4Q25 Partners Fund Commentary

Southeastern Asset Management argued that 2025's momentum-driven market — where over 35% of S&P 500 stocks rose more than 20% — resembles prior late-cycle turning points including 1987, 1999, 2007, and 2021, and that circular financing at AI companies reinforces their view that the current market cycle is nearing its end. The firm also flagged a broader wealth-effect risk: a large segment of investors holds low-tax-basis stocks they feel unable to sell, a dynamic the firm said historically leads to an overshoot to the downside when sentiment shifts, citing UnitedHealth and Fiserv as recent examples. To position for that environment, Southeastern noted its portfolio now carries roughly 45% in defensive growers and cash — comparable to its 1999 positioning but well above the ~20% it held in 2007 and 2021. The firm also reported that weighted-average credit spreads on its holdings are roughly half the levels seen in 2007 and 2021, which it views as bond-market validation of portfolio resilience. Key holdings include Mattel (which repurchased $600 million in shares in 2025), Regeneron (net cash, active repurchaser, pipeline optionality), and Kraft Heinz (where incoming CEO Steve Cahillane and a planned split into two businesses underpin a sum-of-parts appraisal above $40 per share). The Partners Fund returned +2.93% for full-year 2025 versus +17.88% for the S&P 500, with the gap attributed primarily to the absence of large momentum winners rather than outright losses. Southeastern also raised its single-position overweight limit from 6.5% to 8%, citing consistent team performance data and a desire for greater engagement leverage with portfolio companies.