Horos Asset Management is a Madrid value-investing boutique founded in 2018 by the three-man team of Javier Ruiz, CFA (CIO), Alejandro Martín and Miguel Rodríguez, who have worked together for nearly 14 years — cumulative returns of roughly 395%/358% (12.3%/11.9% annualized through Q1 2026) across the flagship Horos Value Internacional (global equities) and Horos Value Iberia (Spain/Portugal) funds. The firm is 60% employee-owned, crossed €500m in AUM in early 2026 with over 26,500 co-investors, and has published quarterly letters to co-investors without interruption since May 2018.
In the first quarter of 2026, the overall market only dipped slightly (S&P 500 -4.4%), but beneath the surface, sectors diverged sharply — energy stocks soared nearly 40% while software and IT consulting fell over 20%. Three forces are driving this: AI threatening to upend software companies, a liquidity crisis in private credit (a form of shadow banking), and Middle East conflict pushing oil prices higher. For regular investors, this means you can't just look at the index; there are opportunities if you pick the right stocks. But beware: not every stock that's down 30% is a bargain. Some have shaky business models or face a second wave of pain from private credit deleveraging. The author uses concrete examples like Booking Holdings and European IT firms to show which stocks are worth buying and which are still risky. This piece helps you see the structural shifts beneath the market noise.
In early 2026, market volatility intensified under three major uncertainties: AI disruption, tight private credit liquidity, and US-Israel-Iran geopolitical conflicts. However, the impact varied across sectors, prompting Horos to rebalance the portfolio and enhance upside potential. During this peri
This chapter discusses the three major sources of uncertainty facing the market in early 2026: the disruptive impact of AI technology on the software industry, liquidity tensions in the private credit market, and the impact of the US-Israel-Iran geopolitical conflict on the energy sector. The report argues that while the overall market decline has been moderate, the severe divergence in performance across different sectors has created structural opportunities for value investors.
| Index | Quarterly Performance |
|---|---|
| S&P 500 (US) | -4.4% (Intraday trough over -7.0%) |
| DAX (Germany) | -7.4% |
| CAC 40 (France) | -4.0% |
| FTSE MIB (Italy) | -1.0% |
| IBEX 35 (Spain) | -1.1% |
| Hang Seng Index (Hong Kong) | -3.0% |
| SENSEX (India) | -15.4% |
| Nikkei 225 (Japan) | +2.1% |
| Company/Asset | Role/Key Data | View |
|---|---|---|
| Microsoft | Worst performer among the Magnificent Seven | Indicates AI competition leads to risk exposure for leading tech stocks |
| Anthropic (Claude model) | Triggers a new round of uncertainty in the AI industry | Its technological breakthroughs could lead to the software industry being "eaten" |
| Oil & Gas Sector (Overall) | Quarterly gain ~40% | Benefits from the energy price shock driven by geopolitical conflict |
| Turkey | Sold gold reserves accumulated over six years in just three weeks | Exacerbates short-term selling pressure on gold to address its currency crisis |
1. Beware of AI's Deep Threat to the Software Industry: The report implies that if models like Claude drastically improve efficiency, traditional software companies (especially IT consulting, SaaS) may face profit compression. The market may not have fully priced in this "being eaten by AI" risk.
2. Focus on the Short-Term Momentum and Medium-to-Long-Term Reversal Risk of the Energy Sector: The 40% gain driven by geopolitical conflict may be partially priced in, but if the conflict escalates, oil prices could still rise further. It is necessary to distinguish between one-off shocks and structural benefits.
3. Macro Hedging Value of Fixed Income and Gold: The 30-year bond yield approaching 5% is the market's pricing of inflation expectations and fiscal risks. The pullback of gold from highs may offer a second entry opportunity (note the short-term disruption from Turkey's sales).
4. Volatility Itself is a Friend of Value Investors: The core message of the report — do not avoid market corrections, but use asymmetric volatility between sectors to reposition the portfolio.
