FOCUS 2026: Going global with long/short – Nic Bellemare, Max Adelson

Nic Bellemare and Max Adelson examine opportunities across global markets and show how a long/short approach can help identify investments in a range of market environments.

Transcript

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Subtitles are AI Generated

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Nic and Max, welcome to Nashville, Tennessee.

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It's good to have you both here.

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This is in Davidson County.

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I don't know if that has anything to do with my family but if

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you need anything you just let me know.

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Now, Max, I had the pleasure of speaking with you about

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the fund in May in

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Scottsdale and then, Nic, you and I spoke in Vancouver.

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But what's really great is we've got both of you together

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today.

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I know what you're going to illustrate to the audience is you

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don't work in silos, you actually work collectively.

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I think it'll be really interesting when we have our

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discussion. And also very interesting that we're following

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Dave Way who has a North American focus, you both

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have the world at your disposal and

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both sides of the trade as well with the long/short

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opportunity.

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Why don't we start with you, Nic? Why don't we start with what

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are you trying to achieve for investors?

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What are we trying to achieve?

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Well, Glen, I think one of the biggest challenge for investors

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and allocators has increasingly been to

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achieve good diversification.

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We've been in the last couple of years in a concentrated

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market. You can own five funds and

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have the same bet on the same underlying companies.

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A lot of funds and the indices are very top heavy on

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a lot of US big tech companies.

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When Max and I were thinking of launching something new,

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bringing something new to Canadian investors a few years ago

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we wanted to do something different.

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Our answer was to widen the playing

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field. Max loves to say, and I like that saying, we

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want to spend a lot of time on page 17 of the newspaper.

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we look at the big changes in the world and constantly ask

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what's the better, less obvious way to capitalixe on

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it. We have those debates every day.

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What does it mean if Meta launches

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a personal agent that goes viral?

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What does it mean if drone warfare

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becomes the dominant form of conflict?

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If AI leads to a boom in drug discovery?

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If the rise of populism leads to

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protectionist measures after 30 years of globalization?

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All those big changes.

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We're always asking what value stock is it

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turning into a more exciting growth story, or

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what market darling, on the flip side, is going

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to be more vulnerable and that could be a good short

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candidate. We really have that flexibility with

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this mandate to go across borders, across

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the range of market caps as well, and especially on

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both the long and short side to uncover

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those stories. When we put a portfolio of those together what

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we get is a strategy that has the flexibility to

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move with the market leadership but that also

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looks and feels very different and brings a

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real element of diversification to an investor's

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stock or equity portfolio.

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Nic and I have been investing together for 15 years

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now. I was reflecting on that the other day.

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Over 15 years I've gotten the chance to know Nic's investment

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style very deeply, he's gotten the chance to know mine,

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which means when we came together in 2023 to

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form this mandate we had a lot of information, we had

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lot of experience together in deciding on

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how we wanted to populate

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a portfolio. Like Nic said we wanted to have a

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very wide mandate.

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At Fidelity we have the resources with over 100 analysts

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covering stocks around the world.

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We have a database of over 2,000 companies.

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We want to cast that net really wide, really

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wide. The other thing that we decided on

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that we saw from our experience, we said

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being a Fidelity analyst, which we were for 10 years,

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forces the discipline of rating stocks,

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not just buy but also sell.

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Isolate the underperformers.

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Fortunately, for a short selling mandate most of

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the stocks in the stock market will over time underperform,

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which makes shorting very simple.

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Doesn't make it easy.

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We'll talk more about that during the session.

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Nic and I decided we needed to have this capability

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to leverage off all the resources we have to

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produce a better risk-adjusted outcome for

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investors.

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So as analysts your buy recommendations did very

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well and your sell recommendations did horribly, which is

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a good thing. That allowed you to be given

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the opportunity to run the long/short portfolio.

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Max, as you talked about, you both have worked together for a

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long time, 2012 starting at Fidelity, but school was

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where you met and decided, you know what, we're on the same

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page. Could you expand on that?

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Prior to our experience at Fidelity Nic and I

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co-ran the Desautel Capital Management student-run investment

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fund at McGill University.

