Do We Still Have a Deal?
Last week, we wrote about the US Administration’s intention to complete a deal to end the war in Iran. The 14-point memorandum of understanding to establish a temporary ceasefire was signed on June 17, 2026, with many strategic variables still to be negotiated. Maritime security in the Strait of Hormuz continues to remain highly unstable. While the agreement intended to formalize a ceasefire and restore commercial shipping, the security environment is characterized by what experts call a “transitional phase” rather than a return to normalcy. One of the issues that we have written about previously is that even with the strait opened, the flow of traffic will take some time to return to normal. Indeed, during the first week, it looked to us that the traffic had only return to 40-50% of normal, and that traffic was essentially one way (i.e. ships that had been held up for months leaving, rather than new ones arriving). This makes sense as there are still mines in the water that need to be cleared, and there is also some confusion with respect to approved transit routs. For example, the situation was further exacerbated yesterday with a drone attack by Iran on a Singapore based freighter the “Ever Lovely” that hit the ship’s bridge. The Ever Lovely was traveling the “southern corridor”, a route along the Omani coast promoted by the International Maritime Organization (IMO) as mine free and safe but was “unapproved” according to Iran. After the attack, the IMO officially paused its coordinated plan to evacuate over 500 stranded vessels from the Gulf, citing the need to re-verify safety guarantees.
Figure 1 presents the some of financial fallout in the current environment. The premium in Brent Crude has come out of the market. Even this morning, it traded down with the drone attack. The US$ has strengthened as a safe haven and also probably as a reaction to increased inflation, which would require increased administered rates. Gold did not act as a save haven asset, which is not what we would have expected. But given the strength of the US$, it can be explained.
“This means that” we remain laser focused on our process. Regular readers of the Outlook will note that we have written this before, so I am probably sounding like a broken record but clearly, in our opinion, a developed investment management process is what helps serious investors work through these kinds of difficult markets. Having stable goal posts to evaluate the businesses that we invest in will allow us to make adjustments that will benefit the fund and portfolios for the long-term.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
For more information, please follow the links above to review the fund term sheets.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Pathfinder Conviction Fund are presented based on the master’s series of each fund. The Pathfinder North American Equity Portfolio and The Pathfinder North American Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder North American Equity Portfolio (January 2011), Pathfinder North American High-Income Portfolio (October 2012) Pathfinder Partners’ Fund (April 2011), Pathfinder Conviction Fund (April 2013), and Pathfinder International Fund (November 2014).
Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.