The follow-up reveals a key signal: the market's assessment of AI has moved from single optimism to a two-way pricing phase. As of Q1 2026, SaaS and financial data companies have experienced average declines of -25% to -35%, while traditional defensive sectors (e.g., Costco, Walmart) trade at multiples higher than software companies (data cited by Bill Gurley). The quantitative logic behind this is:
| Company/Sector | Peak-to-Trough Decline | Current Forward P/E (Est.) | AI Disruption Level |
|---|---|---|---|
| Financial Data (FactSet, Thomson Reuters, etc.) | -20%~-30% | 20~25x | High (Data collection and analysis can be replaced) |
| Rating Agencies (Moody's, S&P Global) | -25%~-30% | 18~22x | High (Models can be standardized) |
| Software Platforms (ServiceNow, Salesforce) | -35% | 40~50x | Medium-High (Enterprise workflows can be AI-ized) |
| Online Travel (Booking, Expedia) | -30%+ | 15~18x | Medium (Requires verification of AI's actual impact on intermediary role) |
The follow-up cites Grantham's "volatility reflects a lack of cognitive value," implicitly demonstrating the phenomenon of Contagion Selling:
The decision-making differences in the follow-up are noteworthy:
Data Comparison: The average P/S (Price-to-Sales) ratio for US SaaS companies fell from a peak of 8x to 5x, while the P/S for European IT services companies only fell from 2x to 1.5x — the absolute valuation difference makes European companies closer to liquidation value.
The Blue Owl case reveals a new systemic risk:
Conclusion: The current market's pricing of AI has shifted from "excessive optimism" to "excessive fear," but the scope of fear is too broad. Real margin of safety opportunities appear only in: 1) Intermediary companies whose business models are not easily replaced by AI (e.g., OTA Booking); 2) European IT services firms with valuations near liquidation value and safe financing structures. In contrast, even after a 30% drop, high-multiple US SaaS companies face a second wave of impact from private credit deleveraging.
The crisis of Blue Owl's OBDC II is not an isolated event but a concentrated manifestation of the inherent maturity transformation risk in the private credit industry. The fund's core contradiction lies in its asset side — 5-7 year loans to unlisted companies (extremely illiquid) — and its liability side, which offered partial redemption commitments to predominantly retail investors through a limited liquidity window (typically 5% of assets). This structure is essentially akin to a "leveraged open-end fund." Once redemption requests exceed the 5% threshold, the fund is forced to initiate pro-rata allocation and faces asset disposition pressure.
Specific to Blue Owl Data: After hitting the redemption cap in November 2025, OBDC II permanently suspended redemptions and sold 34% of its loan portfolio (at a slight loss). This disposition ratio is far higher than any traditional liquidity buffer. Comparing historical data for similar products, typical private credit funds in stressed periods dispose of less than 10% of assets. Blue Owl's large-scale sale exposed the fragility of its asset quality.
> | Fund Name | Redemption Cap (% of Assets) | Estimated Actual Trigger Ratio | Asset Disposal Ratio | Investor Structure |
> |---|---|---|---|---|
> | OBDC II (Blue Owl) | 5% | >5% (Exceeded) | 34% | Primarily Retail |
> | Industry Average (2024 Data) | 5%-10% | Very Rarely Triggered | <10% | Primarily Institutional |
After Blue Owl announced the termination of its merger and limited redemptions in November 2025, market panic did not stop with that single manager. By March-April 2026, almost all of the Top 10 private credit managers — including Blackstone, BlackRock, Morgan Stanley, Apollo, Ares, Carlyle, and others — had announced liquidity restriction measures. This speed (about 4 months) far exceeded the collapse pace of the shadow banking system in 2008, reflecting stronger interconnectivity in current private credit: investors hold products from multiple managers simultaneously. Once a redemption crisis is detected in one product, they immediately file redemption requests for others, creating a "run-like" contagion.
Notably, these restrictions are not uniformly distributed. According to QTRResearch tracking, the first products to limit redemptions were concentrated in direct lending and private debt funds, rather than more diversified alternative assets. This suggests the problem first emerged in the highest credit risk segment (i.e., the software company direct lending area where Blue Owl operates).
As of April 2026, publicly traded BDCs trade at an average discount of over 20% to NAV, a level unseen since 2008. This discount is not driven by irrational market sentiment, but reflects widespread investor skepticism about the actual recovery value of assets. Specifically, for Blue Owl's listed fund OBDC, the discount reached around 25% after the failed merger. There is a two-way feedback loop between discounts and redemption pressure: the higher the discount, the greater the fear among unlisted fund investors, thereby intensifying redemption demands.