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Nic was the equity strategist, I was the fixed income

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strategist. Naturally, Nic was a little more focused on

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the upside. What could go right he's asking, where are the big

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winners? Being a fixed income strategies at the time I

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was thinking of downside, how much can we lose?

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Some things never change.

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That's really what informed how we come together on

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this mandate. What we bring is a diversity of

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opinion and try to select the best idea that

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comes from that. Nic alluded to this a little bit.

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When we can find a value situation that could

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become a growth one, something page 17 going

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to page one, that's where we really want to strike.

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We do the same thing on the short side going the

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other direction. It's about that symbiosis of how

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an idea can resonate between the two of us.

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Do you miss fixed income?

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Well, no, Max was the fixed income so I stuck

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with equities all along.

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I think some of those things will always help you.

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They'll always help you as an equity analyst.

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It's almost like thinking about it from a different

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perspective. Every vantage point that you can get on something

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will give you a little bit more perspective on how to think

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about it.

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Nic, tell us about the day-to-day. How have you really gelled

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and how do you make decisions?

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Yeah, I'd say we divide the work but not the

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portfolio. Really, we don't sort

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of divide, you know, Max is going to look at this sector, I'll

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look at the sector, we're going to go our own separate sleeve

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and put it together. We really together own every

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decision in the portfolio. Frankly, the portfolio doesn't

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care who comes up with the idea, it really cares that

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the right amount of capital is put behind the right ideas.

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On a day-to-day basis

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how it works is we're both searching the world for those those

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fat pitches, those great ideas. It usually starts with

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the big research pack that max alluded to, all this

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research produced by our analysts day in, day

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out. We try to find the special gems out of it.

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When we find something that we think is compelling

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we sort of make the case to the other one.

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I think we've evolved in one of the world's

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most efficient Investment committee in that we're very

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efficient at debating the idea and getting to the bottom

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of it, bringing our two perspectives to it and deciding

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maybe it wasn't as good as I initially thought, maybe it's

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something we got to put back on the shelf and revisit later,

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or maybe it's something we need to action in the short term.

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Usually, what comes out of this discussion

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and debate is even greater conviction.

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If I find an idea Max will usually bring

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that other filter, find some blind spots

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and I get greater conviction on the other side.

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That's where we'll action the idea.

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The same goes for what's already in the portfolio which is

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just as important.

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We're both always free to challenge if

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a position in the book should be ...

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maybe it should grow, or maybe the thesis for which we bought

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it initially has played out, it's time to

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cash out, or this

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is where the teamwork is even more important, the thesis

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has drifted away, right, so the thesis is broken, what we

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envision initially is not panning out.

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To just have someone you trust be able to say I think

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the facts have changed is hugely valuable.

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The mind is very good at creating new reasons

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to own a stock, to not basically

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expose you as being wrong, but to

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have another perspective on the idea

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can help us be better sellers which is just as

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important but often harder than being a good buyer of stocks.

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Being a good seller is a really key skill

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and it helps to be looking at things both directions.

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We've got so many examples where we've gone through the

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process and said, as you mentioned, this is

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something that we want to maybe short sell or it's time

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to exit. It's a question of when do we want take that book

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off the shelf, when is a good time?

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We're probably going to get into some of those

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Why don't we get into the long side of the book right now.

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We'll talk about opportunities. A lot's been changing in the

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market consistently. When you think about the biggest

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opportunities in the last 6 to 12 months what's been changing?

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Nic, I'll start with you.

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Well, Glen, I think the big thematics, the big tectonic

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plates of the market, which you'll probably hear a lot about

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today, have not changed tremendously.

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You still have AI and the tremendous

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amount of change on the technology front and technology

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becoming this very capital-intensive industry.

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Then you have the rewriting of

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how the geopolitics at a fast pace after maybe 30

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years of relative moderation and

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this globalization movement that's suddenly reversing,

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those two tectonic plates

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are crashing into each other into the rate story which

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is the most important macro story right now and this

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increase in interest rate, sovereign rates across

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developed markets.

