March 2026

The fund returned -4.9% in March, our toughest month since inception. Global equities were also weak, with the Nasdaq -5.0%, S&P 500 -5.2%, ASX 200 -7.8%, and MSCI ACWI AUD -3.2% (helped by a 3% AUD decline).

Two shocks drove the drawdown: the continued software selloff and a sharp macro shock from the Iran conflict, which impacted both our technology and materials positions.

We responded by increasing cash to 45% and adding energy exposure, which partially offset losses.

As a result, we believe the opportunity set has improved materially. High quality tech, commodities, and real assets are now trading at valuations not seen in years. I will be adding personal capital again in April.

Since inception the fund is up 3% net, slightly ahead of the MSCI (AUD). We remain confident about future returns.

Two shocks hit at once.

The “SaaSpocalypse” continued from February. The Software ETF (IGV) fell over 21% year to date as AI displacement fears triggered indiscriminate selling across enterprise software. Software valuations compressed from around 30x to 20x EV/FCF, similar to 2022 levels. Microsoft fell over 30% from its highs and every Mag 7 stock entered a double digit drawdown.

Then the closure of the Strait of Hormuz saw crude surge above $100 and the USA 10 year bond yield jump to nearly 4.5%. FED rate cut expectations shifted from two cuts to a potential hike. Energy was the only positive S&P 500 sector and everything else sold off. Goldman Sachs reported that March was the worst monthly drawdown for hedge funds in over four years.

We were positioned defensively with low net exposure, the index hedges helped, but did not fully offset stock specific drawdowns. Underlying volatility at the stock level was far worse than what the indices reflected.

Materials drove the bulk of the damage. Price action across materials looks disconnected from underlying value, with several names trading below mid cycle earnings assumptions despite stable realised commodity prices. If conditions stabilise post the Middle East conflict, we see meaningful upside.

Technology was also weak. AMD, Microsoft, Twilio, and Amazon all declined in what has been a broad selloff across tech and software. These remain high quality core positions and we expect them to recover. We added to AMD during the month, amongst others.

Energy and hedging were the bright spots. Yancoal was the largest contributor for the month which we exited once it hit our valuation target. The Nasdaq hedge, crude oil trades, and options strategies all contributed meaningfully. Bank shorts (CBA and ANZ) also added positively.

At month end: 16 long positions, 3 shorts. Cash is elevated at 45%. The portfolio holds concentrated long positions, with index hedging used to manage downside risk.

During the month we repositioned the portfolio meaningfully. We reduced exposure to names where the thesis had weakened or risk/reward had shifted, and redeployed into higher conviction opportunities at more attractive entry points.

Post month end we have decreased cash significantly from 45% to 15% (as of yesterday the 7th of April).

The top holdings at month end are below.

We used the drawdown to add several new positions at attractive valuations, while maintaining our core holdings.

Twilio: Communications infrastructure layer for messaging, voice, and authentication. Appears to have been sold indiscriminately in the SaaS selloff, but Twilio is becoming more relevant in an AI world. Voice AI model providers have highlighted Twilio's platform as critical to reach users, manage real time audio, and maintain conversational reliability. As AI voice agents scale, every call still runs through telephony infrastructure and Twilio is that infrastructure.

BYD: New position. World's largest EV company. Demand accelerating on the back of higher oil prices. Margins improving. Global expansion underway.

AMD: Core AI infrastructure holding. As more users adopt local hardware and AI agents scale across enterprise, the demand for inference chips grows structurally. Hyperscalers are spending around $470B on AI infrastructure in 2026. AMD is positioned across inference chips, data centre GPUs, and embedded processors. We added to the position during the month.

Bravura Solutions: New position. Our work suggests a strong probability of beating its full year result. Trading at an attractive valuation with improving fundamentals.

Northern Star: New position. Quality gold producer which was oversold in March. Tactical trade positions to benefit if war noise subsides.

Amazon: 22x forward P/E vs a 5 year average of 35x. AWS growing 20%+ and central to the AI buildout. Retail and advertising add diversified cash flow underneath.

Aerovation (Private, 2.2% of NAV): Pre-IPO drone producer held at a $30M valuation. The company is currently indicating a potential $150M to $200M valuation at IPO, implying a 9-12% uplift for the fund, subject to market conditions and execution.

Aus banks short. CBA trades on around 28x earnings, 3x book value, with mid single digit earnings growth and 13% ROE. The global banking sector median is around 11x. The RBA has resumed rate hikes, affordability is worsening, and Australia's heavy variable rate mortgage exposure means higher rates hit consumers fast. Add a fuel shortage with limited local oil supply and the banks are one of the most leveraged expressions of that stress. We see limited justification for this premium. We have shorted CBA profitably before. Following the recent rally, we have re-initiated the position.

The pessimism is loud. The data underneath tells a different story.

Tech sector earnings revisions are accelerating. At 30 March the four week change in 12 month earnings forecasts for S&P 500 technology is the biggest positive jump since data began in 1995. Fundamentals improving while prices fall.

The S&P 500 multiple has compressed 17% from its peak in late 2025 to around 19x forward estimates while earnings are expected to grow 14% this year. In late March, Tech valuations relative to the broader S&P 500 were at their cheapest since 2019, and the 17 largest companies were globally trading on 2027 forward P/E estimates mostly in the teens: JPMorgan 13x, Nvidia 16x, Microsoft 20x, Alphabet 22x, Amazon 23x.

The AI infrastructure buildout is accelerating. OpenAI closed a $122B fundraise on 1 April, the largest private capital raise in history. The scale of investment required to compete in AI is extraordinary and flows to some of the companies we own: chips, energy, cloud infrastructure, and data centre capacity. This cycle is creating extraordinary numbers. Anthropic (the company behind Claude) went from $1b ARR in Dec 24, to $9b by last December, to $30b run rate in April. They added $11b ARR in a single month. These numbers reinforce the strength of the underlying demand.

Over the last 72 years, S&P 500 corrections of 10–20% have produced average returns of +15% in the three months after the trough, and +24% six months later. When VIX levels exceed 28, one year forward S&P 500 returns average 22%.

Midterm election years have also tended to see drawdowns followed by strong forward returns.

Oil stabilises and inflation expectations ease. Bond yields peak and the Fed maintains a path toward easing later in the year. Earnings hold for AI infrastructure and quality software names. The Iran conflict de-escalates and the Strait of Hormuz reopens, relieving supply pressure. The forced selling exhausts itself and institutional flows begin to normalise heading into Q2.

A prolonged oil shock that pushes crude sustainably above $120 and forces a rate hike. Deeper earnings revisions across the broader market if consumers pull back. A policy mistake from the Fed or a wider geopolitical escalation. If the conflict drags on, energy costs remain elevated, and a stagflationary environment develops. AI advancement erodes the competitive moats and pricing power of companies we own.

We are mindful of this risk and it informs our preference for businesses with deep data moats, physical assets, and infrastructure that AI needs rather than replaces.

The war in Iran dominates the near term noise, meanwhile we believe the underlying technology cycle remains intact. AI capex is accelerating. Earnings for the companies we own are growing. Valuations have reset. The war is overshadowing the technology boom underneath.

We are not calling the bottom, but after month end we have taken advantage of market weakness to invest a significant amount of the fund’s capital. The portfolio’s exposure as of yesterday is:

I am personally investing more into the fund on this pullback for the reasons outlined above. So far the fund is up 4% net in April.

I truly appreciate the support of all clients. Call or email any time if you would like more detail.

Regards