Key Takeaways
- • Stone Sentinel Capital (SSC) gained 25.4% year-to-date through September 30, 2026, against 12.8% for the S&P 500 Total Return Index (gross USD returns, not annualized), according to its Q3 2026 letter to partners.
- • The letter uses a competing manager's collapse as a cautionary case: a former OpenAI researcher's fund reportedly reached roughly 80% YTD by early August, then lost 67% in July, forcing a fire-sale of its public equity book.
- • The letter reportedly attributes the rival fund's survival largely to its private holdings, including a stake in Anthropic, which were marked by periodic appraisal and avoided the drawdown's repricing.
- • SSC argues that returns alone are an incomplete measure of manager quality, and that risk process and survival through drawdowns matter more, with performance best judged over three to five years.
- • SSC's year-to-date return improved from 7.6% through June 2026 (versus 10.2% for the S&P 500), per its Q2 2026 letter, though the publisher context also notes the fund reversed most of its year-to-date gains between August and September.
Summary
Stone Sentinel Capital reported a 25.4% gain for the year to September 30, 2026, nearly double the 12.8% return of the S&P 500 Total Return Index. The figures are gross returns in U.S. dollars and are not annualized. In the letter to partners, the firm stressed that performance is best judged over three to five years, a window in which its strategy is designed to operate.
The letter's central argument concerns a rival manager whose results were far more volatile. According to the letter, a fund run by a former OpenAI researcher reportedly reached 80% year-to-date by early August 2026 by buying popular AI stocks and shorting then-unpopular software stocks. That fund's gains through June had reportedly turned each dollar into $5.40, but it lost 67% in July, leaving roughly $1.80 per dollar. The letter says the drawdown forced a fire-sale of the fund's entire public equity book at a discount, and that leverage, reportedly 4x gross, amplified both gains and losses.
SSC contends that the rival fund's private investments, including a stake in Anthropic, likely cushioned the damage. Because the private book is marked by periodic appraisal rather than daily prices, it did not reprice with the public book's decline, which the letter says flattered the fund's remaining value. The letter characterizes this as mechanics rather than risk management. Judged by returns alone, the rival fund remains ahead of most investors, SSC included, which the letter cites as evidence that returns are an incomplete yardstick.
Supplementary context from the publisher's domain shows a more mixed path for SSC during 2026. The firm returned 7.6% year-to-date through June 2026 against 10.2% for the S&P 500, per its Q2 2026 letter. A separate Q3 2026 investor letter excerpt notes the fund reversed most of its year-to-date gains between August and September, though it states that few quarterly losses were realized. The letter's closing line, that surviving Russian roulette proves neither the wisdom of playing nor the safety of playing again, frames process and risk tolerance as the decisive measures of an investor.
The letter's central argument concerns a rival manager whose results were far more volatile. According to the letter, a fund run by a former OpenAI researcher reportedly reached 80% year-to-date by early August 2026 by buying popular AI stocks and shorting then-unpopular software stocks. That fund's gains through June had reportedly turned each dollar into $5.40, but it lost 67% in July, leaving roughly $1.80 per dollar. The letter says the drawdown forced a fire-sale of the fund's entire public equity book at a discount, and that leverage, reportedly 4x gross, amplified both gains and losses.
SSC contends that the rival fund's private investments, including a stake in Anthropic, likely cushioned the damage. Because the private book is marked by periodic appraisal rather than daily prices, it did not reprice with the public book's decline, which the letter says flattered the fund's remaining value. The letter characterizes this as mechanics rather than risk management. Judged by returns alone, the rival fund remains ahead of most investors, SSC included, which the letter cites as evidence that returns are an incomplete yardstick.
Supplementary context from the publisher's domain shows a more mixed path for SSC during 2026. The firm returned 7.6% year-to-date through June 2026 against 10.2% for the S&P 500, per its Q2 2026 letter. A separate Q3 2026 investor letter excerpt notes the fund reversed most of its year-to-date gains between August and September, though it states that few quarterly losses were realized. The letter's closing line, that surviving Russian roulette proves neither the wisdom of playing nor the safety of playing again, frames process and risk tolerance as the decisive measures of an investor.
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