Dear Partners,

We compounded capital at a reasonably healthy rate—advancing +13% in 2025.

On a relative basis, this placed the fund between most benchmarks—trailing the international markets which delivered an exceptionally strong rebound year based on weakness in USD, behind US large-cap indexes and slightly ahead of US small-cap and fund composites.

Numbers never seem to paint the full picture, though, as we arrived at those results in a very different way. From our perspective, it was a fairly steady year with relatively minimal volatility. Long positions generally moved higher, while hedged/short exposure remained a frustratingly persistent friction. Markets meanwhile seemed to bounce around on geopolitical news, macro flows and changing narratives, but ultimately arrived at new highs driven by a narrow leadership set.

There are a lot of different directions I want to take it from here… which is the primary reason I have been struggling to deliver this letter. But in the interest of time and respect for your human (!!!) attention span… I will try to keep it brief and merge the Outlook section into a single consolidated segment. AI would never…

Over the years I have come up with a lot of references and analogies to talk about economic concepts. I then use these letters as a way to tie them together to form a relevant long-term framework, which helps provide a clearer snapshot for how we think about the world and investing landscape.

Bumbershoot Holdings L.P.

2025 Performance

The last great hideout…?

This is inflation vs. deflation …The Central Bank Superheroes …How Fast, How High, How Long …Crucifying mankind on a cross of T-bills …The reflationary pump …The cartoonish increase in money supply …Brushing against the third-rail of USD reserve status …The Lizard Brain …Algo-Trader Chicken …That you have to get it right on price too …The economic riddles from last year…Questions and narratives …All of it.

One aspect I’d like to reexamine though is liquidity —and particularly the next reflation cycle .

I stated last year that the ” next reflation cycle will be something to witness “—and so I just want to expand a bit on what that means from my perspective.

The challenge with this is that it requires holding some conflicting ideas . About personal beliefs. The state of the economy. Growth, valuations, interest rates…

I will not be attempting to predict when the next cycle will kick off and/or what will precipitate it… but I am willing to stake that in a debt-driven system, deflation is simply too destabilizing to allow it to persist for any measured amount of time. This is even more the case with policymakers increasingly sensitive to financial market performance as a scorecard. Even the question of a mismatched growth/contraction and expectations of deflation might reasonably set off the next reflation cycle sooner rather than later. And my opinion, taken for what it is—whenever it occurs, it will be substantial.

The dynamic reminds me of the show Breaking Bad . Every episode, viewers are presented with a seemingly fatal constraint. Hank is boxed in. Consequences are finally going to be unavoidable. But through a series of increasingly creative and risky maneuvers, disaster is averted to push the story forward to the next episode. Stabilizing the present, while quietly raising the stakes for the future.

Economic storylines have behaved quite similarly over the course of my career.

An economic slowdown looms.Policy mistakes threaten instability.Credit pressures emerge.

But through some combination of policy intervention, fiscal expansion, monetary accommodation, and/or financial engineering—those immediate consequences can be postponed. Kicking the can down the road.

Each rescue works… but brings with it new distortions. A subtle erosion in the confidence of fiat currency. An increased dependency on a political reaction function. Greater public leverage. Uneven distribution of wealth. Higher risk of long-term inflation.

Understandably, the market focuses on survival to the next episode—not the longer-term story arc.

But this is the liquidity .

Whenever those maneuvers occur, liquidity floods the system. And when that happens, it inevitably searches for somewhere to flow.

Money needs to be absorbed .Liquidity needs to go somewhere …

And so, it does…

It finds its way into anything capable of absorbing it—Durable businesses… Financial assets… Real estate… Anything with a credible narrative …

And it will keep pushing on that string for as long and as hard as it can until the price hits some tension. This is what can stretch it way beyond fundamentals as the crowding effect takes place within a narrowly anointed leadership cluster.

Anything even resembling a worthy mattress becomes stuffed to the gills —expressed via multiple expansion—and may not be safe for your next investment dollar.

“If the narrative is not contentious, then the valuation almost certainly is…”

Even an exceptional growth story can be pushed to the point that it is just a tough deal.

So, what am I saying?What am I worried about?Where is the catastrophe risk ?

Why am I talking about deflation , the effects of excess liquidity and the cause of even more (!) excess liquidity with the next reflation cycle all in the same breath…?

Because in many ways they are all the same story.

The economy is working really well for certain parts of it. Institutional sponsorship and capital market access is wildly strong for the companies benefiting from the central technological/geopolitical narratives. And for individuals who own financial assets, the system is still largely working as designed—compounding wealth.

The rich get richer… but it’s not a collective experience.

While macro headlines and market leadership remain fairly resilient—growth has been uneven with pressure mounting beneath the surface for many. Affordability remains a real constraint for most people/households. Inflation shocks to non-discretionary items like food, rent & healthcare; combined with higher home prices and elevated interest rates have now effectively frozen many people out from ever becoming owners…

This is the down-leg of the K-shape recovery/economy we’ve all talked and read so much about. And it is that descender portion that is being forced to carry the real economic burden—felt deeply in the consequences of economic mobility and financial security.