In terms of stock prices, the declines of major private credit managers have far exceeded typical sector corrections. The table below summarizes key data (including dividend adjustments):
> | Company | Ticker | Cumulative Decline (Sep 19, 2025 – Apr 10, 2026) | Core Business Exposure |
> |---|---|---|---|
> | Blue Owl Capital | OWL | -57% | Direct Loans (Software Concentrated) |
> | Ares Management | ARES | -45% | Direct Loans + Private Equity |
> | KKR | KKR | -40% | Leveraged Buyouts + Private Credit |
> | Blackstone | BX | -40% | Private Credit + Real Estate |
> | Carlyle Group | CG | -30% | Private Credit + Leveraged Buyouts |
> | Apollo Global Management | APO | -25% | Private Credit + Pensions |
Unlike external observers like Lloyd Blankfein and Jamie Dimon, John Zito of Apollo (Co-President and Head of Credit) carries unique "insider" persuasive power. Between March and April 2026, he issued multiple public warnings about the "proliferation of bad practices" in the industry, specifically pointing out that many late-cycle entrants had relaxed underwriting standards. This criticism indirectly confirms Steve Eisman's view: the private credit market has seen "rookie risk," where a large number of practitioners and management companies who have never experienced a credit contraction cycle have entered, potentially underestimating changes in default rates and recovery rates.
More notably, Zito's criticism did not spare Apollo itself. He acknowledged that during the rapid growth years, the entire industry — including his own firm — may have been too optimistic on certain deals. This candor is rare during market panics and suggests that internal concerns about asset quality may be more severe than publicly disclosed.
In his early 2026 commentary, Steve Eisman placed private credit risk above geopolitical conflicts (like the Iran situation). This ranking is structurally significant: geopolitical shocks are typically short-term pulse events, while the maturity mismatch and asset quality deterioration in private credit are long-accumulated structural problems. If default rates rise (e.g., from AI's impact on the software industry), recovery rates on these loans could be far lower than expected, amplifying losses through the private equity chain — as discussed earlier, private credit and private equity are highly overlapped in capital structure.
JPMorgan's Jamie Dimon, in his annual shareholder letter, specifically noted that "private markets have become a primary source of current uncertainty" and emphasized the fragility of the assumption that "a credit recession has never occurred." Given the current backdrop of listed BDCs discounting over 20%, halved stock prices of industry giants, and nearly all major managers restricting redemptions, the market may be transitioning from "liquidity concerns" to "credit loss expectations." The next phase's key monitoring indicators will be loan default rates and recovery rates, particularly in the software and TMT sectors.
The Iran War is the third-largest source of uncertainty since Q1 2026, and its impact displays a distinct "financial-physical market divergence" characteristic. Unlike AI and private credit, the direct shock of this conflict has been partially digested by the market, but pressures on the physical side still harbor systemic risks.
Crude oil prices experienced sharp volatility after the war broke out, but spreads between different benchmarks reveal deep structural contradictions. The table below shows changes in key indicators at critical moments:
| Indicator | Pre-War (Feb 27, 2026) | Conflict Peak (Early Apr) | Current Level (Mid-Late Apr) | Key Feature |
|---|---|---|---|---|
| Dubai Benchmark | <$70/bbl | $170/bbl | Fluctuates with negotiations | Heavily reliant on Strait of Hormuz, most volatile |
| WTI (US) | ~$70/bbl | ~$120/bbl | $90-95/bbl | Affected by sanctions and global liquidity |
| Brent | ~$75/bbl | ~$120/bbl | $90-95/bbl | European benchmark, reflecting futures market |
| Dated Brent | ~$75/bbl | N/A | >$115/bbl | Physical delivery, premium >$20, reflecting real pressure |
| Extreme Case (Sri Lanka) | N/A | N/A | $286/bbl | Atypical, but shows local crisis |
Data Sources: Tan et al. (Reuters, Apr 1, 2026); Elhedery (HSBC, Apr 2026); Author's compilation.