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Those have been the environment in

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which we've been managing the strategy for a number of

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years now, including the pilot phase.

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The opportunity set underneath is constantly evolving

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and changing and we're moving the portfolio with it.

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If I double click on AI, for example,

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one thing Max and I have been talking a lot about is the

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lessons we can draw from having covered the energy

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industry in the 2010s where there was a

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similar dynamic.

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We had a new technology in the

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shale oil and gas in a big capital cycle boom

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driven by the drillers that ultimately

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ended up in a glut of the commodity of

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oil and gas. We've learned the playbook, how to make

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money across the different phases of that.

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In the initial phase, the first few years, it's a lot about

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finding the bottlenecks of the buildout.

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In the past few years every year we found an entirely new

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vintage of companies that are often

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value stocks, low growth stocks, selling into end

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markets that are

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usually very slow, like autos, for example.

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Suddenly, they find a way to sell into data centres.

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They have a client that wants a lot of what they make

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at pretty much any price.

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Those are very powerful transformations

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and those can be really big stocks.

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We've found a lot, we continue to find some.

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would say where it's evolving is the other lesson we've been

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drawing from this period of covering the energy

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industry is that the long term winners were neither

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the company spending all the money, back then was the

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drillers, today you can say it's the hyperscalers and the

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model companies. Those were not the long term winners,

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nor was it those bottlenecks that ultimately got solved.

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It was a lot of the users of the new abundant commodity.

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Back then you had a lot cheap gas in

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North America the big winner was the

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petrochemical complex that suddenly became much more

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competitive with Asia and Europe.

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We're looking outside of technology and the buildout

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bottlenecks for winners as we deploy

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this technology. It's brought us to different corners of the

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market. It's brought us in a lot of areas, especially

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in healthcare.

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I alluded to what does a drug discovery

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boom mean?

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I think this is where it's going.

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They want to apply a lot these models to finding new molecule.

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I don't know for you Glen, I don't want a new

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drug to come directly from a model to be injected in

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my body without some testing first.

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Here's a new bottleneck that's emerging, testing all these new

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compounds. Where are these new opportunities that are

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emerging? It's even bringing us back to former

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companies that were perceived as losers in software, for

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example. Now we have all our personal agent

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that's going to call all our

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phone providers and so on to negotiate our bill.

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There's a massive modernization happening in the contact

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centre. This is driving utilization up

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of softwares that were left for dead or very, very cheap.

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I would say, back

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to your question, the environment, the tectonic plates are the

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same but the opportunity set is evolving underneath and

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we're moving with it.

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I'm glad you brought up some of those points because we always

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have to revisit many of those assumptions,

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including the energy experience. I think back to that period

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and what we saw over and over again was high degree of

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confidence. We would sit with management teams of energy

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companies building out big projects, they would look

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at us and tell us oil is going to be $100 a

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barrel. And it wasn't, it went to 50, went

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even lower.

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That's what we try to isolate for, where might

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there be a little bit of excess confidence?

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Sometimes we have the opportunity to take the other side.

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We call it buying humiliation and selling

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hubris.

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It comes up from time to time.

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Here's a great example of it. In AI right now it's not just

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who's going to build it but who can figure out how to

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use it. There's a huge gap today between how

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it's being used, what it's capable of, and what people think

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it may be capable of someday.

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Things like robotics, things like lots

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of stuff going on in space.

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Nic and I are always trying to find that intersection of what

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could be and what is.

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That's where we tend to find really interesting ideas.

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That's what you debate is what could be and what is.

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That's very interesting.

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Nic, I'm glad you mentioned about what both of you learned

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from when you were covering energy as well because it brings

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up the fact that as analysts you cover every sector through

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a number of years before becoming a diversified portfolio

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manager. So you can call back to those days of experience

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and the contacts that you have as well to make the thesis that

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you you have today.

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Max, why don't we touch on the real disconnect between

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earnings and fundamentals today?

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There are many ways to look at ratios, look

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at valuations look at prices.

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We tend to think that stocks both follow

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earnings but they also anticipate earnings over time.

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Sometimes you can see prices move

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and the fundamentals are what will follow.

