Q1 2026 — Letter to Partners

Dear Partners,

M’Squared Capital closed its first full year since the firm's April 2025 inception with the portfolio compounding well ahead of plan before giving back a portion of the gain as we scaled position sizes into a more difficult 2026. We write these letters to explain the process behind the number, because the number is only ever the residue of the process.

What worked

The year was made in 2025. A small, concentrated book let a handful of asymmetric winners — AMD into the AI-accelerator re-rating, and the critical-minerals names as export controls bit — compound the account far faster than a diversified portfolio could have. When you are small and right, concentration is a gift. We took those gains into strength rather than fall in love with them.

What did not

2026 has been humbler. As the book grew, position sizes scaled with it, and several trades we sized up did not work: we were early and wrong on Novo Nordisk, we paid too rich a price for Rocket Lab, and we anchored to quality in Microsoft and ServiceNow at the wrong moment in the narrative. Each was cut at its stop. Larger size on the losers than on the winners is the least flattering fact in this letter, and we state it plainly because you are entitled to it. It is the single thing we are most focused on improving.

When you are small and right, concentration is a gift. The discipline is not to confuse it for skill when the book grows.

The discipline of doing less

The best positions of the year were several we did not take. We passed on the most crowded corners of the AI trade at their most euphoric, and we resisted averaging down into broken theses. Capital preservation is the first mandate; the freedom to do nothing, and to hold that nothing without discomfort, remains our rarest advantage.

Looking ahead

We enter the back half of the year cautious on the semiconductor complex — expressed through a defined-risk short — and constructive on a small set of long-term compounders bought at prices we can defend. We will keep sizing winners with more conviction and losers with more humility. Thank you for your trust.

— Quan Pham, on behalf of M’Squared Capital