2025: Sourcing Alpha

In this note whilst I set out some details around performance at a high level. It was a good performance month (and quarter) overall for the Binary Capital investment solutions. At the start I need to emphasize our resilience to working hard to achieve such results in the face of investment market volatility and ‘noise’ Whilst the short-term does appear uncertain I am confident that the longer-term opportunity in the key investment themes and thesis we focus on and build around remains positive for the long-term. It is all about being patient to allow these themes to develop and the potential upsides or alpha to be achieved. We are always sourcing alpha.

The markets closed June with a positive flourish, pushing major indices to fresh all-time highs amid renewed optimism over trade deals and resilient corporate earnings. But to be clear- beneath the surface of these numbers lies a market of stark contrasts and hidden areas to focus on.

The US indices were around +5% during June. Whilst this looks like broad-based strength overall it is a far more nuanced reality. The market’s performance has been increasingly concentrated, with ai – centric technology companies delivering most of these gains. Technology continues to be a dominant theme in all markets and returns. Ignoring this is a big investment risk.

Companies that have positioned themselves at the nexus of the ai revolution are capturing disproportionate returns. Such as, Google (Alphabet Inc.), Microsoft, Nvidia, Apple, Amazon, Meta Platforms, IBM and Taiwan Semiconductor Manufacturing Company (TSMC) Technology’s dominance is unmistakable throughout Q2 and June.

The macroeconomic picture remains decidedly mixed. Inflation is still high, GDP growth is all over the place at times, and government policies are not set well so far and often lack credibility. Inflation is expected to remain above trend for the rest of 2025.

The USD weakness stems from a number of factors, anticipation of, by 2026, interest rate cuts, and investors moving assets from the US towards other areas, emerging markets specifically.

Against this backdrop, the market’s bullishness appears increasingly disconnected from economic reality. Recent news on a framework for a US – China trade deal been reached sparked a relief rally, but the July 8-9 deadlines for restarting tariffs remains a concern around global markets volatility. We view the current optimism as premature and potentially misplaced.

Looking globally, the divergence in market performance is very striking:

Hong Kong’s Hang Seng continues its remarkable run, up +19% year-to-date.

The thematic focus that demands our attention is the widening gap between market sentiment and economic fundamentals. This disconnect has historically presaged significant market adjustments. While timing such inflection points is notoriously difficult, positioning portfolios to benefit from – rather than fall victim to – these inevitable realignments is precisely what separates exceptional active and blended investment management from mere index-tracking.

Our strategy in this environment remains consistent: being patient, being long-term and investing within conviction. The overall strategy is primarily two-fold:

•  Selective technology and growth exposure: maintain positions in companies with genuine technological capabilities and sustainable competitive advantages, while avoiding those merely drifting on the ai narrative without any substantive implementation or any competitive advantage.

We believe healthcare is going to be one of the biggest winners within the whole ai technology agenda. As demand for healthcare continues to grow, costs are rising at an unsustainable pace, and billions of people face multiple barriers to better health – including inaccurate and delayed diagnoses. Increasingly, people are turning to digital tools for medical advice and support. This will further create investment opportunities in the whole healthcare and biotechnology space.

•  Quality growth: emphasise fund strategies with investments within strong balance sheets, consistent cash flow generation, and pricing power – attributes that will prove invaluable when liquidity conditions come under pressure.

The reality is that markets cannot indefinitely diverge from economic fundamentals.

At Binary Capital, we remain vigilantly focused on identifying opportunities where the downside is quantifiably limited, but upside potential remains substantial. We have a range of investment strategies and our three-pillar approach to investing in fixed income, equities and liquid alternatives is a very compelling way to take advantage of opportunities as markets develop further and perhaps diverge from realities.

June’s performance, with many indices at all-time highs should be viewed not as validation of unbridled optimism per se, but as a potential warning sign of market consensus getting ahead of itself. This is something we watch carefully.

In markets obsessed with symmetry and normal distributions, asymmetrical returns represent the ultimate investment opportunity. While conventional investors accept the efficient market’s premise that higher returns require proportionally higher risk, elite capital allocators look in the “asymmetrical zone” where this relationship breaks down entirely.

As the below chart illustrates, traditional investments (red dot) follow the blue dotted line – a predictable risk-return relationship. The green dot positioned directly above: this represents an asymmetrical opportunity with identical risk (%) but dramatically higher returns (% vs %). At Binary Capital, we don’t diversify for diversification’s sake – we concentrate capital where the math tilts dramatically in our favour. We identify opportunities where downside is quantifiably limited while upside potential remains high. This isn’t broad conventional investing – it’s mathematical opportunities against market inefficiency. We say “no” many many times, waiting patiently for opportunities and returns where risk/reward asymmetry creates strategies for outsized long-term returns. Our long-term investment returns validates our investment strategy.

The current market environment, characterised by record highs alongside potentially challenging economic fundamentals, presents precisely such opportunities for the disciplined investor willing to look beyond general consensus views and narratives.

Invested capital deserves nothing less than this clear assessment, disciplined and conviction-led approach to navigating these increasingly complex market dynamics.

This is what we do at Binary Capital. This is what we will always do. This is the Binary Advantage.