Longleaf Small-Cap Fund Reviews Weak Q3 and Adds One Holding
Longleaf Partners Small-Cap Fund reported negative third-quarter and year-to-date returns, trailing its Russell benchmarks. Management said its three-year annualized return was 12.3% but expressed dissatisfaction with recent performance and noted strong value-per-share growth. The fund added one new position during the quarter, describing it as a strong free-cash-flow generator in a familiar industry.
Longleaf Partners Small-Cap Fund (LLSCX) ended September 30, 2026, with 17 holdings, 5.6% cash, and a price-to-value ratio in the low 50s. Its third-quarter return was -9.24%, while year-to-date was -13.89%, behind Russell 2000 and Russell 2000 Value. The fund's three-year annualized figure was 4.04% as of that date; management noted it had begun 2026 at 12.3%.
Management attributed part of the drag to Group #1 and said Group #2 should have contributed roughly 1,000 basis points rather than declining. It added one new company, described as a strong free-cash-flow producer in a familiar sector. The letter also cited higher rates and Mattel takeover interest after quarter-end.
The fund's weak recent results could affect individual investors and retirement savers holding LLSCX, potentially prompting reassessment of active small-cap value strategies. Poor performance may also influence capital flows to small-cap companies, though long-term value investors may view drawdowns as opportunities. Management's comments on higher rates and takeover interest may shape expectations for other concentrated funds, but outcomes remain uncertain.