage as premature. The opportunity set is characterized as requiring selectivity and patience rather than being broadly abundant, with good ideas in specific pockets but not across the board.

Time Horizon

72%

Short-TermLong-Term

Decade+ (72%)

The manager explicitly discusses five-year return expectations for technology holdings and describes following Do & Co for over ten years before initiating a position. Long-term contracts with 70% visibility to 2030 are cited for Do & Co. The manager emphasizes not changing the investment process mid-stream and maintaining discipline through short-term volatility. However, the letter also discusses quarterly results, near-term catalysts like earnings reports, and trimming positions based on expected return forecasts, indicating some medium-term focus. The overall horizon is multi-year (3-5 years) with willingness to hold through volatility, but not the decade-plus permanent capital timeframe that would score above 0.80.