In the first half of 2025, the SVN Capital Fund demonstrated a resilient performance, securing a net return of 6.26% amidst considerable market fluctuations. The period was marked by significant geopolitical and economic headwinds, including the imposition of tariffs and escalating trade barriers, which cast a shadow of uncertainty over global markets. Despite these challenges, the fund maintained a strategic posture of 'divine inaction,' prioritizing a disciplined, long-term approach to investing. This strategy emphasizes patience and a deep conviction in the intrinsic value of its holdings, allowing the fund to weather short-term turbulence by focusing on robust, owner-operated businesses with strong fundamentals.

A critical examination of the market environment reveals that the early part of 2025 was dominated by concerns stemming from new trade policies. The market's initial reaction was a sharp downturn, with significant drops in both the S&P and NASDAQ indices, as companies faced reduced earnings visibility. This period of heightened anxiety prompted discussions among investors about appropriate responses to such macro-level shifts. For SVN Capital, the prevailing challenges were encapsulated by what was termed the 'three Ts': Trump, Tariffs, and Trade Barriers. These elements, though external to individual company operations, created an environment where traditional market reactions to earnings reports were overshadowed by broader economic fears. For instance, Copart, a major portfolio holding in the salvage vehicle auction sector, experienced both inflationary pressures and potential volume suppression due to tariffs, illustrating the complex, often unpredictable, impacts on businesses.

The fund's investment philosophy, however, dictated a measured response. Drawing inspiration from historical leadership, the manager advocated for 'divine inaction,' a deliberate choice to resist impulsive adjustments. This approach is rooted in the belief that not all market disturbances require immediate intervention, and that allowing events to unfold can sometimes be the most prudent course. This conviction is supported by the fund's long-standing positions in several high-quality companies, many of which have been held for multiple years and now constitute a significant portion of the portfolio. The core strategy remains focused on identifying and holding companies with enduring competitive strengths and reliable cash flow generation, a strategy that has historically proven effective in navigating various market cycles.

Looking at specific holdings, the fund's portfolio is heavily concentrated in businesses that align with its core investment criteria. India, in particular, has emerged as a significant investment destination, now representing approximately 20% of the portfolio. This reflects a growing recognition of the country's potential for high-quality business opportunities. Among the strong performers, Bajaj Finance, an Indian specialty finance firm, has seen its stock price surge, reflecting its robust fundamentals. Similarly, Dino Polska, a Polish grocery chain, has rebounded strongly after an earlier dip, benefiting from a renewed focus on expansion. These successes underscore the fund's ability to identify and capitalize on growth opportunities in diverse geographies.

Despite the overall positive trend, some long-term holdings faced temporary headwinds. KKR, a significant part of the portfolio since 2020, experienced a volatile period with notable declines due to a slowdown in IPO and M&A activities, which are crucial for alternative asset managers. However, the fund maintains confidence in KKR's long-term prospects, anticipating a recovery as market stability returns. Copart also saw a downturn following its fiscal Q3 2025 results, compounded by rumors of losing a major insurance client. Nevertheless, the underlying business drivers for Copart, such as the increasing age of vehicles and the rising cost of repairs, continue to provide tailwinds, reinforcing the long-term value proposition. The fund remains confident that management's prudent, owner-operator approach will enable these companies to overcome short-term challenges.

A notable addition to the fund's Indian holdings is Triveni Turbine Limited (TTL), a leading global manufacturer of industrial steam turbines. TTL exemplifies the fund's investment criteria: a comprehensible business model, strong returns on capital, competent owner-operator management, and an attractive valuation. The company's capital-light approach, significant revenue from export sales with higher margins, and a growing aftermarket service segment contribute to its strong financial performance. With a robust order book and a dominant position in its market segment, TTL is poised for continued growth. The management's focus on organic expansion and a healthy balance sheet further reinforce its appeal as a long-term investment. This holding reflects the fund's disciplined application of its four-part investment objective, aiming for substantial long-term returns.

Ultimately, SVN Capital's strategy is characterized by an unwavering commitment to its foundational investment principles. The fund's performance during the first half of 2025, despite external pressures, reinforces the efficacy of focusing on high-quality, owner-operated businesses and exercising patience in the face of market volatility. The integration of well-researched, fundamentally sound companies like Triveni Turbine alongside established players like KKR and Copart, allows for a diversified yet concentrated portfolio. This meticulous approach aims to deliver long-term value appreciation for its partners, reflecting a belief in methodical execution over reactive adjustments, much like a meticulous artisan crafting a masterpiece from raw materials.