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Copia Investment Partners – Market Insights & Fund Performance

As we step into 2025, market volatility remains a key theme, with investors closely watching global economic shifts. Copia Investment Partners highlights insights from Howard Marks’ latest memo, examining potential market bubbles and valuation concerns.

This update also covers:
Chester High Conviction Fund – A deep dive into themes like the USD, China, and AI
Mutual Limited Funds – Now Recommended across all strategies by Lonsec
Fund Performance – A snapshot of Copia’s investment partners and their latest returns

📖 Read the full report below:

Hasn’t The Donald started his latest reign as the 47th President of the US with some gusto! Will he be good or bad for markets we’re all wondering… personally I’m not sure just yet but it does seem heightened volatility might be the ‘flavour of the year’.

I occasionally reference one of the publications I enjoy reading, Howard Marks’ memos, and his latest one (On Bubble Watch) is no exception – available at https://www.oaktreecapital.com/insights/memo/on-bubble-watch. It’s a good reminder that bubbles can form in markets and there is good cause to be alert to this possibility and what tends to lead to them. I have extracted a few sections from this memo that stood out for me:

[At] the end of November, U.S. stocks represented over 70% of the MSCI World Index, the highest percentage since 1970… Thus, it’s clear that (a) U.S. companies are worth a lot compared to the companies in other regions and (b) the top seven U.S. stocks are worth a heightened amount relative to the rest of U.S. stocks.

My early brush with a genuine bubble caused me to formulate some guiding principles that carried me through the next 50-odd years:

–          It’s not what you buy, it’s what you pay that counts.

–          Good investing doesn’t come from buying good things, but from buying things well.

–          There’s no asset so good that it can’t become overpriced and thus dangerous, and there are few assets so bad that they can’t get cheap enough to be a bargain.

The point is that when stocks rise too fast – out of proportion to the growth in the underlying companies’ earnings – they’re unlikely to keep on appreciating. Michael Cembalest has another chart that makes this point. It shows that prior to two years ago, there were only four times in the history of the S&P 500 when it returned 20% or more for two years in a row. In three of those four instances (a small sample, mind you), the index declined in the subsequent two-year period. (The exception was 1995-98, when the powerful TMT bubble caused the decline to be delayed until 2000, but then the index lost almost 40% in three years.) In the last two years, it’s happened for the fifth time. The S&P 500 was up 26% in 2023 and 25% in 2024, for the best two-year stretch since 1997-98. 

I should clarify, I haven’t shared the above to suggest there is in fact a bubble (e.g. Mag 7) or that we should be nervous about markets, just that when we see certain pockets of lofty valuations, I guess it prompts me to pause and reflect and query if / how / why they are sustainable.

Copia Managers: Around the grounds

A couple of things to bring to your attention this month, including returns for Copia’s investment partners (see table below).

*** Chester High Conviction Fund | Quarterly Thoughts

As you may be aware, the Chester team publish quite a comprehensive quarterly note which makes for fascinating (and patient) reading. The latest quarterly includes a summary of themes/areas they are reflecting on at the moment e.g. US dollar, China, AI etc (on page 5), recent portfolio activity (on page 4), and detailed insights on some key holdings e.g. RMD, BOT, LNW, DVP, WOR (on pages 8-12). See attached.

*** Mutual Limited | Lonsec Upgrades | Recommended

A reminder that Lonsec now rates all Mutual Limited funds as “Recommended”. Late last year, the Mutual Income FundMutual Credit Fund, and Mutual High Yield Fund each received ratings upgrades, joining the Mutual Cash Fund, which retained its Recommended rating.  Summary of key information relating to the funds below.

*** Copia fund – platform availability

You can access Copia funds across most major platforms – please click here for current platform availability.

*** Copia fund – Performance

Finally, below is a summary of the performance (1 month & 1 year) of the Copia suite of funds and links to the latest fund updates for more detail. Highlighted in bold are the returns that exceed those of the relevant benchmark for that time period.