2025—what a year that was. It was the year Chess Capital transformed into a better version of itself. The year we took the relationships we’ve built over a decade and leveraged them into a renewed investment format.
It all started with partners expressing doubts about the lackluster results of five years spent investing in European family-owned mid-caps. We heard things like, “We believe in what you’re doing,” “We know value investing is a long-term game,” or “We can see you’re investing in solid companies.”
But the follow-up was always: “How long do you think it will take for the stocks you’re holding to be discovered?” And the more critical take: “Are you sure Europe is ever going to bounce back?” After all, hadn’t the expectation been set that capital could double within five years?
The first two years—2020 and 2021—were hard to fault (with returns of 9.6% over eight months and 12.6% over a full year, respectively). And yet, with the benefit of hindsight, we would have handled 2021 more cautiously, as that’s where the seeds for 2022’s trouble were sown. We grew too fast in 2021 and chased prices that seemed to climb indefinitely. Part of that was out of necessity—as a fund, you’re required to be 70% invested—but we pushed that to 90%.
The fact that almost every global market took a 15% to 20% hit doesn’t excuse our disastrous year, where we lost 17.2%. Europe, in particular, bore the brunt of Putin’s invasion of Ukraine.
2023 clawed back some of that ground with a 10.3% return, but 2024 drifted along, ultimately ending in a slight loss of 3.8%. With 2025 marking the five-year milestone, the questions were getting louder.
I clearly remember the dinner we organized with the fund’s founding fathers. Sam, Joël, and six other founding members sat down for an open chat. It was incredibly enriching. The comments and questions I mentioned were put on the table and dissected. No concrete decisions were made that night; we needed time to let it all sink in. Should we make our value investing more aggressive—more ‘deep value’—or lean into high-quality companies at fair prices—’quality investing’? Should we hunt for more special situations? Move in and out of positions more frequently (as we’d successfully done with a few firms)? Or should we look far beyond Europe, even if that meant a higher risk of making mistakes? Everything was on the table.
In February, we headed to Guy Spier’s annual “Value Investing Seminar” in Klosters. It’s the valley next to Davos, held a couple of weeks after the World Economic Forum. Fresh air and inspiration are guaranteed. But this time, we didn’t come back with a handful of stock ideas; we came back with a concrete plan to overhaul the fund.
From Player to Player-Coach
During those sessions where value investors pitch their highest-conviction ideas, one speaker expressed his gratitude to the group and confessed that he found his own ideas less attractive than what the group had been pitching for years. Consequently, he had started investing in the funds managed by some of the people in that very room. It was an idea as simple as it was brilliant.
During our eight-hour drive back, we talked about only one thing: the plan to make our fund significantly more robust. Not less performant, but more resilient against sharp declines. Keep in mind that Sam and I live off our investments; avoiding another year like 2022 is at the very top of our priority list.
We would no longer only hand-pick every single stock in our European backyard. Instead, we would call upon specialists who have spent years finding the best value stocks in other parts of the world. And we know these specialists. We’ve known them since 2020; some have become friends. But we aren’t selecting them out of friendship; we’re selecting them for a few very solid reasons. I’ll get to those in a moment.
The essence of the story is that we are becoming player-coaches. We’re still “playing” because we continue to manage about a third of our portfolio ourselves in those European stocks—especially since we believe Europe is finally due for a catch-up. But from now on, we’re investing the other two-thirds in other players, other funds.
As experienced value investors, we are perfectly capable of understanding other value investors’ portfolios. We can look under the hood and understand what’s happening and why. We know how to vet other funds. For instance, we invested in a fund with an exceptional long-term track record that had hit a rough patch. We were able to see through the temporary malaise and invested anyway. Luck was on our side, as we were rewarded sooner than expected with a sharp rise within two months. In short, looking beyond the published returns is a necessity in this world.
Most importantly, we know the fantastic players we want on our team. As coaches, we can now field the best possible lineup. When it comes to value investing, we believe we’re top-tier players, even if our recent results haven’t shown it yet. But the people we know? They’re Champions League level. That’s the team we want to build.
That plan took concrete shape in the spring of 2025. In the regulated world of funds, execution always takes time. But by September, we were ready. We got the green light from the auditor, our administrator, the custodian bank, and—most importantly—the Luxembourg CSSF, which has the final say.
The rollout could begin.
The Practical Steps
While the administrative boxes were being checked, we put about twenty candidate funds through a rigorous analysis. Step by step, we requested documentation, pored over quarterly letters, and scrutinized results with a magnifying glass. Our conviction that we would function better as player-coaches only grew.
Once we settled on a fund, the most time-consuming step began. Our auditor, Deloitte, provided a checklist to evaluate every fund, assign a risk score, and—crucially—conduct heavy due diligence. Since we are entrusting a significant amount of capital to third parties, we must be absolutely certain that the underlying structure of those funds is rock solid.
For every fund we invest in, there is a bulky report covering everything: history, structure, risks—from the administrator (ensuring correct NAV) to the custodian bank (ensuring assets are safe)—the integrity of board members, past performance, a deep dive into the portfolio, and the cost structures of various share classes.
