What are Blue Quadrant’s three primary macro scenarios for 2026?
We have an overweight in the energy sector, a key theme for us. Other key themes we have positioned the fund’s investments in are the legacy automotive sector, while also still having exposure to precious metals mining companies and more recently broadening that exposure to include industrial metals.
As a contrarian manager, how do you distinguish between a “value trap” and a genuine “price re-rating” catalyst?
It is difficult to distinguish “ex ante”, which is why we try to incorporate macro and industry-level analysis to reduce our probability of being caught in a value trap. Incorporating this analysis increases the probability of a re-rating “catalyst”.
Can you describe a current position you have taken that exhibits high levels of “asymmetry” – where the downside is capped but the upside is multi-fold?
There are investments in our funds where the company’s net cash position almost exceeds the market value of the company; this is a very clear asymmetric position.
What “absolute” benchmarks do you use to hold your investment team accountable during periods of equity market rallies?
Inflation plus over 12- and 36-month rolling periods. We aim to generate positive returns over a 12-month rolling period and exceed our hurdle rate over a 36-month rolling period.
To what extent does your definition of a “significant discount to intrinsic value” change when interest rates change?
A significant change in interest rate expectations will, for some companies (not all), reduce our estimate or target price level. This will mainly reflect a lower multiple being applied to account for the risk to revenues and margins from a change in interest rates, or vice versa.
To what extent do you prioritise permanent capital loss versus market volatility?
We are primarily concerned with permanent capital loss and hence why we remain value focused and disciplined. However, in terms of our overall leverage, cash levels, etc, we will monitor “ex ante” volatility levels and will reduce risk exposure if they exceed a certain level.
How do you identify the “superior earnings growth” inflection point?
Companies that have depressed earnings and margins lower than the median historic margin for that industry and where we believe macro or industry headwinds are about to abate and become a tailwind are very likely to show superior earnings growth. However, we can never be 100% certain, especially regarding timing.
In terms of leading indicators, it would really depend on the industry or type of business. For a retailer, it would primarily be interest rate movements that would act as a leading indicator.
What is misunderstood about your “balance of probabilities” approach?
Even an exceptional fund manager will make mistakes or get it wrong sometimes, but the difference is that they get it right more regularly, so over time they will produce good returns. As an IFA, you should never judge a fund manager based on one stock pick or investment idea, rather stay focused on their overall performance over a long-term period, ideally five years.
What enables you to execute your “Macrovalue” philosophy effectively?
As investment professionals, we have always paid attention and spent significant time on understanding macroeconomic and industry trends or dynamics. It is part of our “DNA” in a sense and any individual wishing to join our company will need to be able to look at the world in the same way. So this gives us something of a competitive edge when combining those two core “beliefs” or pillars.
In terms of general macro or industry themes, we have not really gotten it “wrong” per se, but we have at times been too early on a specific call, which then has led to periods of underperformance vs peers and equity indices.Where we have been wrong on occasion is in the selection of a specific company to express a particular theme. This is also why we follow a “basket” approach where possible and select up to five companies to express a theme.
About LEANDRO GASTALDI | Leandro is the portfolio manager of the Blue Quadrant Capital Growth Prescient RI Hedge Fund, Blue Quadrant Worldwide Flexible Prescient Fund and Blue Quadrant USD Capital Growth Fund. He has extensive industry experience, having worked as a research analyst and portfolio manager. He joined Anglorand Securities in 2006 and managed the Anglorand Growth Fund between 2007 and 2009, before founding Blue Quadrant Capital Management in 2010. Leandro holds a BCom (Honours) from the University of Cape Town and is a CFA charterholder.Blue Quadrant Capital Management (Pty) Ltd (Reg Number: 2009/018608/07) is an authorised financial services provider with a Cat IIA Licence. FSP Number: 42165.
