Peter Cooper, who founded the $13bn funds house that carries his name, said the return of surging inflation and the unwinding of “free money” by central banks has changed the investing game.
“It’s all gone back to the notion of back-to-basics risk,” Cooper says.
The inflation-led shake-out of markets so far this year has been “extraordinary”, representing some of the reversal of the massive asset bubble that has built up since the Global Financial Crisis. But there could be more fallout to come with big super overseeing investments that include debt sitting out of sight from public markets.
“A lot of those private market structures have a lot of leverage behind them,” he says. “Australian superannuation is in a good spot, but there’s been a lot of money pressed into private equity and property development.”
Cooper, one of Australia’s top-ranked investors, rarely gives interviews but spoke to The Australian ahead of the seventh Sohn Hearts & Minds investment conference to be held in Hobart on November 18.
Cooper is one of the headline fund managers who plans to offer an investment tip, with all proceeds from the high-end conference to be donated to charity.
For his part, Cooper says he is neither bullish nor bearish, “just dispassionate” about markets. Cooper Investments’ mantra is “observation not prediction”.
He oversees eight funds, including the flagship CI Brunswick fund, which has been closed to new investors for years. Named after the inner-Melbourne suburb where he grew up, the fund has a long line of potential investors waiting to get in given its reputation for beating the index. Since its inception nearly two decades ago, the Brunswick fund has returned 15 per cent compared to 7.9 per cent for its benchmark. While it is focused on long-term returns, it is one of the few to deliver positive returns (1 per cent) this financial year to date even in the face of one of the biggest market shake-outs since the GFC.
The 30-year market veteran says he is not going anywhere as he continues to oversee the funds. He intends to continue doing what he describes best as the “art of investing”, as opposed to asset gathering.
As long as Cooper has been in the markets, inflation has always been trending down, but he says it is no surprise the level of stimulus in the system, even before the pandemic, is now catching up. What happens next is “somewhat new territory”.
While the first order of effect on markets about rising interest rates and inflation is predictable (a shift to infrastructure and defensive stocks come into favour versus growth stocks), it’s the second-round effects that is the real unknown.
“What I mean by that is what activity in the market was happening as a result of the cheap money,” Cooper says.
Here he points to the wealth effect that comes from surging property prices and how that influenced spending decisions by households through the decade.
“What unwinds from all of that in terms of a retraction of consumer behaviour is a really challenging question,” he says.
He also points to the inequality created by ultra-low interest rates. The huge amount of money flooding the financial system is creating real social tensions.
“We’ve had inflation for the last 20 years. It’s called asset inflation,” he says.
When it comes to investing, Cooper looks for cyclical opportunities and, while it sounds basic, companies with quality business models that represent something tangible.
For tech, the proposition has to be clear – that is, finding companies that use tech that enable business to increase revenue and decrease costs.
Some key themes involve finding companies that have the utility of the value proposition, such as an “everyday needs business” like supermarket operator Woolworths. He even nominates Apple in this category because an iPhone is almost an essential service in the new economy.
He also points out that governments and economic policy are playing a bigger role than ever in influencing companies, particularly around energy, healthcare and demographics.
“If you draw a line down the middle of the page, in a relative sense, half the companies on the stockmarket are going to be on the positive side of government and the other half are going to be on the negative side,” Cooper says.
High importance in stock selection is the quality of management teams, with a clear focus and an entrepreneurial mindset.
He says Macquarie Group is “an amazing company” for its abilities to create opportunities.
“They (Macquarie) are an example of regulatory dexterity just outstanding around navigating government influence on policy from green investment to infrastructure,” he says.
Others include Qantas, which as a cyclical stock is “ruthlessly driven” for investors and has been able to exploit data to deliver higher returns. Another is BHP, which is supplying all the raw materials such as copper and iron ore needed for the new economy.
Cooper is less convinced about hydrogen as a near-term solution for a renewable energy shift, saying serious work has been going on in the area for decades and as a technology it still seems to be 20 years away from application.
