FFM Fund Newsletter - Aug 2026

August 2026

Dear Friends, Dear Investors,

July turned out to be a particularly turbulent month. Investors' favourite sector, semiconductors, but also, more broadly, anything related to artificial intelligence, sold off sharply for no apparent reason.

A leveraged technology fund, Situational Awareness (irony clearly has a sense of humour), was forced to massively liquidate positions to meet a cascade of margin calls. Its 24-year-old manager appears to have forgotten Charlie Munger's warning that three things reliably ruin otherwise intelligent people, namely liquor, ladies, and leverage.

Anything related to technology has since rebounded, the forced deleveraging now being over. But this is a shot across the bow that markets would be wrong to ignore.

We are using this newsletter to take stock of the FFM AGF fund. Despite a very good year in 2025, the fund has significantly underperformed the S&P 500 since the start of the year. The reason is no mystery. Our exposure to AI remains considerably lower than that of the S&P 500, which now dedicates close to 50% of its weighting to it.

We have already addressed this subject and will not revisit the AI bubble. As it continues to inflate, we continue to trim our exposure, probably too early, but better safe than sorry. We should also recall that we originally invested in the hyperscalers because they were asset-and-investment-light companies that printed money, competed little against each other and bought back their shares massively. That era is over. They have all become hungry for assets, think datacenters, and for investment, while growing increasingly opaque on the financial front, with obscure off-balance-sheet debt structures and circular financing.

If one must invest in capital-intensive sectors, fair enough, but that does not justify valuations of 30 times earnings, or even 60 times free cash flow, since there is now … little of it left. This is why we have been gradually building exposure to the traditionally capital-intensive sectors of energy and materials, accustomed to managing asset-heavy balance sheets and trading at a fraction of the valuations of the newcomers.

This positioning has proved costly in the short term, but we remain convinced that its relevance will become apparent in the years ahead.

Best regards,

Your CaridaB Group Team