SaltLight Capital Q3 2025 Co-Investor Letter

Core Insights - The letter discusses the ongoing exploration of intriguing investment opportunities for the upcoming year, emphasizing a proactive and opportunistic investment approach [2][3] - The firm expresses a long-standing bullish stance on AI, particularly in companies like Nvidia, while acknowledging a more selective investment strategy due to recent market developments [6][7] Investment Performance - The fund's annualized return since inception in November 2020 stands at +21.30%, significantly outperforming the South African Consumer Price Index (CPI) of +10.44% [4] - The fund's performance over the years shows fluctuations, with a notable recovery in 2023 at +30.82% after a decline of -34.25% in 2022 [4] AI Infrastructure and Market Dynamics - There is a growing skepticism regarding the AI infrastructure investments, particularly concerning the balance between capital expenditure and actual returns, leading to questions about over-capacity and potential market bubbles [5][7] - The current profit pool in the AI industry is unevenly distributed, with companies like TSMC and Nvidia capturing most of the value, while the overall industry returns on capital remain respectable [8][9] Credit Market Insights - Credit markets are seen as a crucial source of capital for AI infrastructure development, with major tech platforms tapping into these markets, indicating that the cycle is still in its early stages [14][15] - The firm notes that despite equity investor skepticism, credit investors remain optimistic, which may signal a favorable environment for continued investment in AI infrastructure [15][16] Currency Impact - A strong South African Rand is identified as a headwind for reported returns, as the fund has approximately 80% of its assets offshore, which could negatively impact returns when converted back to local currency [17] Administrative Changes - The fund administrator has undergone consolidation, but the investment strategy and philosophy remain unchanged, with only operational adjustments being made [18][19]