Distillate Capital Fund Lags as AI Enthusiasm Whipsaws Markets

Distillate Capital's U.S. FSV strategy returned 2.24% net of fees in the first half of 2026, trailing the S&P 500's 10.19% gain and the Russell 1000 Value's 16.22% advance, the firm said in its second-quarter investor letter.

The letter pointed to artificial intelligence enthusiasm and uncertainty as the main driver of the whipsaw. Valuations were pushed to what it called extraordinary levels, making it harder for a value-oriented strategy to keep pace.

Distillate Capital did not disclose specific holdings or sector bets in the summary. The firm runs a free-cash-flow-yield focused approach, screening for companies with strong cash generation relative to their enterprise value.