This provided essential cues for our capital allocation. Some selected funds got a larger slice of the pie, others a bit less.
We entered the first fund at the end of September, followed by four others before the end of 2025. In January 2026, we added another four. As I write this, we are invested in nine funds, with positions ranging from half a million to four million euros. This is largely based on each fund’s risk profile (the “maximum drawdown,” in jargon) but also partly on potential returns.
How Do We Select Our Players?
I’d like to dive deeper into our selection criteria. Beyond the simple requirement that they share our philosophy—fundamental analysis with a value investing tilt—there are a few critical parameters.
Integrity: This is at the very top of the list. Smart, hardworking managers who lack integrity will simply use those first two traits against you. We’ve known these managers for a long time. We’ve built relationships, checked references, and in some cases, we know their board members or close associates. They are part of our community, where anyone coloring outside the lines is found out quickly.
Skin in the Game: The fund manager must have a very significant portion of their own wealth invested in the fund. Usually, it’s the only fund they manage. All their focus and dedication goes into that one vehicle.
Proven Results: We work with managers who have a solid track record in their specific region or niche. For example, we invested in a fund active in the commodities sector. In the due diligence report, we noted: “The sub-fund has navigated several major commodity cycles, including severe bear markets in 2008 and between 2011–2018, while maintaining a historical performance that has significantly outpaced its benchmarks since launch.” If we want exposure to commodities today, this fund is the right choice.
Risk Taken: You don’t measure results by percentage returns alone. It’s just as much—if not more—about how much risk was taken to get there. To understand a manager’s risk, you have to read their quarterly reports. How well do they understand the companies they invest in? How deep is their analysis? Do they pick companies with low debt? Have they properly vetted the management? These aren’t things you can pull from a spreadsheet. You have to read between the lines to gauge a manager’s risk appetite. Warren Buffett was once asked for the definition of risk. He said: “Not knowing what you’re doing.”
Stability: All our managers are “rocks” who won’t capsize when a big wave hits. They know the ropes. They’ve survived setbacks and kept doing what they do best: analyzing and selecting companies. You don’t achieve stability if you don’t love what you do. Without exception, their love for the game is obvious. They do it with genuine passion, and usually, they’ve been at it for a long time.
Transparency: Much like us, our managers are open about what’s going well and what isn’t. They are an open book. We can call them anytime for a quick explanation. They are responsive and don’t hesitate to talk about their mistakes. We actually prefer reports where managers spend more time discussing their losers than bragging about their winners. We know which companies they’re invested in, but they appreciate that we don’t make their portfolios public.
And last but not least: They are regular people. Very casual, feet on the ground. They look nothing like Savile Row investment bankers. They don’t feel the need to pretend to be something they aren’t. Their capabilities speak for themselves.
Structural Selection Criteria
Beyond the quality of the managers, the structure of their fund and portfolio must also suit us. Here are the key traits:
Safety First: The fund’s architecture must be built on solid foundations, including a reliable custodian bank, administrator, and auditor. We want to know our capital is in good hands, calculated correctly, and properly overseen.
Boutique Funds: We are convinced that smaller funds led by smart managers will outperform the market over time. Being small has undeniable advantages. Specifically, the ability to invest in companies with lower market caps has proven its worth throughout stock market history. Just because mega-caps are currently hogging the spotlight doesn’t mean this principle has changed.
Concentrated: A manager’s level of conviction matters. The most concentrated managers limit themselves to 5 to 10 companies. The more diversified ones top out at around 40. That’s still far fewer than typical bank funds. You only invest in your highest convictions when you know those companies almost as well as if you were the CEO yourself. Our most extreme example is (reserved for partners)
He describes it this way: “Most of our capital is allocated to our six to eight best investments. We look for businesses with attractive economics and management teams who possess and foster a culture of high integrity, customer focus, and prudent capital allocation. Our businesses may be ‘hidden gems’ because they are small, receive little coverage, listed on under-researched exchanges, operating in unpopular industries, or offer terrific opportunities beyond short term concerns. We develop a research edge by doing extensive primary research. This edge can be significant when we are competing mostly against individual investors or the small positions of larger institutions, which is why we deliberately fish in those waters.”
Fair Fee Structure: We prefer partners who charge a fair price. We watch costs closely, and if a low fixed management fee is available, that’s our preference. “Pay for performance” is perfectly fine with us. As is well known, we watch the pennies. Since our own money is in the fund, we are extra vigilant here. The costs funds incur also depend on their strategy. For instance, our manager active in Africa—who finds incredible value stocks there—naturally has higher compliance and travel costs because he verifies the situation on the ground.
Low Correlations and Low Drawdowns: I’ll discuss this in detail in a moment. In our view, this is the true added value of a well-designed Fund of Funds.
Can’t You Just Invest in Those Funds Directly?
Why pay Sam and Joël a fee on top of the funds’ own costs? It’s a fair question. There are several reasons.
