FPA Crescent Fund

This was a Q&A webcast, so no fund-level revenue, EPS, or gross margin figures were reported. The team said higher-yielding credit was a bit over 5% of the portfolio at quarter end, energy-related exposure was about 4%, and cash/short-term instruments were generating a decent yield. For forward positioning, they said there is a “very decent chance” of increasing credit exposure over the next 12 months, they are buying more REITs opportunistically, and they would add equities if attractive prices emerge, including in consumer staples-like businesses and potentially Microsoft after a larger sell-off.

Steven Romick emphasized a contrarian, micro-focused approach: the team tries not to forecast macro variables like rates, recession timing, or geopolitical outcomes, and instead models downside scenarios around individual businesses. He said they prefer businesses that can grow cash flow over time rather than owning gold, and that they are comfortable letting opportunity, not benchmark weights, determine portfolio construction. His tone was measured and skeptical of broad-market conclusions, but constructive where valuations and business quality lined up.

No formal CFO prepared remarks were given. Financially, the team said cash sat in short-term instruments and was earning a decent yield, while higher-yielding credit was a bit over 5% of the portfolio at quarter end. They also said the public credit market still offered yields that were “way too low” relative to covenant quality, though they expect credit exposure could rise as conditions improve. On capital allocation, they described a very opportunistic approach and noted that REIT purchases were based on buying real estate at clear discounts to replacement cost.

Analysts asked about gold, geopolitical risk, energy exposure, interest rate caps, regional banks, AI, pricing power, cash deployment, REITs, Meta/Microsoft/Amazon, and China. Management answered that they are unlikely to buy gold, do not try to handicap macro risks, used interest rate caps as a limited-loss option on 30-year Treasury rates, and see regional banks as vulnerable because digital bank runs can happen in a day. They said AI may improve research productivity but does not create a clear edge, and they explained that they prefer price-makers over price-takers, are comfortable with Meta and Amazon at current valuations, and have reduced China exposure because regulation, competition, and cyclicality have become harder to underwrite.