Key Takeaways
- • Black Bear Value Fund, LP returned +2.5% in the third quarter of 2026 and +4.1% year-to-date, after a -10.3% decline in September, according to its Q3 2026 letter to partners.
- • The S&P 500 returned +2.3% in Q3 and +12.7% YTD, and the HFRI Index returned -2.0% in Q3 and +5.5% YTD, per the letter.
- • The short book generated the bulk of the fund's Q3 returns, according to the publisher's summary of the letter.
- • Gains from July and August were partly reversed in September, and the manager attributes the volatility largely to portfolio concentration.
- • The manager argues that value investing remains challenging amid market enthusiasm for growth, easy financing and AI, and says the fund does not seek to mimic the S&P 500.
Summary
Black Bear Value Fund, LP returned +2.5% in the third quarter of 2026 and +4.1% year-to-date, according to the fund's Q3 2026 letter to partners. The fund returned -10.3% in September, reversing part of the gains made in July and August. Over the same periods, the S&P 500 returned -0.4% in September, +2.3% in the quarter and +12.7% year-to-date, while the HFRI Index returned -2.8% in September, -2.0% in the quarter and +5.5% year-to-date. The manager described Q3 performance as strong on both an absolute and relative basis, though the path was volatile.
According to the publisher's summary of the letter, the short portfolio generated the bulk of the fund's returns in the quarter. The manager said the fund's concentration can amplify moves in either direction and that a handful of holdings can materially affect monthly results. Using housing as an example, the letter said a slower housing recovery calls for patience and lower near-term estimates, while the structural need for additional homes continues to support the long-term case for those holdings. The manager stated that patience must be earned through business performance.
The letter characterizes the current environment as challenging for value-oriented investors. It attributes much of the market's enthusiasm to continued growth, readily available financing and expectations for AI, noting that even diversified portfolios can share exposure to these themes. The manager contrasts this with businesses in housing, commodities and other less favored areas that trade at prices reflecting considerable pessimism.
The fund's short book targets businesses whose prices depend on demanding assumptions or whose capital structures may prove unsustainable, and it uses both equity and credit shorts. The letter notes the fund also invests outside the U.S. and allocates capital based on the relationship between price and estimated value, rather than market capitalization as the S&P 500 does. The manager cautioned that value indices rely on relative accounting ratios and growth characteristics, so no single benchmark closely captures the fund's holdings. The fund will continue to present the S&P 500 and the HFRI Value Index as context.
According to the publisher's summary of the letter, the short portfolio generated the bulk of the fund's returns in the quarter. The manager said the fund's concentration can amplify moves in either direction and that a handful of holdings can materially affect monthly results. Using housing as an example, the letter said a slower housing recovery calls for patience and lower near-term estimates, while the structural need for additional homes continues to support the long-term case for those holdings. The manager stated that patience must be earned through business performance.
The letter characterizes the current environment as challenging for value-oriented investors. It attributes much of the market's enthusiasm to continued growth, readily available financing and expectations for AI, noting that even diversified portfolios can share exposure to these themes. The manager contrasts this with businesses in housing, commodities and other less favored areas that trade at prices reflecting considerable pessimism.
The fund's short book targets businesses whose prices depend on demanding assumptions or whose capital structures may prove unsustainable, and it uses both equity and credit shorts. The letter notes the fund also invests outside the U.S. and allocates capital based on the relationship between price and estimated value, rather than market capitalization as the S&P 500 does. The manager cautioned that value indices rely on relative accounting ratios and growth characteristics, so no single benchmark closely captures the fund's holdings. The fund will continue to present the S&P 500 and the HFRI Value Index as context.
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