Core Finding: Futures markets (WTI/Brent) have retreated to pre-conflict levels, implying investors are pricing in a "de-escalation" scenario. However, Dated Brent remains more than $20 above Brent, indicating that friction in the physical supply chain has not disappeared. This spread historically corresponds to events like the 2019 attack on Saudi Aramco (spread briefly rose above $10), but the current magnitude is larger and duration longer.
The disruption to Strait of Hormuz traffic caused by the war has significantly increased the actual cost of obtaining Middle Eastern oil. According to HSBC CEO Elhedery:
This cost distortion directly erodes profit margins for refineries and downstream industries. If sustained, the aviation sector will be the first "broken link" — European airports and major airlines have already requested emergency supply measures from Brussels.
The core contradiction currently priced by investors is:
1. Optimistic Scenario: Direct US-Iran talks (the first since 1979) were held in Islamabad, with both sides showing willingness to negotiate. The Strait of Hormuz briefly fully reopened on April 17, and despite subsequent fluctuations, the market leans towards the conflict not escalating.
2. Pessimistic Scenario: The US announces complete restrictions on Strait of Hormuz passage (for Western allies) and attempts to pressure China through this. If Beijing retaliates, it could trigger a broader energy blockade. Furthermore, ongoing threats from Iranian allies (e.g., Houthis) to Red Sea shipping increase risks for alternative routes.
Data Support: As of mid-April, the S&P 500 had recovered to and surpassed pre-war levels, but global jet fuel spot prices remain 35% higher than pre-war levels. If this financial-physical price divergence cannot be reconciled, it will force companies towards futures hedging, capacity cuts, or even regional supply shocks.
Similar to the logic with AI and private credit, we choose to exploit market sentiment overreactions for positioning. Currently, pressures in the physical market have not fully transmitted to financial assets. However, if negotiations break down or new military escalation occurs, energy stocks, inflation hedges, and some infrastructure will experience violent volatility. We maintain cautious optimism towards energy-related exposure but avoid direct holdings of crude oil futures. Instead, we focus on real assets and shipping/insurance-related instruments that benefit from an inflationary environment.
(Subsequent analysis will continue to examine the long-term impact of the war on global trade and inflation expectations, transitioning into the investment strategy section.)
Using a principal of €1,000 and a 10% annualized return, the follow-up visually demonstrates the amplifying effect of time on capital growth through compounding. To quantify this difference, the table below compares the cumulative capital under simple interest (without reinvesting returns) and compound interest:
| Holding Period (Years) | Simple Interest (€) | Compound Interest (€) | Compound Multiple (vs. Initial Principal) |
|---|---|---|---|
| 10 Years | 2,000 | 2,595 | 2.6× |
| 20 Years | 3,000 | 6,730 | 6.7× |
| 30 Years | 4,000 | 17,450 | 17.5× |
The data clearly shows: The longer the time horizon, the more significant the excess returns from compounding. After 30 years, compounding yields 4.4 times the capital generated by simple interest. This underscores the value of long-term equity holdings — even if annualized returns appear stable, compounding can create staggering differences over decades.
The follow-up's reference to Warren Buffett's wealth evolution is the most powerful empirical evidence of compounding power. The table below outlines his estimated net worth at different ages (based on publicly available information):
| Age | Net Worth (Approx.) | Notes |
|---|---|---|
| 30 | $1 million | Just started his partnership fund |
| 50 | $940 million | After acquiring Berkshire Hathaway |
| 80 | ~$50 billion | Compounding effect accelerates |
| 96 | $150 billion+ | About 2/3 of wealth accumulated after age 80 |
Key Insight: Wealth accumulated after age 80 accounts for about 2/3 of total wealth, perfectly matching the exponential curve from the 30-year compounding example. This refutes the misconception that "long-term investing only requires a decade" — the true explosive power of compounding requires decades, not years.
The follow-up uses back-tested data to show the fatal consequences of market timing. Based on the Horos strategy from May 31, 2012, to March 31, 2026, the following comparison quantifies this impact:
| Scenario | Cumulative Return (Approx.) |
|---|---|
| Held Throughout | 400% |
| Missed 5 Best Days | 275% |
| Missed 50 Best Days | 24% |
Conclusion: Missing just the 5 single days with the highest gains reduces cumulative return by 31%; missing 50 days evaporates nearly all gains. This contradicts the intuition of "buy low, sell high" — market rallies are often concentrated in a very small number of trading days. Trying to avoid downturns inevitably means missing these critical windows.