“There’s going to be a lot of money made and there’s going to be an enormous amount lost … we’re just a little cautious on the technology frontier stuff,” he says.
With markets having just gone through an incredible period of zero interest rates and mad money theory “nonsense”, central bankers and policymakers now have to work through this, which is going to take time, Cooper says.
The paradox is that all the free money designed to save the system from the GFC or Covid crash has made it inherently more risky.
“As that gets unwound somehow, I just don’t know how this movie is going to end.”
But this means the risk-adjustment process is alive and well.
“There’s been a lot of readjustments, so, we’re looking with enthusiasm at some of the some of the stuff that’s been crunched,” Cooper says.
“Markets are like an air mattress in some respects – you sit on one side and the other side goes up.”
Peter Cooper will be a speaker at the Sohn Hearts & Minds Investment Leaders Conference on November 18 in Hobart, Tasmania.
This article was originally posted by The Australian here.
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Two hundred of Australia’s best and brightest money managers, bankers and entrepreneurs toasted the seventh Sohn Hearts and Minds conference at David Walsh’s Museum of Old and New Art, better known as MONA, in Hobart on Thursday night.
Fund manager turned anti-corruption campaigner Bill Browder is advising investors to hang on to their cash until central banks stop raising interest rates and the cost of living starts to come down, before investing it strategically.
The Sohn Hearts & Minds Investment Leaders Conference, held annually, had before Friday’s event made more than $40m in collective donations to medical research. It applies the stock picks made by fund managers in an investment portfolio.
Professional gambler and arts impresario David Walsh had a brutal message for successful top money managers – you may just be lucky.
Technology behind the tech; healthier lifestyles; the green transition and regulatory tailwinds. These are the mega-themes the smartest minds in the market are now firmly getting behind which they believe can help them deliver outsized profits.
A room filled with 700 of the country’s financial luminaries and billionaires is a difficult place to pitch an investment idea but it’s a great place to raise money for charity.
Top global money managers are telling investors to steer clear of companies that don’t make money and invest instead in unloved but profitable businesses, as continuing central bank interest rate rises threaten to keep markets falling.
Perpetual’s star stock picker Anthony Aboud says companies with strong balance sheets will finally be rewarded for their discipline in an environment of rising interest rates and global market upheaval.
Perpetual’s top stock picker Anthony Aboud makes his money running against the crowd and this is why property trusts like Charter Hall are sitting right the top his list right now.
Some of the top fund managers in the country will on Friday pitch their best investment ideas to the Sohn Hearts & Minds conference.
Twenty students from Kingston High School have been given the opportunity to attend the prestigious Sohn Hearts & Minds conference this week.
Gerry Cardinale, the owner of AC Milan and a host of other soccer, cricket, baseball and ice hockey assets is trying to double his money in the ‘resilient’ asset class.
Carleton’s conviction will be on full display on Friday, when he makes his third appearance at the annual Sohn Hearts & Minds Investment Leaders Conference, where stock-pickers share their best ideas in the name of medical research.
James Miller, a portfolio manager at Firetrail Investments, believes investors need to stop seeing the global decarbonisation push as a risk – and start seeing it as an opportunity.
Maggie O'Neill, Head of Marketing and Operations at HM1 joined Nick Griffin, CIO of Munro Partners to discuss the history of Hearts & Minds, Munro Partners' involvement and Nick's upcoming stock pitch.
Bob Desmond is Head of Claremont Global and Co-Portfolio Manager. He will present at the Sohn Hearts & Minds Investment Leaders Conference in Tasmania on November 18.
An increasing intransigence from authorities in Beijing toward private enterprise - and harsh pandemic restrictions - might be keeping some investors away, but the same factors are creating good opportunities in Chinese stocks.
Joyce Meng is a presenter at this year’s Sohn Hearts & Minds Investment Leaders Conference on November 18, which takes place in Hobart and aims to raise money for medical research.
