Leaven Partners Q3 2025 Letter To Partners

Core Insights - The fund's assets appreciated by 11.0% in Q3 2025, with a three-year return of 66.7%, compared to the S&P 500's 92.0% return [4][20] - Japanese equities have shown strong performance, with a year-to-date increase of 21.6%, marking a shift in the long-term underperformance trend [4][23] - The MSCI EAFE Index is outperforming US markets in 2025, indicating a significant shift in global equity leadership [5] Japanese Market Performance - The Japanese market's recent outperformance is attributed to corporate reforms, record stock buybacks, and supportive capital-market policies [4][23] - The last notable outperformance of Japan over the US was in 2013, driven by "Abenomics" reforms [4] US Market Dynamics - The current US outperformance cycle has lasted 14.3 years, significantly longer than the historical average of eight years [6] - S&P 500 earnings growth has been four times faster than that of MSCI EAFE, leading to substantial P/E multiple expansion [6][10] - A recent study indicates that most of the US outperformance is due to valuation expansion rather than superior earnings growth [10] Bitcoin Treasury Holdings - Public companies are increasingly allocating capital to Bitcoin as a core reserve asset, with nearly 1 million BTC controlled by public companies and institutions, valued at over $115 billion [11][12] - Strategy Inc. holds over 640,000 BTC, and the number of companies using Bitcoin as a strategic reserve is growing rapidly [12] - The phenomenon is compared to the 1970s gold rush, driven by the desire to escape fiat devaluation [12] Investment Strategy - The investment strategy emphasizes value investing, focusing on companies with improving operations and strong cash positions [16][17] - Toho Lamac Co. Ltd. was identified as a value opportunity, with plans to invest in Bitcoin and Ethereum, leading to significant gains for the fund [17]