Sydney-based hedge fund Bronte Capital’s flagship Amalthea fund has recorded its second consecutive year of negative returns, finishing the 2026 financial year down 9.2 per cent. This significantly lagged the MSCI All Country World Index’s 17.6 per cent gain, following a 7.7 per cent fall in the previous financial year. The firm, which manages investments by taking both long and short positions in various assets, has seen its high-profile investment chief, John Hempton, miss the substantial rally in computing memory stocks amidst ongoing concerns that the artificial intelligence (AI) trade is headed towards an inevitable bust.
Hempton admitted the fund was “wrong-footed by the momentous shift in market leadership,” retaining positions in established technology companies like Amazon and Alphabet while missing the surge in memory component manufacturers such as Samsung, SK Hynix, and Micron. These chip giants have tripled and doubled in value respectively, far outperforming Bronte’s portfolio. “We have failed to keep up with a roaring bull market,” Bronte Capital informed clients, noting that suppliers to the AI capital expenditure boom had significantly outperformed. The hedge fund remains adamant that the AI trade will ultimately end in a bust, either from a lack of return on capital or a huge spike in unemployment, or a combination of both.
Bronte is particularly worried about its long position in Google parent Alphabet, whose core search business faces an “existential” threat from AI disruption. Despite trimming some Alphabet holdings, the fund acknowledged having “no idea what it is worth,” labelling the stock as “abnormally risky” given the disruption. While Bronte’s long book included small-cap Japanese AI supply chain stocks, their impact was limited due to small position sizes. The Amalthea fund did finish the financial year with a strong 6.5 per cent return in June, primarily from its short positions in materials and energy, and longs in companies like Swiss-listed DSM-Firmenich and ASX-listed Brambles, with the fund stating, “the hot part of this market is narrowing. And that suits us.”