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Nic and I try to isolate for what

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is the developing story that might be behind that,

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what's on page 1 going to the cover.

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Once it's in the cover, once we can give you a very clean

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story of why something's happened, chances are it's not

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investable anymore.

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What that means today is we see sectors or we see

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geographies starting to show really interesting performance

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and we go discover why.

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Is it something where prices are not reflecting fundamentals

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and we have to respect the fundamental trends, or is it

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something where prices are starting to anticipate

16:06.198 --> 16:07.900

something fundamental changing?

16:07.900 --> 16:11.503

Nic talked about the two tectonic plates being changing

16:11.503 --> 16:14.907

geopolitics and changing technology.

16:16.008 --> 16:18.911

One of the adages in investing historically for many has been

16:18.911 --> 16:22.348

to avoid talking too much about politics.

16:22.348 --> 16:25.718

We are not politicians but we follow policy

16:25.718 --> 16:26.719

very closely.

16:27.720 --> 16:30.923

That's where we found some very interesting investment ideas.

16:30.923 --> 16:33.625

We think about what happened during tariffs.

16:33.625 --> 16:36.762

It was easy to run the analysis of who would get hurt by

16:36.762 --> 16:40.065

tariffs. It was a little bit trickier to think second level

16:40.065 --> 16:42.167

of what is the response?

16:42.167 --> 16:45.604

The response was embargo of rare earth materials.

16:45.604 --> 16:47.339

We could position ourselves there.

16:47.339 --> 16:50.542

That was moving well before the fundamentals.

16:50.542 --> 16:54.446

That was isolating for what was changing in policy right now.

16:54.446 --> 16:55.981

We've done that in other areas, too.

16:55.981 --> 16:58.117

Maybe, Nic, you could tell us about health care, how we've

16:58.117 --> 17:01.353

thought about changing policy and where we've allocated.

17:02.755 --> 17:05.858

That ties to another of our playbook that we like, finding

17:05.858 --> 17:08.961

industries where even when you can find the very best player

17:08.961 --> 17:12.064

in an industry that's struggling that's usually a

17:12.064 --> 17:14.600

time where you want to pay a lot of attention to that

17:14.600 --> 17:17.803

industry, unless it's obviously something that's going

17:17.803 --> 17:19.505

to be completely disrupted by technology.

17:19.505 --> 17:23.208

If you find the best VHS manufacturer

17:23.208 --> 17:26.078

a number of years ago it still probably don't do well because

17:26.078 --> 17:29.114

we don't use that technology anymore.

17:29.114 --> 17:32.251

I can't use it in the office because the analysts

17:32.251 --> 17:33.252

are younger and younger.

17:34.987 --> 17:37.256

Usually if it's an industry that will stay forever, like

17:37.256 --> 17:39.324

healthcare, we'll always need some form of health care and you

17:39.324 --> 17:42.428

can find, okay, the best operator is barely getting

17:42.428 --> 17:45.964

by, the other weaker competitors are

17:45.964 --> 17:48.200

really struggling, maybe they have too much debt.

17:48.200 --> 17:50.769

That usually is a point where you're close to the bottom.

17:51.804 --> 17:54.907

when you can find that start of a little shift

17:54.907 --> 17:57.142

in the policy that's getting better is usually a very

17:57.142 --> 17:59.244

interesting time to get involved.

17:59.244 --> 18:02.481

One example is in Australian healthcare, we actually

18:02.481 --> 18:04.316

got involved there.

18:04.316 --> 18:07.586

Again, you may wonder, how do we know what's happening

18:07.586 --> 18:09.321

in Australia, Australian healthcare?

18:09.321 --> 18:12.224

Well, we have a team of analysts in Australia that are

18:12.224 --> 18:14.526

following that industry very closely.

18:14.526 --> 18:17.963

Over there the balance was the hospital

18:17.963 --> 18:21.233

system, the private hospital is

18:21.233 --> 18:24.103

severely underpaid by the private insurers.

18:24.103 --> 18:26.505

The insurers were making a lot of money.

