This report provides a detailed overview of the FPA Queens Road Small-cap Value Fund's performance during the third quarter of 2025, highlighting its results against a key benchmark and articulating the investment philosophy that guides its strategic decisions.
Navigating Volatility: A Strategic Approach to Small-Cap Value Investing
Performance Analysis: Q3 2025 Returns and Year-to-Date Outperformance
In the third quarter of 2025, the FPA Queens Road Small-cap Value Fund delivered a return of 7.46%. This performance occurred in a market where the Russell 2000 Value Index (R2KV) posted a stronger gain of 12.60%. Despite lagging the benchmark in this specific quarter, the Fund demonstrated robust year-to-date performance. For the initial nine months of 2025, the Fund generated an impressive 13.77% return, significantly surpassing the R2KV's 9.04% for the same period. This indicates a strong overall outperformance by the Fund within the small-cap value segment.
Investment Philosophy: Resilience in Down Markets, Prudence in Up Cycles
The FPA Queens Road Small-cap Value Fund operates under a foundational investment philosophy centered on rigorous discipline and patience. The fund's managers anticipate that this approach will lead to superior results during periods of market decline, while acknowledging that it may result in trailing the market during highly speculative phases. This strategic outlook is a deliberate choice, reflecting a commitment to capital preservation and long-term value creation rather than chasing short-term gains in volatile or overvalued markets.
The Four-Pillar Process: A Framework for Value Investing
Central to the Fund's operations is its meticulous four-pillar investment process. This framework is consistently applied to every investment decision, ensuring a coherent and disciplined approach. The pillars guide the fund in identifying companies that possess specific characteristics crucial for long-term success. This structured methodology underpins the Fund's ability to navigate various market conditions effectively.
Extreme Discipline: Identifying Resilient and Compounding Companies
A key aspect of the Fund's investment strategy is its commitment to extreme discipline in company research. The objective is to identify businesses that demonstrate resilience during economic downturns and possess the capacity to compound value at attractive rates over extended periods. This rigorous selection process focuses on intrinsic value and sustainable growth, aiming to build a portfolio of high-quality companies that can withstand market fluctuations and generate consistent returns for shareholders.
