Night Watch Investment Partners LP returned 0.84% net of fees in Q3 2026, bringing its since-inception total return to 59.29% and CAGR to 18.45%.
The fund runs roughly 120% gross long and 95-100% net, hedged by a ~20% short book that includes refiners as protection against escalation in Ukraine/Russia or Iran.
Marex (MRX) was the top contributor, while Universal Technical Institute (UTI) was the main detractor.
While most of Wall Street was busy sweating a volatile September, one hedge fund quietly ground out a gain and lived to brag about it in its investor letter. Night Watch Investment Partners LP posted a 0.84% net-of-fees return for Q3 2026, according to its own disclosed, already-realized performance figures — not projections. The quarter was a tale of two halves: a strong July, when the AI trade deflated and the broader index fell, followed by a rougher September, when rising inflation expectations triggered a widespread risk-off move that clawed back some of those July gains.
Inside the Portfolio: Refiners as a Geopolitical Hedge
The fund’s structure explains a lot of its resilience. Night Watch runs about 120% gross long exposure against 95-100% net, with its roughly 20% short book concentrated mainly in market index shorts. Notably, the managers disclosed holding a basket of US-based refiners specifically as a hedge against further escalation in either the Ukraine/Russia conflict or tensions with Iran. Monthly returns swung wildly through 2026 — from 6.44% in January and 9.69% in April to a 6.99% loss in March and a 5.99% loss in September — underscoring just how choppy the year has been. Marex (MRX) was the standout winner, a position the firm said it sized up after laying out its thesis in the Q1 2026 letter. Gains also came from two acquisition targets, Distribution Solutions Group (DSGR) and Japan’s Leopalace21 (8848 JP). On the downside, Universal Technical Institute (UTI), a vocational training provider, was the main drag.
What This Means for Your Portfolio and Wallet
For everyday investors, the takeaway isn’t to chase this specific fund’s picks but to note how a long-short structure with built-in geopolitical hedges absorbed shocks that hammered long-only portfolios in September. A since-inception CAGR of 18.45% shows the payoff of disciplined hedging even in a year with multiple negative months.
Strategic Positioning & Defense Ideas
Retail investors without access to hedge fund strategies can still borrow the concept: holding a small allocation to energy or commodity-linked equities as insurance against geopolitical flare-ups, keeping some cash on the sidelines, and avoiding over-concentration in any single macro trade like AI are all reasonable educational starting points. Disclaimer: This analysis is for educational and informational purposes only and should not be construed as financial or investment advice.
What to Watch Next
Keep an eye on further developments in Ukraine and Iran that could validate the fund’s refiner hedge, along with upcoming US inflation data that triggered September’s risk-off move. Night Watch’s Q4 2026 letter will be the next checkpoint. Full details are available via the original Seeking Alpha letter.
