Markets at present for quite a while have been driven less by earnings than by liquidity. Korean equities have gone vertical, AI-adjacent stocks are commanding multiples that assume perfection, and the FOMO trade is crowding capital into whatever is already working. In that environment, anything outside the momentum channel can be left in a vacuum, not because the businesses have deteriorated, but because nobody is looking.

Our recent conversation with Greg Dean of Langdon Equity Partners, the global small-cap manager, is a useful case study in what that feels like from the inside, and why holding one's nerve matters. Langdon endured what Dean describes as one of the worst relative stretches of a near-20-year career: an absolute drawdown of around 15% while broader markets rose 20% or more. The discomfort was compounded by the source of the pain. Single-country, liquidity-driven flows — Korea's melt-up chief among them — were setting prices, and for two or three reporting seasons the market simply declined to reward companies that kept delivering. As Dean puts it, dislocations like that are unprecedented in anyone's career; single countries are not supposed to move markets the way single securities have.

Our response, when clients understandably pushed, was to go back to the fundamentals line by line. The analysis said the earnings were real and the businesses were compounding, in our words at the time, "money good". The portfolio's roughly 31 holdings were still growing underlying cash earnings at north of 15%, and Langdon's unlevered portfolio IRRs sat in the mid-20s, about as high as they have been since the strategy launched.

In July and August so far the tide appears to have turned and afforded this approach some vindication, at least partially. It was Dean's best relative month in his career, nearly 10% ahead of the market, as reporting season forced prices back towards fundamentals. The portfolio's largest contributor, an insurance broker, delivered core revenue growth of 14% and core profit growth of 20% (headline growth was higher still, flattered by contingent commissions Langdon sensibly refuses to capitalise); the stock has since risen around 60%. Watches of Switzerland, long the stock everyone asked about, is up roughly 71% this year on mid-teens core earnings growth. Good companies, it turns out, do not stay ignored indefinitely.

The broader lesson is about time horizon as an edge. Institutional allocators increasingly move in re-risk and de-risk cycles that resemble political seats, and everyone (institutions, hedge funds, retail) chases performance. Dean's observation is that you no longer need a ten-year horizon to exploit this; three years of patience is enough, though those three years will be uncomfortable. For advisers, the practical implication is that concentrated, fundamentals-driven strategies only work if clients grant the manager that rope, and that granting it is precisely where a well-advised client can hold an advantage over the rest of the market. Importantly, that is not a licence for open-ended patience. Dean is explicit that Langdon will not grant itself five or ten years to be proved right. Three years is the horizon he thinks reasonable, long enough for cash earnings to assert themselves, short enough to remain accountable.

One month does not make a happy ending. But with cross-sectional volatility elevated and dispersion between the wildly overvalued and the wildly undervalued as wide as Dean has seen. In round numbers Dean now puts portfolio IRRs in the mid-twenties, with underlying cash earnings growing north of 15%. If he is right, the prize for doing the fundamental work in global small caps, where fewer and fewer are doing the work, looks unusually large which is something to hold onto amidst considerable uncertainty and noise.