Founder, CIO and CEO of Eminence Capital Ricky Sandler talks about his journey launching the $5.7 billion dollar asset manager, how the market has changed over the past decade and his motivations for participating in this year's Sohn Hearts & Minds conference.
Munro’s Nick Griffin on why he prefers Alphabet and Amazon over Meta, shorting industrials and Chinese equities, and his top picks for the energy transition.
When Auscap Asset Management founder Tim Carleton tips a stock at this month’s Sohn Hearts & Minds conference in Hobart, he doubts it will be a name that shocks investors.
The veteran fund manager says the most uncertain period of his career will deliver huge opportunities – providing his firm can stick to its system.
One of the nation’s most influential fund managers has warned that investment markets have entered a “new phase”, with hidden risks in the form of debt sitting in super funds, private equity and big investors that is set to test the financial system.
Speaking to The Australian Financial Review before the Sohn Hearts & Minds conference, Sandler named global on-demand ride-sharing and food delivery service Uber Technologies among his top picks, alongside real estate marketplace Zillow.
When former Amcor chief executive Ken MacKenzie was named the new chairman of BHP five years ago, that was a sign for top-rated fund manager Peter Cooper to move back into the mining giant.
Jun Bei Liu is the lead portfolio manager at Tribeca Alpha Plus Fund. Ms Liu is set to present an investment idea at the Sohn Hearts & Minds conference in Tasmania on November 18.
Regal’s hedge fund focused on the resources space has thumped the market and its top stock picker, Tim Elliott, says resources stocks are still cheap.
Desmond, who worked in London before moving to Australia in 2008, is making his first appearance at the annual Sohn Hearts & Minds Investment Leaders Conference, where fund managers give their favourite stock tips to raise money for medical research charities.
The WaveStone principal says retail will drop away but quality operators will find a way through.
Catherine Allfrey, Principal and Portfolio Manager of WaveStone Capital will be speaking at this year's Sohn Hearts & Minds Conference in Hobart which raises funds for Australian medical research.
Bill Browder, the fund manager who has become one of Vladimir Putin’s fiercest critics, says the Russian leader is increasingly desperate, but no less dangerous.
Bill Browder, once the largest foreign investor in Russia and the man behind the global Magnitsky justice campaign, says the US is the weakest link in the war in Ukraine.
There are many descriptors for Browder, including Russia’s anti-corruption crusader, and its most dogged oligarch hunter. But it’s his title as Putin’s No.1 foreign enemy that bestows on him another label - consummate survivor.
On November 18, Griffin – with $4.7bn under management at Munro Partners – heads to Hobart for this year’s face-to-face pitch to investors on his 2023 pick.
Tim Carleton, founder of Auscap Asset Management and 2022 Conference Fund Manager sat down with Equity Mates to discuss his investment philosophy and what makes a great Australian company.
When investor Kara Nortman and actor Natalie Portman decided to start a soccer team, they created a brand that has grabbed the sporting world’s attention.
Sporting teams and leagues are becoming serious investments for global firms managing billions of dollars, as private equity funds eye off the sector’s growth potential and resilience to economic slumps.
Australia’s sports leagues are being held back by a culture of conservatism and need to be more open to private equity investment or risk falling behind, investors say, with Netball Australia’s rejection of a $6.5m bailout cited as just one example of administrators’ aversion to private capital. Conservative Australian sports leagues are ‘letting investment opportunities pass them'.
A financier and political activist who is viewed as a key enemy of Russia’s government will address Australian investors on the war in Ukraine at this year’s Sohn Hearts and Minds conference, as the conflict continues to have a major influence on global markets.
Keynote speaker will be Bill Browder, the former Hermitage Capital hedge fund manager that has become an arch nemesis of Russian President Vladimir Putin, as he has lobbied governments to black-list senior Russian officials attempting to shift their assets offshore.
Bill Browder, one of Russian President Vladimir Putin’s fiercest critics, the founder of Hermitage Capital and the man behind the Magnitsky Law on human rights, will headline this year’s Sohn Hearts & Minds investor conference.