But immunity by the upper-leg does not last forever—effects eventually begin to work their way upward…

Which is about when the structural constraint of policy response kicks in. Because as the economy slows… and credit contracts… and fear takes over… the historical answer has been remarkably consistent: reflate .

Ironically, it is this cycle reinforcing the very imbalance which created the pressure in the first place. Liquidity flows into financial assets … precisely the thing that the struggling portion of the economy was stressed by not owning to begin with! Cue the William Jennings Bryan quote … it’s no wonder populism is awakening around the world!

The game is not fair .

But as I’ve said previously—we didn’t make the rules… and we certainly are not in charge of trying to change them. All we can do is play it to the best of our ability.

But to be a happy unintended consequence of the next reflation cycle… we need to know what the “playbook” is going to look like. And my suspicion is it won’t look exactly the same as the last time.

Because the market narrative is changing…

AI is still a primary driver, but the question of whether AI will be “ transformational to the world? ” was one I labeled last year as not having any real stakes . Accept that it is going to transform the world and productivity, but then what? Is it investable ? And who wins ?

The new question of whether AI is hugely deflationary to the job market and the rest of the SaaS technology ecosystem is one that has a lot more bite to it.

The market is also still starting from a tough position. To repeat last year, a little fizz almost never turns into a bubble . But it is expensive. Signals are there—stretch valuations, investor complacency, excessive leverage… Perhaps most notably, “ good company news ” in terms of fundamental positive strength/improvement in the underlying operations of a business is beginning to not always have an effect. That is typically an end cap to a bull market, as the multiple expansion has played out.

To put it very simply, uncertainty is going up. Meaning the number of places with credible narratives in which to park substantial amounts of capital is going down…

Selection is going to be paramount.

This has always been at the core of our process—know what we own, why we own it and what it may be worth. Selection is where we shine …

It is why we go through the entire hassle of still trying to identify key themes, understand the core narratives, evaluate critical fundamentals… ie: research .

And it works.

But it is forcing us to confront the challenging question of whether we are taking enough risk?

And the answer to that question is probably not .

Too often we have arrived early, but then moved on to our next idea far too quickly…

To use a baseball analogy, we’ll show up in the second or third inning… and then usually try to leave after the seventh-inning stretch. Reasonable .

But we’ve been at the right games… and the market has increasingly rewarded those who have stuck around through the eighth and ninth innings. The increase in volatility as the game nears an end has been worth it .

This is not a change in our process… core principles remain exactly the same. We will never take risk that forces a permanent capital impairment. We will never become a forced seller. But from a playbook with fewer places to live… we need to hold those spots much more dearly in terms of both concentration and duration.

The question in my mind is not whether we can locate the right corners of the market… it is whether we are being compensated appropriately for our conviction to be standing there.

Perhaps not quite going full Charlton Heston on you—“ pry it from my cold, dead hands… ” … but at the very least… you’re going to have to come and take it.

Our job is still to find them first.

But when we do, stay a little longer.

Volatility may tick up… and that may be a good thing.

As a reminder, Bumbershoot remains my primary way to navigate the markets and to grow wealth—through all cycles and conditions. It is an absolute return fund. A multi-strat, eclectic expression of my philosophy on what I ought to be doing with my own money. Because indeed, it is my own money. I have still never touched a single dollar of my initial investment as an LP, which represents the vast majority of my net worth.

I am as excited about our opportunity set today as I have been at any time since starting the company. The market remains narrative-driven and increasingly split between assets everyone wants to own and those that have quietly fallen out of favor.

It is rewarding understanding businesses, rather than just trading based on price action. It is an environment that tends to prize deep work—valuing the process we have been building all along.

Since the fund’s inception, I envisioned an alternative in asset management services, guided by a clear set of values and goals—and I am proud to say that we have remained steadfast in commitment to that mission.

I believe we are exceptionally well positioned to take advantage of whatever comes next…

Performance

Bumbershoot Holdings L.P. generated a positive gross return of +13.02% for the full-year 2025.

The partnership has a cumulative total gross return of +156.3% since inception in Oct-2015.

Looking at relative performance, our monthly returns were directionally correlated with key benchmarks, but with significantly less volatility. Despite concentration in our largest holdings, it was a steady year—with no individual month being +/- more than 5% for the first time since the pandemic.

Investment activity is categorized into five segments— Core, Micro, Value, Special Situation & Discretionary —with estimated P/L contributions as follows:

Core gains were led by investments in the Technology sector including Alphabet (GOOGL) (GOOGL:NYSE), Micron (MU) (MU:NYSE), First Solar (FSLR) (FSLR:NGS) and Camtek (CAMT) (CAMT:NGM). We remain particularly focused on key critical “OS platform” businesses and semiconductor-related adjacencies.

