Cooper Investors Global Equities Fund (Unhedged)

Performance Commentary 

The portfolio returned -3.3% for the quarter. For the calendar year 2025, the portfolio returned 2.6%. Currency movements were a circa 5% headwind to returns for the year. This quarter caps off a remarkable three years for global equities markets over which period the Fund returned 14.2% on an annualised basis¹.

Over this same three-year period, the MSCI AC World Index’s annualised return is 21.3%. These gains have not been evenly distributed – the largest 10 companies in the index have accounted for 40% of the benchmark’s performance. For context, the equal weighted index has returned 12.8% per annum over the same three-year period.

Much has been written about the potential risks of this concentration effect and so we will not belabour the point here only to counsel investors against expecting persistent mid-teens (or higher) returns – history, and a wealth of academic studies, suggests a realistic market return expectation is close to 9-10% over rolling 5-10-year periods.

To be clear, over the long-term we are seeking to deliver you, after all fees, a risk-adjusted return above that over the market. Given we are seeking to achieve this by running an index-unaware portfolio structure, portfolio returns may differ materially from the index over shorter time periods.

¹Past performance is not a reliable indicator of future performance.

Contributors to Performance

The largest positive contributors to Fund returns over the past 12 months were our holdings in TKO Holdings (TKO) and Taiwan Semiconductor Manufacturing Company (TSMC).

TKO Holdings

TKO Holdings (TKO) is the owner and operator of the two leading combat sports content assets – the UFC and WWE. We wrote about TKO in our September 2024 Quarterly Report and provided updates in our June 2025 and September 2025 Quarterly Reports.

We have been investors in TKO for a little over one year over which time the share price has appreciated over 80%. Our investment proposition is based on the increased demand for sports media rights from traditional broadcasters/cable as well as global streaming platforms (Netflix, YouTube, Amazon, Apple). These media companies see live sport as crucial to maintain and grow viewer numbers and/or subscribers. Given the year-round volume and flexibility of both the WWE and UFC, TKO’s assets are well positioned to benefit from this trend. In addition, TKO benefits from a powerful flywheel where in addition to media rights, it monetises its content via sponsorships (e.g. Monster Energy on the Octagon) and live events (with site fees paid by local governments and ticket sales).

Over the past year, TKO has renewed most of its important media deals (US UFC and WWE Premium Events) at rates well above previous deals. In addition, management continues to grow its sponsorship business, signing several new multi-year deals which we expect to become increasingly lucrative as the UFC’s and WWE’s growing exposure (via Paramount+ and Netflix respectively) becomes more of a factor.

Going forward, we believe there are still meaningful areas of latency across the business including international UFC media rights which are roughly a third the size of the US rights despite 80% of the fanbase residing outside of the US.

In addition, we are now starting to see TKO’s Zuffa Boxing venture take shape. Boxing as a sport has a rich heritage; however, for several decades the fragmented administration and promotion of the sport has resulted in an erosion in the quality of the spectacle. TKO’s approach will be to replicate the UFC’s model using a stable of “ranked” fighters who move up the rankings based on performance. The best will fight the best. Although it will take time, the long-term prize is significant – for example, the Canelo-Crawford super-fight shown on Netflix in September (also promoted by TKO) drew 41 million viewers, upwards of 10-15x UFC’s typical (albeit growing) audiences.

“What [boxing] has that the UFC didn’t have is you need to be educated on the UFC, you need to understand how the sport works, MMA, grappling, karate, jujitsu, boxing, all that goes into it. Boxing, everybody gets. It’s been around for 100 years. It’s a gladiator sport one of the three biggest sports as far back as the roaring twenties…so we think there is enormous runway once it’s run the way it should be run.” – TKO COO Mark Shapiro

We remain enthusiastic shareholders and are looking forward to attending UFC 325 in Sydney in February.