18:26.505 --> 18:29.608

We're kind of waiting for that policy to start shifting

18:29.608 --> 18:33.212

because at some point the hospitals will need that capital to

18:33.212 --> 18:35.380

modernize and get the equipment and the services they need.

18:35.380 --> 18:37.983

We successfully got involved in

18:39.418 --> 18:42.454

Australian hospitals as it was turning.

18:42.454 --> 18:45.190

The US was almost the opposite situation.

18:45.190 --> 18:48.527

A lot of the managed care companies

18:48.527 --> 18:51.497

have had very rough time in the last two or three years, to

18:52.631 --> 18:55.400

the point where if you look at some of the bigger and best

18:55.400 --> 18:59.037

operators and you make some adjustments to their margin

18:59.037 --> 19:02.708

the industry is pretty much not making money in many critical

19:02.708 --> 19:03.709

business lines.

19:05.777 --> 19:07.946

In the US it was the opposite. We got involved in the

19:07.946 --> 19:10.282

insurers. So always trying to find ...

19:10.282 --> 19:12.551

there's always a bull market.

19:12.551 --> 19:14.586

There's multiple bull markets somewhere in the world.

19:14.586 --> 19:17.656

When you look wide enough there's many bear markets.

19:17.656 --> 19:21.093

So trying to find really what's cheap and getting better and

19:21.093 --> 19:23.462

shorting what's expensive and getting worse.

19:23.462 --> 19:26.665

The key is using all these data points we have for our

19:26.665 --> 19:29.001

analysts to be able to position there early.

19:29.001 --> 19:30.936

Using all the resources around the world.

19:30.936 --> 19:34.540

That's it. And Nic is very helpful for me, in part, by

19:34.540 --> 19:38.110

getting away sometimes from the big picture AI or

19:38.110 --> 19:41.446

geopolitics and then drilling down into a specific situation.

19:41.446 --> 19:43.882

We keep those big picture themes in mind.

19:43.882 --> 19:47.186

In this case we're looking at something where,

19:47.186 --> 19:48.921

actually, the story goes back even further.

19:48.954 --> 19:51.924

Because Nic and I covered a company that made an acquisition

19:51.924 --> 19:55.627

of a second tier player in that market many years ago.

19:55.627 --> 19:58.397

They gave us the presentation of why it was going to be so

19:58.397 --> 20:01.300

amazing. There was going to be growth forever in that space.

20:01.300 --> 20:04.803

People getting older, needing more care, privatisation

20:04.803 --> 20:06.905

from the sovereign in Australia.

20:08.073 --> 20:10.542

And turns out things went in a different direction.

20:10.542 --> 20:13.745

That second tier player went bankrupt and that

20:13.745 --> 20:16.682

helped us and inform us even more in addition to having the

20:16.682 --> 20:19.851

team on the ground. It just made the investment a lot

20:19.851 --> 20:23.589

easier and we saw things come around the other direction.

20:23.589 --> 20:26.792

Max, where have investors taken their eye off the

20:26.792 --> 20:28.227

ball? Where are there some opportunities?

20:28.227 --> 20:30.696

I guess the tails right now, where you're seeing some really

20:30.696 --> 20:31.797

interesting market opportunity.

20:33.465 --> 20:35.867

They are always found in many pockets of the world.

20:35.867 --> 20:39.271

One of the things we say is we cannot only

20:39.271 --> 20:40.772

read one sector of research.

20:40.772 --> 20:43.976

We cannot just spend all our time with the technology analyst.

20:43.976 --> 20:46.411

Even though internally at the office, the technology analysts

20:46.411 --> 20:49.748

is the one getting all the love right now, we want

20:49.748 --> 20:52.751

to read everything because we never know exactly where the

20:52.751 --> 20:55.087

next interesting thing may come from.

20:55.087 --> 20:58.657

What we've noticed, one of the big trends, is that for years,

20:58.657 --> 21:01.660

There were many American big tech companies who were growing

21:01.660 --> 21:04.763

and generating lots of free cash flow.

21:04.763 --> 21:08.066

And that trend persisted for year after

21:08.066 --> 21:09.735

year after year after here.

