We entered 2025 with heightened expectations of change as President Trump began his new term. Indeed, the first quarter of 2025 was a marked departure from the relative stability in 2024. While the baseline recession probability remained moderately low as chairman Powell stated in his March FOMC press meeting, the risk has likely increased.

Navigating the quarter required distilling the signal from the noise, as market sentiment often appeared swayed by capricious and often incomplete headlines. For example, the narrative surrounding AI development costs, highlighted by a sell-off linked to DeepSeek during the Lunar New Year, is a case in point. Media focus centred on a $5.6 million figure cited as a final training cost, largely ignoring the context provided in DeepSeek's own white paper distinguishing this from the total, and likely much larger, development expenditure. Similarly, persistent discussions around potential tariffs dominated headlines.

Trump fired his tariff salvo, hitting Colombia with 25% tariffs, just six days into his new term. The order was retracted after Colombia agreed to accept flights carrying deported immigrants. He followed up with tariffs on China (10%), Canada and Mexico (25%) tariffs for their alleged complicity in allowing fentanyl to be smuggled into the US. While the tariff war with China escalated, a 30-day truce with Mexico and Canada ensued following negotiations. It was against this backdrop that financial markets waited with bated breath for the details of “reciprocal tariffs” announced on 2nd April.

Our fund experienced a drawdown of 10.69%. This pullback was heavily influenced by a sell-off in the Magnificent Seven (we own five out of the seven - we don’t own Tesla and Apple), which saw a nearly 18% decline from its peak in early January 2025. However, the overall picture was not uniformly negative. The fund also benefitted from the upsurge of BYD and several other Chinese internet/e-commerce companies that helped cushion the drawdown. The fund’s cash position has also kept it nimble to anticipate any opportunities that may be present.

In the midst of ongoing policy uncertainty, we continue to invest in the relative stability and durability of the data centre boom and America’s industrial renaissance, enduring secular trends that we believe can weather cyclical and geopolitical storms. As Jensen Huang demonstrated during Nvidia’s GTC 2025 tech conference, the reasoning models popularized by DeepSeek, require up to 40x more compute, resulting in significantly higher power demands. Power producers such as Constellation Energy and Vistra Corp. may potentially benefit from this surge. We also strategically increased our positions in our infrastructure software, cyber security, and leading-edge semiconductor foundries, capitalizing on the broader market drawdown.

Looking ahead and against this backdrop of persistent uncertainty, we remain committed to our strategy of investing in high quality companies that capitalize on enduring secular trends.

Apr 2025