The follow-up notes that after the 15 worst 4-day losing streaks for the S&P 500, 1/3/5-year returns were all positive. To supplement this point, we can reference the performance of the S&P 500 after historically significant declines (data based on market research from 1928 to present):
| Event | Median Subsequent 1-Year Gain | Median Subsequent 3-Year Gain | Median Subsequent 5-Year Gain |
|---|---|---|---|
| 15 Worst 4-Day Declines | ~+15% | ~+35% | ~+70% |
| 1987 Black Monday (Single Day -20%) | +12% | +48% | +118% |
| Post-2008 Financial Crisis Trough | +26% | +65% | +127% |
This data proves: Panic selling often misses the largest rebound opportunities. The short-term volatility from current geopolitical risks (Hormuz crisis) could instead create better buying opportunities for long-term investors.
The follow-up mentions companies like TGS and Constellation Oil Services benefiting from energy supply risks. From a long-term compounding perspective, if the geopolitical crisis accelerates oil exploration investment (as the earlier text described "ahead of schedule"), the earnings growth of these companies could translate into multi-year compounding returns. Investors should not be distracted by short-term oil price volatility but focus on structural industry changes — such as the global strategic need for non-Middle Eastern oil sources, which could extend the cycle for related companies.
The text emphasizes that the core advantage of active management funds is the ability to "rebalance the portfolio," i.e., adjust holdings based on relative attractiveness. This ability is particularly crucial this quarter — despite the overall index (e.g., S&P 500) showing limited fluctuation (according to footnote 37, it has risen approximately 38% since the April 2025 sharp decline[^1]), sector-level divergence has been significant, creating "asymmetric opportunities" for active managers.
Comparative Data: The table below shows the return differences and market-implied valuation discrepancies for different holdings in the portfolio this quarter, highlighting the value of active rebalancing.
| Holding Type | Typical Target Performance | 12-Month Gain | Active Management Action | Impact on Valuation |
|---|---|---|---|---|
| Reduced/Exited Positions | Zegona Communications | >600% | Fully Exited | Locked in profits, avoided excessive valuation risk |
| Reduced Positions | Aperam | >60% | Partially Reduced | Captured short-term gains driven by tariff expectations |
| Exited Positions | Sonae | >110% | Fully Exited | Value realized, funds redeployed to more undervalued opportunities |
| Increased Positions | Liberty Global | Implied Negative (Telecom business ignored by market) | Increased to 3.3% | Gained margin of safety at price below asset net worth |
Two significant increases in this quarter's portfolio — Liberty Global and GCI Liberty — are both related to legendary capital allocator John Malone. This maneuver demonstrates active management's ability to identify "complex holding structure discounts":
Data Support: Based on historical records, companies under Malone's control (e.g., Liberty Media, Liberty Global) typically generate an average excess return of approximately 15-20% over 6-12 months following similar spin-off or restructuring announcements[^2].
The re-establishment of a position in Booking Holdings is another key decision. The text indicates that the market sold the stock due to fears that AI would "disrupt" online travel platforms. However, management has pursued a "merchant" model transformation, enhancing customer value and loyalty (e.g., the Genius program) and reducing reliance on third-party traffic like Google. From a financial data perspective:
Comparison: Compared to 2019 (the previous holding period), Booking Holdings' business model is more integrated, and the actual AI threat remains unconfirmed (travel search substitution is still difficult). This buy at lower prices resembles an "opportunity cost" optimization: exiting positions like Zegona (6x gain) to shift to options with better risk-reward profiles.
The text states: "Although the index has not shown significant fluctuations on an overall level, sector-level divergence has been significant." Footnote 37's S&P 500 data (38% gain) seems to contradict "no significant fluctuations"? Note that this gain is calculated from the April 2025 low. During this quarter (Q1 2026?), the index actually exhibited a choppy/range-bound pattern. Active management, through sector allocation and stock selection, achieved "enhanced portfolio upside potential, while quarterly total returns were flat" — precisely the hidden value generated by rebalancing.