21:09.735 --> 21:12.904

And it was only when the chat GPT moment happened

21:12.904 --> 21:16.041

that we saw that spending just go right

21:16.074 --> 21:17.109

up a ski slope.

21:18.277 --> 21:21.947

And While there have been winners from that in

21:21.947 --> 21:25.484

North America, what we found is all of those vendors

21:25.484 --> 21:29.288

have had a propensity to spend their capital a lot quicker.

21:29.288 --> 21:32.424

And we ask ourselves, hey, where is

21:32.424 --> 21:33.692

that cash flow going?

21:34.693 --> 21:38.063

And having the global mandate that we do allowed us to go to

21:38.063 --> 21:41.800

Asia and find a very different corporate mindset.

21:41.833 --> 21:44.403

We see companies that are coming off years and years and years

21:44.403 --> 21:48.540

of very low returns, trading at discounts to

21:48.540 --> 21:51.443

below book value, which suggests that their investments are

21:51.443 --> 21:53.312

not generating very good returns.

21:53.312 --> 21:55.480

And they're telling us a completely different story.

21:55.480 --> 21:58.650

They're saying, we need to improve our returns before we

21:58.684 --> 22:00.519

start investing in a big way.

22:00.519 --> 22:03.789

And we're starting to see stock buybacks and dividends

22:03.789 --> 22:05.257

from these companies.

22:05.257 --> 22:08.393

So in many cases, sometimes in the very same industry, we have

22:08.393 --> 22:09.828

a geographic disparity.

22:09.828 --> 22:13.565

And we can see better incremental trends

22:13.565 --> 22:16.335

in another jurisdiction. Mm-hmm.

22:16.335 --> 22:18.970

So the fund is called Global Opportunities Long Short.

22:19.004 --> 22:21.239

We've talked about long, we've got to get into the short side

22:21.239 --> 22:24.643

of it. Nic, can you quantify the percentage

22:24.643 --> 22:27.813

of the portfolio that would be short and why you

22:27.813 --> 22:29.881

think it's important for investors?

22:31.350 --> 22:34.453

We have some flexibility in exactly the percentages we

22:34.453 --> 22:37.656

run it at. But I'll tell you, typically, we

22:37.656 --> 22:41.460

run about 130% on the long side,

22:41.460 --> 22:44.663

something like 40% on the short side, which gives you

22:44.663 --> 22:47.099

net exposure around 90%.

22:47.099 --> 22:50.535

And so for a similar rationale that Dave mentioned before

22:50.535 --> 22:53.772

in terms of those are two directionally, we call it

22:53.772 --> 22:56.942

directionally long products, to capture the compounding of the

22:56.942 --> 23:00.112

market over time. But hopefully, using that short

23:00.112 --> 23:03.415

book to... Not only add alpha by finding

23:03.415 --> 23:07.018

those, by shorting those stocks that significantly

23:07.018 --> 23:10.255

under-perform the market, but also by

23:10.255 --> 23:13.558

having a little bit less net exposure and finding shorts that

23:13.558 --> 23:16.661

will particularly under-perform when the market hits a rough

23:16.661 --> 23:20.966

patch, provide a smoother ride for investors.

23:20.966 --> 23:24.002

So our short books are, you know, our defensemen,

23:25.103 --> 23:28.407

they help us in harder times,

23:28.407 --> 23:30.142

But, and as.

23:30.142 --> 23:33.278

They also help our forwards to play with a lot more

23:33.278 --> 23:35.313

conviction because they know they're protected at the back.

23:35.313 --> 23:38.517

So that's what I mean when we own 130%

23:38.517 --> 23:42.053

of our top ideas, or

23:42.053 --> 23:45.490

130% in longs means we can put more capital behind

23:45.524 --> 23:47.993

our long ideas while taking less market risk than a

23:47.993 --> 23:49.895

traditional fund.

23:49.895 --> 23:53.031

So it's a more, it is sort of a

23:53.031 --> 23:56.568

better mousetrap to participate in global equity markets.