Taiwan Semiconductor Manufacturing Company

Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest semiconductor foundry. The Fund has been invested in TSMC since May 2020. Over this period, the company has cemented its position as the leading manufacturer of advanced chips and delivered Earnings per Share growth of close to 30% per annum. Investment returns have been over 36% on an annualised basis. More recent growth has been fuelled by the demand for chips used in High-Performance Computing applications, or AI.

Source: Counterpoint Research, Company Filings, CI Analysis

History shows that the long-term winners from significant technology shifts such as AI are difficult to predict. Our approach instead is to observe the industry trends and invest where we perceive the most attractive risk-adjusted returns. In this case, semiconductor proliferation (across AI and other markets) as well as the increasing complexities in the semiconductor manufacturing processes place TSMC in an increasingly important position. Put simply, TSMC have a near-monopoly position in the manufacture of leading-edge chips and so will thrive for as long as the semiconductor industry continues to push the performance envelope. This is a bet we are willing to make. We expect TSMC’s earnings growth to remain in the low-20% p.a. range; an outcome which is not captured in the current share price.

Detractors from Performance

The largest detractors from fund performance over the last year were Ryan Specialty Group (RYAN) and freee K.K.(freee).

Ryan Specialty Group

We wrote about wholesale insurance broker Ryan Specialty (RYAN) in our December 2024 Quarterly Report. The business is currently navigating a soft underlying insurance pricing environment predominantly in the property portion of the business. Even in this softer environment, we expect RYAN to grow its 2025 revenues organically at close to 10% and EBITDA at over 20% when taking into account completed acquisitions.

By way of background, as an insurance broker RYAN’s revenues are generated as a percentage commission applied to the insurance premiums they help to place. Therefore, insurance pricing has a direct short-term impact on revenues. However, over the long term, insurance volumes are the most important driver of revenue growth. On this front, flows into the Excess and Surplus market, which is RYAN’s focus, remain at a robust double-digit growth rate. Management continues to execute at a high level – introducing new products and integrating acquisitions as exemplified by the company’s 15% organic revenue growth in the third quarter, which is several-fold faster than the broader insurance broker peer group.

We were most impressed with management’s decision to increase investment counter-cyclically, a move we believe will pay-off handsomely for long-term shareholders.

“As the industry reacts to a transitioning market, we are attracting more talented professionals that are looking for a platform that not only withstands market cycles, but powers through them. Over the last 15 years, we built a culture and business model that stands apart from our competitors. Throughout the quarter, we saw a significant opportunity to ramp up our recruitment efforts. As a result, we added a significant number of experienced professionals to our world-class team.” – Ryan Speciality Executive Chairman and Founder, Pat Ryan.

We have used the share price weakness to add to our investment.

freee K.K.

freee K.K. is a Japanese software company primarily focused on providing accounting and HR-related tools to small businesses and sole proprietors (akin to a Japanese version of Xero). We have been following and meeting the company since 2019, prior to its subsequent IPO in 2020.

Today we see a de-risked opportunity – freee’s best-of-breed cloud offering has achieved 10% market share, it continues to grow revenues above 20% p.a., and the business has now reached a scale such that it is sustainably cash flow positive. Freee’s existing product suite and distribution strategy will support continued penetration of the enormous market opportunity ahead, as Japanese businesses are increasingly forced to adopt technology-led productivity solutions as an offset to meaningful demographic headwinds. This revenue growth is expected to flow with very strong incremental margins driving strong gains in overall firm profitability. In just three years, we believe freee should be generating circa ¥11B in Free Cash Flow².

Source: Company Reports, CI Internal Analysis

When compared to today’s ¥160B Enterprise Value, we can only conclude that the shares are very cheap. There is a material growth runway beyond 2028. The market seems overly fixated on short-term profits, which has provided the opportunity for us to build our investment. We visited the co-founders and senior management team in Tokyo in mid-December where the meetings supported our analysis.

²Please note that references to FCF growth are a forecast only, based upon Cooper Investors’ current views and assumptions, and is not guaranteed to occur. Any forecast may differ materially from the results ultimately achieved.