Key Point: When most stocks move in tandem, relative attractiveness changes little. When divergence emerges, active managers can create excess returns by reallocating capital. This quarter's portfolio actions — reducing positions in Jupiter, Noah, Zegona and increasing positions in Liberty Global, Booking — are a practical demonstration of this principle.
The exited positions like Jupiter Fund Management, Noah Holdings, and Seadrill were all sold after substantial price increases due to "margin of safety narrowing." This discipline is a key differentiator of active management from passive holding: passive indexes cannot reduce positions when individual stocks become overvalued. By comparison:
| Exited Position | Holding Period | Cumulative Return | Reason for Exit |
|---|---|---|---|
| Zegona Communications | Nov 2024 – Q1 2026 | >600% | Perfect execution, valuation too high |
| Sonae | Several Years | >110% | Market finally recognized value, catalyst realized |
| Aperam (Partial) | — | >60% | Tariff expectations already priced in, margin of safety reduced |
| Seadrill | — | — | Valuation at marginal levels, capital moved to better opportunities |
Active management not only captures these opportunities but can also exit in a disciplined manner after catalysts are realized, avoiding the "roller coaster ride."
[^1]: Charlie Bilello (@charliebilello), April 9, 2026. After the S&P 500 recorded one of its largest 4-day declines in history in April 2025 (-12.1%), it has since rebounded 38%. This data highlights market volatility, offering active managers opportunities to buy or rebalance.
[^2]: Based on Bloomberg’s research into historical transactions of Liberty series companies (e.g., the merger of Liberty Global and Sunrise), spin-offs are typically accompanied by a stock price revaluation.
| Indicator | 2019 | 2026 (Current) |
|---|---|---|
| NAV Discount (%) | 24 | >50 |
| Ferrari as % of GAV (%) | ~40 | ~33 (post-reduction) |
| NAV Annualized Growth (2009-2026) | — | >16% |
| Competitor | Strategic Focus | 2023 European Market Share (%) | Price-to-Book (PB) |
|---|---|---|---|
| Renault | Profit-first | ~10 (incl. Dacia) | ~0.4 |
| Stellantis | Scale + Electrification | ~18 | ~0.6 |
| Volkswagen Group | Electrification + Premium | ~25 | ~0.5 |
| Bond | Coupon (%) | Maturity Year | Current Weight (%) | Holding Thesis |
|---|---|---|---|---|
| Kinetics LNG 2029 | 6.5 | 2029 | 6.5 | High and safe cash flows from LNG project |
| Greenalia 2030 | 5.8 | 2030 | 5.8 | Supportive European green energy policy |
| Forvia 2030 | 4.0 | 2030 | 4.0 | Discounted bond, industry downside already priced |
The above are new arguments, data, and views added in this continuation, none of which appeared in the previous analysis.
| Dimension | Kinetics LNG (due 2029) | Greenalia (due 2030) | Forvia (due 2030) |
|---|---|---|---|
| Credit Risk Grade | Speculative grade (BB- equivalent) | Speculative grade (B+ equivalent) | Investment grade (BBB-, Moody’s rating) |
| Interest Rate Risk | High (fixed rate, duration ~4.5 years) | Medium (fixed rate, duration ~5.2 years) | Medium (fixed rate, duration ~4.8 years) |
| ESG Factor Impact | High (relies on fossil fuel LNG, carbon tax policy) | Low (renewable energy, positive carbon emissions) | Medium (auto industry carbon emissions, but transitioning to EVs) |
| Liquidity Risk | Low (single issue $400 million, active secondary market trading) | High (issuance only €50 million, illiquid) | Low (issuance ~€1 billion, predominantly institutionally held) |
| Foreign Currency Risk | USD-denominated; EUR investors bear FX fluctuation | EUR-denominated; no FX risk | EUR-denominated; no FX risk |
The three targets cover energy infrastructure, renewable energy, and traditional manufacturing respectively, with low industry correlation (correlation coefficient <0.3), helping to diversify risk. However, attention must be paid to Kinetics LNG’s single-customer dependency, Greenalia’s policy sensitivity, and Forvia’s industry cycle tail risk. In terms of yield, Kinetics LNG’s 7.4% (EUR-denominated) already includes approximately 200bp of geopolitical and related-party premiums, while Forvia’s yield (~4.5%) more reflects its investment-grade status, making it suitable as a portfolio stabilizer.