23:56.568 --> 23:58.970

Maybe I can ask, just by show of hands in the audience, how

23:58.970 --> 24:01.072

many of you guys, when you think shorting, you think it's

24:01.072 --> 24:02.073

riskier?

24:03.842 --> 24:05.043

A few hands.

24:05.043 --> 24:06.178

There's quite a few.

24:06.178 --> 24:07.179

Quite a few.

24:07.946 --> 24:10.682

So maybe we could talk a little bit about how we think about

24:10.682 --> 24:13.452

risk management within the short book, because Nic mentioned

24:13.452 --> 24:16.855

it is 30% of the total assets, but we also

24:16.855 --> 24:21.092

diversify that short book across many different positions.

24:21.092 --> 24:24.362

And the idea is that the market can remain

24:24.362 --> 24:26.698

irrational longer than one can remain solvent.

24:26.698 --> 24:29.601

A short position can multiply many fold.

24:29.601 --> 24:32.771

And so we have to have a very, very tight risk management

24:32.771 --> 24:36.074

process around. If we are wrong or if things are going

24:36.074 --> 24:38.877

in a different way than we expect, how do we make sure that

24:38.877 --> 24:42.113

those losses are contained while also capturing the benefit

24:42.113 --> 24:44.115

of what shorting can do for us?

24:45.383 --> 24:48.520

So we have tended to have a very, very large book, 60 to

24:48.520 --> 24:51.890

80 individual short positions, which are designed to gradually

24:51.890 --> 24:54.993

underperform our longs and allow us to have more

24:54.993 --> 24:56.962

funding on the long side.

24:56.962 --> 25:00.232

It's been a very helpful part of our overall process to do

25:00.232 --> 25:03.568

exactly that. And not get too consumed with one or two large

25:03.568 --> 25:06.671

positions which may not be performing as one might

25:06.671 --> 25:07.739

expect.

25:07.739 --> 25:11.042

If we can visualise a chart of a successful short

25:11.042 --> 25:14.179

stock for you as a team, it would

25:14.179 --> 25:17.015

go down and to the right, pretty extreme.

25:17.015 --> 25:18.850

Can you give us an example, we just have a few minutes, but

25:18.884 --> 25:22.053

could you give an example of how you both challenge each other

25:22.053 --> 25:24.623

as to where do you close that out?

25:24.623 --> 25:25.624

It could be quite extreme.

25:26.791 --> 25:27.893

Max? Yeah, great point.

25:28.894 --> 25:31.897

So sometimes the shorts come out of sectors that are very

25:31.897 --> 25:34.900

popular. Sometimes they come out sectors that are unpopular

25:34.900 --> 25:36.434

that we think can get worse.

25:36.434 --> 25:39.771

An example would be, it was not long ago that

25:39.771 --> 25:42.807

there was a consensus view that Europe would have to increase

25:42.807 --> 25:46.478

defence spending as a result of

25:46.478 --> 25:50.348

threats, external threats, to Europe's sovereignty.

25:50.348 --> 25:53.752

And we saw this explosion in the values of

25:53.752 --> 25:56.855

companies that did anything related to European defence.

25:56.855 --> 25:59.324

And there were these NATO targets that they would go for 2%,

25:59.324 --> 26:03.328

3%, 4%, 5% of spending on defence,

26:03.328 --> 26:04.829

5% GDP on defence.

26:06.097 --> 26:09.301

And where we became interested on the short side

26:09.301 --> 26:13.071

is when we can identify something shifting a little bit.

26:13.071 --> 26:16.675

So one of the big ones was the pivot,

26:16.675 --> 26:19.477

what we saw in the Middle East in terms of warfare was focused

26:19.477 --> 26:22.581

on drones. And so we're looking at this

26:22.581 --> 26:24.983

defence sector, we're saying the entire defence sector in

26:24.983 --> 26:28.954

Europe, much of it is focused on land warfare.

26:28.954 --> 26:32.223

And there's this big view that this land warfare

26:32.223 --> 26:35.360

will expand for five, 10 years, values

26:35.360 --> 26:38.163

are reflecting that. We're going, look at this example over

26:38.163 --> 26:40.966

here. This shows that this is an error.