First, you have to find the managers. Even if you, like us, learn to find and vet them, the required capital is a major hurdle.
If you’re swimming in millions, hurdles are small. But if your available investment is more “earthly” and you want to diversify properly, you’ll hit limits fast. We invest in funds where the minimum entry is €1 million, or where such an amount is needed to access the institutional share class. By pooling capital, we can save on costs.
Then there’s the paperwork involved in managing subscriptions and the ongoing follow-up required.
Another aspect is rebalancing. When we rebalance within our SICAV, there’s no capital gains tax or transaction tax. If a private individual rebalances, the taxman takes a cut. And reshuffling the portfolio with some regularity is absolutely necessary.
Diversification remains a key theme. We chose funds in unique niches or geographies, but also those that differ in their approach. Within value investing, we define four sub-domains:
- Deep Value: As Benjamin Graham taught us—focusing on “net-nets” and “cigar butts” that need a trigger to bounce back.
- Special Situations: Playing on changing capital structures (spinoffs, mergers, recapitalizations, etc.).
- Activism: Buying a stake and shaking the tree yourself.
- Quality Investing: Well known and popularized by the likes of Luc Kroeze and Pieter Slegers.
That diversification—not just in niche and geography, but in style—is an invisible strength. All these specializations are present within our group of fund managers.
The Invisible Power of Teamwork
A player joins the team because they add value to the squad. In the fund world, that means they should have a low or negative correlation with the existing team. What does that mean in plain English? Let me try a football analogy: if you have a team full of right-footed players, you’re better off picking a left-footer. If your bench is full of defenders, attackers are welcome. You don’t always pick the “best” individual player; they have to be good and complementary.
Mathematically, we talk about the degree of correlation. When the whole market (and our boat) is drifting downward, we want funds that move in the opposite direction at that exact moment. This is all about keeping the downward movement (the “drawdown”) as low as possible. We still vividly remember that -17.2% in 2022.
A portfolio that drops 20% needs a 25% gain just to get back to break even. Negatively correlated players help limit that damage. It’s not a “sexy” story, but it’s a vital one.
Correlations aren’t perfectly predictable; they change over time. That makes it hard to grasp. What worked yesterday might not work today—or it might work even better. The fact is, rational analysis is required to avoid blindly following the herd. We feel much more comfortable taking the road less traveled. We believe that’s where the best discoveries are made—as long as you can pick good, low-correlation assets for a price below their value. Because that is the essence of value investing, isn’t it?
The Ugly Duckling
You know the story of the Ugly Duckling—cast out because it didn’t look like the other chicks in the nest. We have an “ugly duckling” in our fund too. At first glance, it looks like a total misfit. We’ve taken a fairly large position in a protective options fund. At face value, that seems like the opposite of value investing.
Just like in the fairy tale, this options fund might look clumsy or misunderstood among our solid value funds during normal market times. While the value managers steadily build returns, a “tail-risk” fund designed to catch crashes might constantly underperform. It doesn’t “quack” like the others.
However, when the market suddenly crashes (Nassim Taleb’s “Black Swan”), the transformation happens. At the exact moment the rest of the portfolio is struggling, this fund soars. The swan then proves its value as the ultimate insurance policy.
That options fund is the “antifragile” component: something that grows stronger through chaos. And because it works contrarian to the rest and protects us against drawdowns, we believe it’s the perfect finishing touch to value investing: limiting the downside!
You could call it our fund’s insurance policy. In good times, it doesn’t contribute much to the return, but in bad times, it saves our capital.
Traditional value investors always keep a large chunk of their wealth in cash to take advantage of exceptional opportunities. When the market crashes and everything is on sale, they can strike while no one else has the cash to buy. That cash is the traditional value investor’s insurance. This options fund is our cash insurance—and then some.
The fund
At the end of January, you received the factsheet for December 2025, providing a complete picture of the full year. While we hope to speed this up in the future, we have to keep in mind that reporting the Net Asset Value (NAV) will regularly take three to four weeks. If the calculation for even a single fund is delayed, the total picture has to wait.
Unfortunately, we’ve also noticed that the pace of intermediaries—who provide the data we use for our calculations and checks—adds extra delays. Rest assured, we await the results with at least as much impatience as you do.
With a return of 9.23% over 2025, we are satisfied, especially considering the major changes within the fund. This transformation did weigh on the results last year, as we held a significant cash position in anticipation of our investments. That was good for a good night’s sleep, but less ideal for immediate returns. Without these adjustments, I dare say our return would have been higher. That is purely hypothetical, of course, and it was a conscious choice because we weren’t thinking about the past year, but about the next 10 to 20 years.
Ultimately, that doesn’t matter much now; 9.23% is the result that was actually achieved.
Due to last year’s changes, we are now in a transitional phase regarding our approach to this discussion. In the coming periods, we will focus more on the underlying funds, while also treating our own strategy as a separate fund.
Below, we discuss the funds largely as a share of the total, as we were only able to make the full switch in the final quarter.
The rest is reserved for our partners
Kind regards,
Sam & Joel