Our long-standing position in gold (and copper!) miner Barrick Mining (GOLD) (B:NYSE) finally moved higher as a reflection of the gains in the underlying yellow metal. Materials sector exposure to the agricultural-fertilizer industry via Intrepid Potash (IPI) (IPI:NYSE), Nutrien (NTR) (NTR:NYSE), CF Industries (CF) (CF:NYSE) was also a positive contributor to results.

The Healthcare sector was once again led by Ligand (LGND) (LGND:NGM) and Madrigal (MDGL) (MDGL:NGS), but was more than offset by losses in Viking Therapeutics (VKTX) (VKTX:NCM). While Viking has been a roller-coaster over the past couple of years, we remain optimistic as it moves VK2735 into multiple Ph3 trials. We remain interested in investments targeting biopharmaceutical royalties and metabolic disorders.

Home improvement retailer, Kingfisher (KGFHY) (KGF:LSE), finally started to turn things around… perhaps Europe does still count for something after all.

And playing on the continued theme of infrastructure spending, defense and energy sustainability, a handful of our positions in the Industrial and Energy sectors added positively to performance including Oshkosh (OSK) (OSK:NYSE), Coterra (CTRA) (CTRA:NYSE), OSI Systems (OSIS) (OSIS:NGS), and Herc Holdings (HRI) (HRI:NYSE).

Core category investment returns were lowered by our direct short exposure and market hedging activity.

Micro strategy had a standout performance, led by a notable attribution from Vimeo (VMEO) (VMEO:NGS), which was acquired during the year. Some of our technology and industrial-themed holdings such as Orion Group (ORN) (ORN:NYSE), NPK International (NPKI:NYSE) and Vishay Precision Group (VPG) (VPG:NYSE) continued to produce meaningful contributions; and a collection of lesser-weighted positions also bumped up results.

Value category registered negligible attribution as an auditor switch at Gencor Industries (GENC) (GENC:NGM) took down performance, offsetting any other gains.

Special Situation strategy was a detractor for the year as our position in BuzzFeed (BZFD) (BZFD:NCM) gave back the “notable gain” from last year. This was partially offset by M&A related arbitrage.

Discretionary trading had no significant attributions to merit discussion in more detail.

In terms of exposure levels, Bumbershoot ended 2025 with Core investments around target range. Non-Core categories remain a mix, with only the Micro category being above the target weighting of ~5% AUM.

Administrative

There is one notable change to talk about.

While I still plan to use the collective “we” in talking about our partnership—DeForest Hinman accepted a new role as an investment officer at a regional bank. I need to thank him for his contributions and wish him the best of luck in the new role.

Aside from that… the picture remains the same.

Before moving on from this section… I want to STOP! This will not be an entire dedicated Marketing section like a few years ago, but I want to do something I have rarely done since starting… ask for your investment .

I fully believe in what we are doing as an alternative in asset management. And am increasingly confident that we’ve built a process that is scalable and repeatable at higher amounts of capital under management.

Any support from existing LPs to intro the fund to new prospective partners remains greatly appreciated; and I’d love people to consider being part of Bumbershoot as we take steps forward.

Taxes

Bumbershoot’s form Schedule K-1 that reports on each partner’s share of income/losses for the tax year have been prepared by our administrator.

As reminder, we successfully implemented a “ Master-Feeder ” structure a handful of years ago to efficiently pass long-term gains in our Core holdings back to the main fund.

Tax implications for 2025 were favorable with partner accounts recognizing only moderate taxable gains for the full-year from a capital account basis.

For existing partners that have sizable (and hopefully increasing) embedded gains in Core investments held in the Feeder account—those gains ultimately become taxable upon being realized at some time in the future. That event, however, is deferred and the consequent tax-effect is long-term in nature. Over time, I expect our tax strategy to remain efficient/advantageous.

Summary

2025 was a solid year for Bumbershoot—one that adds to our long-term track record of compounding.

Another mile.

As many of you know, I ran the Tokyo marathon just a few days ago… so I’ve been thinking about running a lot. It’s given a new perspective to the familiar phrase, “ It’s a marathon, not a sprint. ”

You do not arrive at the finish line. It is only step-after-step-after-step that you ultimately reach the goal. It is an exercise in patience, endurance and preparation.

Stepping forward to 2026!

Sincerely,

Jason Ursaner, Managing Member, Bumbershoot Holdings

1 S&P 500 Index —https://ycharts.com/indicators/sp_500_monthly_return

2 Russell ²000 Index —https://www.ftserussell.com/analytics/factsheets/…/hist…

3 FTSE 100 Index —https://www.ftserussell.com/products/indices/uk

4 BarclayHedge Hedge Fund Index —https://portal.barclayhedge.com/…Barclay-Hedge-Fund-Index

Original Post

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Original post by Invesco