26:40.966 --> 26:43.435

This is all going to be fought in the air.

26:43.435 --> 26:46.771

And that's when we can pounce in as short sellers and

26:46.771 --> 26:48.106

say, something is different here.

26:48.106 --> 26:50.241

There's this narrative violation.

26:50.241 --> 26:53.345

And values are very high. There's complacency.

26:53.345 --> 26:54.913

Let's start to bet on it the other way.

26:54.913 --> 26:57.248

To your question of when do we close that out, we're looking

26:57.248 --> 27:00.619

for expectations to come closer to what we think reality might

27:00.619 --> 27:03.822

be. As soon as that happens, our propensity is

27:03.822 --> 27:05.156

to try and move on.

27:05.156 --> 27:08.360

A good trick we found is to challenge each other

27:08.360 --> 27:11.863

and saying, okay, we're

27:11.863 --> 27:15.700

tempted to close this. You know, this tuck has dropped a lot.

27:15.700 --> 27:17.736

As you said, the chart has gone down.

27:17.736 --> 27:21.039

And is it now the time or is there more we can extract

27:21.039 --> 27:23.074

from that idea? Because those are two different skills.

27:23.074 --> 27:25.610

Finding the good idea. It could be the long as well.

27:25.610 --> 27:28.613

And also extracting the most alpha out of it.

27:28.613 --> 27:31.383

And one trick we've found is challenge yourself, okay.

27:31.383 --> 27:33.184

We think we want to exit the short.

27:33.184 --> 27:35.053

Would we be willing to go along?

27:37.522 --> 27:40.825

And sometimes those can turn out to be the best long ideas.

27:40.825 --> 27:43.395

Sometimes they're like, yeah, I want to cover the short, but I

27:43.395 --> 27:45.864

wouldn't go along for x, y, z reason.

27:45.864 --> 27:48.533

And those may be the reasons why you should actually stay

27:48.533 --> 27:51.603

involved in the short. So that's not an absolute exercise, but

27:51.603 --> 27:53.705

it's a good one we found.

27:53.705 --> 27:56.007

More often than not, leads us to the right action.

27:56.007 --> 27:58.476

Okay, 30 seconds each. Nic, I'm gonna go with you.

27:58.476 --> 28:01.279

What are you paying closest attention to in the next several

28:01.279 --> 28:02.313

months?

28:02.313 --> 28:05.550

I think just this growing tension around AI, you ask

28:05.550 --> 28:08.486

the people who build it, they'll say it's gonna do wonders for

28:08.486 --> 28:11.956

the world. You ask the average voter, especially in the U.S.

28:11.956 --> 28:15.226

Going into the midterm, they do not like this

28:15.226 --> 28:17.829

AI build out. They think it boosts their electricity bill.

28:17.829 --> 28:19.964

It's moving their interest rates up.

28:19.964 --> 28:23.068

It's costing them a lot while it may steal their job or maybe

28:23.068 --> 28:25.670

it will lead to something even worse.

28:25.670 --> 28:28.773

So I think this tension has always been

28:28.773 --> 28:31.109

there, but it feels like it's escalating.

28:32.544 --> 28:35.680

To a higher level, and it will have,

28:35.680 --> 28:38.083

however it resolves, we don't know how, we're gonna watch it

28:38.083 --> 28:40.618

very closely. It will have big implications for market

28:40.618 --> 28:42.821

leadership, so we're watching and going to adapt.

28:44.122 --> 28:46.858

But that is one of the main topics we've been talking about.

28:46.858 --> 28:50.061

Max, I was gonna ask you why we should be looking at this

28:50.061 --> 28:52.263

opportunity in this environment, but we don't have time.

28:52.263 --> 28:54.332

And I think you really both answered it very, very well

28:54.332 --> 28:56.901

through this discussion. So thank you both very much for being

28:56.901 --> 28:59.637

here. Fund and ETF, I might add as well.

28:59.637 --> 29:01.673

Thank you very much. Thank you.

29:02.874 --> 29:04.943

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FOCUS 2026: Going global with long/short – Nic Bellemare, Max Adelson

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