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Dear Partner:
Liberty Park Fund, LP’s value decreased by 7.36%, net of fees, in the fourth quarter of 2025 vs. a 2.19% increase in the Russell 2000 (^RUT). The 6.30% decrease in our long positions detracted 5.30% on a weight-adjusted basis, while the 4.02% increase in our shorts detracted 1.47% on a weight-adjusted basis. Gross exposure averaged 166.63%. Net exposure averaged 16.11%. Gross Pure Alpha 1 — our proprietary measure of returns generated from stock selection— was -4.56% for the quarter.
Liberty Park Select Opportunities, LP’s value decreased by 5.02% net of fees, in the third quarter. Gross exposure averaged 96.27%.
4Q25 Performance Analysis
We are proud of Liberty Park Select’s 2025 performance. We outpaced the index without any exposure to the unprofitable, hype-driven companies that propelled market returns this year.
Since the Fed started cutting interest rates in 2024, the market has exhibited extraordinarily narrow breadth, with gains concentrated in large-cap technology stocks and speculative companies related to artificial intelligence and data centers. Our investment strategy relies heavily on identifying recurring market patterns. The current environment bears striking similarities to past market excesses: companies without revenue or profits are propelling major indices higher, while SPACs and IPOs are experiencing renewed frenzy. Liberty Park Fund, LP clearly was too early shorting many of these companies and predicting the AI bubble would burst, but we still think a reset is inevitable.
Long Performance
- BELFB delivered a strong 4Q25 with sales up 45% year-over-year and higher-than-expected guidance. The performance reflects robust demand across all segments, particularly in the aerospace & defense and networking markets.
- MEC’s increase was driven by the company’s strong third-quarter earnings release, which beat analyst expectations on both revenue and earnings. The results also highlighted progress from the recent Accu-Fab acquisition, which increased the company’s exposure to data centers/critical power.
- XMTR reported another better-than-expected quarter where marketplace revenue accelerated to 31%. Enterprise growth remained >40%.
- ARQ shares fell after third quarter results disappointed. Ongoing delays in granular activated carbon (GAC) production ramp-up led to downward revisions to guidance.
- THRY reported deteriorating organic SaaS metrics that raised concerns over the company’s long-term outlook.
- LAKE’s 3Q25 results fell short of analysts’ estimates. UL certification for the company’s new NFPA-compliant turnout gear took longer than expected and pushed out orders/shipments.
Short Performance
In the second half of 2025, investors aggressively chased risk-on opportunities, particularly anything positioned to benefit from the AI boom. While we believe AI holds transformative potential comparable to the internet over the coming decades, the current frenzy echoes the dot-com bubble: many—if not most—of today’s market favorites are unlikely to survive in their current form, let alone dominate, a decade from now.
Across corporate America, nearly every company is racing to integrate AI in hopes of slashing labor costs and boosting revenue. Yet despite cumulative spending commitments and infrastructure investments reaching into the trillions, very few businesses are reporting meaningful incremental revenue from AI today. Cost savings remain modest in most cases, and broad financial impact is still emerging slowly rather than delivering immediate, widespread returns.
In our view, the AI trade was essentially priced-to-perfection in October 2025. The industry cannot realistically announce more spending before 2030 because the vendors that provide the basic building blocks (e.g., human labor, power supply, data center equipment) are already sold out through then.
Portfolio Outlook
As mentioned, the stock market’s gains in recent years have been very narrow. Likewise, the real economy hasn’t been that great. The housing market, for example, has been in the doldrums since 2022, and it is the largest employer in our economy.
AI investment fatigue is coming. OpenAI is losing market share rapidly to Alphabet (GOOGL), raising questions about durable moats and whether the massive capital investments can ever generate positive returns. The gap between OpenAI’s 2025 revenue of $13 billion and the hundreds of billions needed to justify the spending is enormous.
History shows that every technology boom eventually sees asset prices fall as hype fades. AI infrastructure will be no different. Construction delays, efficiency improvements, and supply chain catchup will cause the data center market to cool. Already, we are seeing news of delays and pushback.
Headed into 2026, the Federal Reserve has already cut interest rates meaningfully. There may be room for a few more cuts, but we aren’t far from neutral. The economy and investors will have to stand on their own. Hopefully, this forces people to begin analyzing fundamentals for a change. If fundamentals matter, we like how our portfolios are positioned.
In Full Disclosure
In our last letter, we announced our plans to begin offering single-idea, special purpose vehicles (SPVs) to investors who want to size-up our favorite ideas beyond our portfolios’ risk management limits. To ready his own personal cash for these SPVs, Charles Murphy will move $100,000 of his investment in Liberty Park Fund, LP to the SPV broker in 1Q26. We will waive normal redemption requirements for other investors to facilitate similar transactions.
Charles P. Murphy, CFA, Managing Partner, Portfolio Manager
Kurt A. Probe, CFA, Partner, Co-Portfolio Manager, Director of Research
Andrew Wang, Partner, Co-Portfolio Manager, Analyst
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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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