LRT Capital Management September 2023 Investor Update

Dear Friends & Partners,

During the month, the LRT Global Opportunities strategy returned an estimated -9.32%, bringing year-to-date returns to +36.58%, net of fees.

Our investment returns are summarized in the table below:

Click to enlarge

Results as of 9/29/2023. Periods longer than one year are annualized. All results are net of all fees and expenses. Past returns are no guarantee of future results. Please see the end of this letter for additional disclosures.

September was a challenging month for our strategy, with our long holdings declining, partially offset by our hedges. Despite the decline in September, year-to-date we are well ahead of the S&P 500 (+13%), the Nasdaq 100 (+35%) and the Russell 2000 (+2.5%). More importantly, we have done this with net exposure of under 50% and beta adjusted exposure of less than 30%.

The markets had been declining all month steadily, but the declines accelerated after the FOMC meeting on September 20^th. During the meeting, the Federal Reserve kept interest rates unchanged but pushed out their forecasts for interest rate cuts further out into 2024. This caused a sharp rise in interest rates on long term US Treasury bonds. The sharp increase in bond yields caused a selloff in stocks, which was most pronounced in the small-cap space. While these kinds of events can be unpleasant, they speak to the uncertainties in investing in stocks and the short term risks we face. I see no meaningful changes to the competitive dynamics of the businesses we invest in due to a relatively small change in long term US interest rates. I expect this drawdown to be relative short-lived as a result. Onward and upward.

As always, if you have any questions, please don’t hesitate to contact me. Thank you for your ongoing support.

Lukasz Tomicki, Portfolio Manager LRT Capital