AI Analysis · Q2 2026

Carrhae Capital's $3.34 billion U.S.-listed portfolio grew by more than $690 million in Q1 2026 — the largest single-quarter AUM increase in this cohort — but the headline story is not the growth itself; it is the structural transformation in how the manager expresses his emerging-markets and macro views. The defining move was a new Invesco QQQ position of $1.43 billion, which instantly became 42.9% of the book and which the manager built from zero to the portfolio's largest single holding in a single quarter. That $1.43 billion QQQ allocation was funded by resources that included both organic portfolio growth and a deliberate rotation OUT of the broad-based emerging-markets ETFs that had composed the portfolio's core in prior quarters: KWEB (the KraneShares Chinese Internet ETF) was reduced by 72.8% — from 6.83 million to 1.86 million shares — and ASHR (the DBX China small-cap ETF) was reduced by 66.5%, while the iShares EEM (broad EM ETF) was liquidated completely. These three ETF reductions released approximately $492 million in capital. The simultaneous, deliberate rotation OUT of basket-ETF exposure into single-name emerging-markets and commodity selection is the quarter's clearest thesis statement: the manager has decided that bottom-up security selection in EM and commodity names produces better risk-adjusted returns than passive ETF exposure. The single-names added tell that story: Alibaba was increased from 309,000 to 1.7 million shares — a 451% increase worth $168 million — making it the portfolio's largest single-name increase. Itau Unibanco, the Brazilian banking giant, was added as a $171 million new position at 20.4 million shares. ICICI Bank, the Indian private-sector lender, was increased by 153% to $131 million. Embracer — wait, no, Embracer is not here. Embraer, the Brazilian aerospace manufacturer, was added to at $171 million, up 152% in share count. Eldorado Gold, a gold-and-copper miner with assets in Greece and Canada, was increased by $24 million. Gold was added through both the SLV silver ETF (+88%) and GLD. Oil was added through USO (United States Oil Fund LP) at $76 million and through new positions in oil-services names SLB and Halliburton and in steel-pipe manufacturer Tenaris. PDD Holdings and GDS Holdings, both China-facing names, were added meaningfully. The portfolio's prior-quarter technology exposure — MakeMyTrip, Baidu, Synopsys, SEA Ltd, Nu Holdings, Franco-Nevada, Banco Bradesco, Credicorp — was substantially reduced or liquidated, with MakeMyTrip reduced by 80% in shares and several names completely exited. The overall impression is a manager who has rotated the portfolio's core from diversified EM ETFs into a concentrated, thematic basket of single-name EM equities and commodity-related positions at a time when the macro backdrop — commodity prices, US-dollar strength, and China's economic trajectory — has reopened the risk premium on EM single names relative to EM baskets.

The QQQ position at $1.43 billion — a new entry of 2.48 million shares in a single quarter — is the most striking trade in the filing and the one that most clearly distinguishes this portfolio from anything Carrhae ran in prior quarters. QQQ is the Invesco Nasdaq-100 ETF, a market-cap-weighted index of the 100 largest non-financial companies listed on the Nasdaq Stock Market. The index is heavily skewed toward technology, communication services, and consumer-discretionary names, with a top-heavy concentration in the largest-cap companies (Apple, Microsoft, Amazon, Nvidia, Meta, Alphabet, Tesla). From a portfolio-construction perspective, building a 42.9% position in QQQ in a single quarter is an extraordinary allocation to U.S. large-cap technology — a sector that had been under pressure through late 2025 and into Q1 2026 on concerns about AI-capital-expenditure sustainability, margin compression in software, and the end of the zero-interest-rate era's favorable treatment of long-duration growth stocks. For a portfolio that had previously been built around emerging-markets and commodity exposure to add a $1.43 billion Nasdaq-100 position in a single quarter reflects either a radical reassessment of the risk/reward in U.S. large-cap technology or the deployment of capital that had originally been earmarked for a different strategy. The explanation that best fits both the mathematics of the quarter and the portfolio's existing positioning is the latter: the $1.43 billion QQQ entry was funded in part by the liquidation of KWEB and ASHR ($492 million combined) plus the $1.01 billion portfolio growth from mark-to-market on existing positions — the capital came from a combination of ETF rotation and existing asset appreciation that created dry powder without the manager needing to raise new external capital.

The KWEB reduction is the most informative of the ETF rotations because it tells a specific country-and-sector story. KWEB tracks the FTSE/Fortress China Internet Index, a basket of Chinese internet and technology companies including Alibaba, Tencent, Meituan, Pinduoduo, JD.com, NetEase, Baidu, and others. The portfolio held KWEB at $233 million (6.8 million shares) at year-end 2025 and reduced to $53 million (1.86 million shares) in Q1 2026 — a 72.8% reduction that effectively returned the position to residual-convenience status. The timing is notable: Q1 2026 was not a particularly strong quarter for Chinese internet stocks, which faced headwinds from regulatory uncertainty, consumer-spending softness, and U.S.-China trade tensions, but the reduction is proportionally much larger than the price move would justify. The inference is that Carrhae concluded the KWEB basket had become less attractive than individual names within it — specifically Alibaba, which was simultaneously increased from 309,000 shares to 1.7 million shares in a trade that cost $168 million in net new capital. This is portfolio-manager behavior at its most instructive: sell the basket, buy the single name you believe is most mispriced within the basket. The KWEB cut released $180 million in capital; the Alibaba increase deployed $168 million of it. The net $12 million difference is the transaction-cost accounting for the rotation.

Quarter at a glance — Q2 2026

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