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Letters & Theses

Source Capital Portfolio Managers · FPA

Source Capital's mid-2025 letter to shareholders, on the tariff sell-off

Covers H1 2025Published 14 Aug 2025Filed 8 Sept 2025Available at SEC.gov, link checked 8 Nov 2026Investor letter · Investment

The view as filed on 8 Sept 2025, not a statement of what the author thinks today.

What to notice

  1. 1

    Before the correction the fund's net equity exposure fell to a recent low of 38.0%; buying during the weakness raised it to 40.9% at quarter-end.

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Checking what you can open…

“Anchoring to daily pricing fluctuations can cause unnecessary stress and lead to decisions that may reduce investment returns.”
Source Capital Portfolio Managers, 14 Aug 2025

Why read it

A balanced fund explaining how it acted in the April 2025 tariff sell-off, and why higher uncertainty meant even wider credit spreads did not look cheap to its managers.

About this letter

The portfolio managers of Source Capital, a closed-end fund listed in New York and managed by FPA, signed this letter on 14 August 2025. It opens the fund's semi-annual report, filed with the SEC on form N-CSRS on 8 September 2025.

The fund's net asset value rose 6.70% in the second quarter and 12.24% over twelve months. The half-year included a few days in April when the MSCI ACWI and the S&P 500 fell 16.3% and 18.9% from their February peaks, after the tariffs announced on 2 April. The managers explain why so brief a drawdown did not materially shift the portfolio, how they build models around low, base and high outcomes, and why they see a better balance of risk and reward in small and medium-sized companies than in large-cap growth stocks. They also describe how high-yield spreads widened and then fell below their pre-tariff levels, and close with the monthly distribution and the discount to net asset value.

Companies

  • Source Capital SOR
  • Holcim
  • Amrize AMRZ
  • International Flavors & Fragrances

Themes

  • risk
  • market cycles
  • credit cycles
  • long term thinking
  • investing philosophy

L3VLUP does not host this document. It belongs to FPA and is a public SEC filing; the notes above are L3VLUP’s reading of it.

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