Category: Letter to Investors

The 5 Most Important Charts Defining Markets Today

In this Letter to Investors, we look at

How the bond market is causing Trump to Always Chicken Out (TACO) and what that means for the likely duration of the Iran War.
Why small caps are in a much better position to weather the Iran oil price spike than the Russia/Ukraine spike of 2022.
The curious case of Nvidia now being cheaper than a global oil giant.
How the RBA’s rate hikes have put Aussie small caps on sale, and why that’s great news for future returns.

I must say, it’s been tough choosing when to sit down and write this Letter. With a new rolling deadline for the Iran war always “just hours away”, I kept putting it off.

A thought invariably rolled through my mind: “Before putting pen to paper, let’s wait for the arrival of the next big market-moving news.”

The reality, though, is in a one-variable market – with daily market moves almost solely dictated by war headlines – it’s best just to get on with it.

Why? Because the end of the war could be this week … or it could still be months away.

(HINT: As we’ll elaborate later, it’s more likely weeks than months. Polymarket has a 78% chance that Trump will announce the end of military operations against Iran by 30 June.)

But our edge is not trying to ‘outguess’ the millions of other investors about Trump’s next tweet; our edge is analysing small-cap companies, where few people are looking, through intensive research and travel.

So, while our Ophir Funds were down fairly in line with the market/their benchmarks in March, that’s ok with us.

Every one of the circa 80 global and regional share market indices we track were down in March due to the war, so it was hard to avoid!

(For us to have materially outperformed last month, we would have had to change our style from Growth to Value, and buy energy, financials, telcos and utilities! That’s not quite our core style.)

In this month’s Letter, we share five charts that have really caught our attention over the past month and helped shape our thinking about markets.

But first, thank the bond market for a happy TACO-versary

Trump Always Chickens Out, or TACO, has been used to describe President Trump’s tendency to escalate and threaten, then, when faced with pressure, to de-escalate and back down.

Just over a year ago, on his so-called ‘Liberation Day’, April 2, 2025, Trump tabled a broad package of reciprocal tariffs. Share markets plummeted. A few days later, Trump retreated and announced a 90-day grace period on tariffs.

What caused the about-face?

It’s widely speculated that he got a tap on the shoulder from his Treasury Secretary, Scott Bessent, who saw the 10-year bond yield shoot up to 4.5% and warned it would worsen the US’s already ballooning debt costs and fiscal deficit.

When you have US$39 trillion in government debt and are adding a US$2 trillion fiscal deficit to it every year, higher interest rates are like pouring kerosene on an already raging inferno.

Fast forward almost exactly a year, and on April 7, Trump warned he would obliterate Iran and a “whole civilisation will die” if Iran didn’t open the Strait of Hormuz. Then, a day later, he agreed to a last-minute two-week ceasefire.

As higher oil prices stoked inflation and rate rise worries, the 10-year bond yield rose from around 3.9% at the start of the war in late February to over 4.4% in late March.

Chart 1. TACOnomics

When the 10-year (or Bessent) speaks, Trump listens.

Source: Ophir. Bloomberg.

Again, it was the bond market and higher yields that caused Trump to TACO and not let the war go on too long.

It reminds us again of that famous quote by Bill Clinton’s political advisor, James Carville:

“I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”

Everybody, including Donald Trump.

We think this is more likely to mean, like most geopolitical events, that the negative share market impact is relatively short lived before the recovery takes hold.

Charts 2 & 3. Margin of Safety

For small caps, this will not be a repeat of the 2022 oil spike.

While the war may not drag on too long, small-cap investors could be forgiven for having PTSD. The current oil price spike, after all, might remind them of 2022.

Almost exactly four years before the US and Israel launched coordinated military operations on Iran, Russia (the world’s third-largest oil producer) invaded Ukraine.

This led to a sequence of events you can see in the chart below. Oil (brown line) spiked and fuelled already-rising post-COVID inflation.

Source: Ophir. Bloomberg.

Both short-term interest rates (controlled by central banks) and long-term interest rates (controlled by the market) started rocketing higher. The gold line shows the US 10-year bond yield (the same one TACO’ing Trump in the first chart in this Letter).

Already sensing that rates would rise during the COVID recovery, equity markets had begun selling off in 2021, but the falls continued in 2022 on the back of the oil spike. You can see this for both US large caps (green line) and small caps (orange line) in the chart below, where we highlight the fall in their P/E ratios.

Source: Ophir. Bloomberg.

You can also clearly see that small-cap valuations fell much more – as we were painfully aware here at Ophir!

(All the while, the recession probability was rising in the US (inverted blue line) and peaked at over 60% in late 2022/2023.)

Which brings us to THE question.

Should we be afraid that today’s high oil prices are going to cause a replay sell-off of small caps?

If oil prices stay high enough for long enough, it’s certainly a possibility that central banks may have to raise interest rates to combat higher inflation, increasing the risk of recession and share market falls.

Markets today, however, are not really expecting that scenario for a couple of key reasons:

2022 was an oil price spike on top of already high and rising inflation from COVID. By contrast, this time, prior to the Iran war, US inflation had been falling, and there were expectations of Fed rate cuts, not hikes.
Essentially, this current spike in oil is self-imposed by the US. It can wind down military operations and relieve pressure on the oil price.

In many ways, Trump will have to weigh a long, drawn-out war (if needed to reach objectives in Iran) against the economic cost to the US (higher inflation and interest rates and potential recession).

Most suspect that, because it will likely cost him dearly at the mid-term elections in November, Trump won’t think the cost of a long war is worth bearing.

That is likely why recession probabilities haven’t spiked and why the market is not yet pricing in rate hikes by the Federal Reserve.

Moreover, with a P/E of around 15x, US small-cap valuations are relatively cheap and well below the more expensive 22-23x before the sell-off in 2021.

Given that the lowest small caps have reached in the last three bear markets are around 11-12x, small caps today have a lot more downside protection and margin of safety.

Chart 4. Nvidia’s Crude Awakening

This next chart shows one of the craziest stats we came across in the last month.

Nvidia’s one-year forward PE: 18.7x.

ExxonMobil: 20.2x.

That’s right, Nvidia stock is now cheaper than ExxonMobil.

Let that sink in.

Source: Bloomberg. Data at 27 March 2026.

The company supplying the picks and shovels for the AI gold rush – the most important technology buildout of our lifetime – trades at a lower one-year forward P/E (price-to-earnings ratio) than an oil major that has roots back to the 1870s!

At Ophir, we watched Nvidia’s meteoric rise and kept asking ourselves: when does the valuation gravity eventually kick in?

Well, here we are.

Three years ago, the market was willing to pay almost anything for AI, and at a P/E of 60x had priced Nvidia to perfection and then some.

Today, despite expecting Nvidia’s earnings to almost double this financial year from US$113 billion to US$203 billion, the market is now pricing Nvidia more like a utility.

It’s not that Nvidia’s share price is down a lot that’s causing its valuation to fall – it’s only about 12% off its all-time highs. The market is just having a hard time maintaining Nvidia’s P/E. If the market did maintain the P/E, Nvidia’s market cap would double to over USD$8 trillion!

Investors are clearly questioning the durability of the AI capex cycle and whether it has gotten ahead of itself.

On the flip side, ExxonMobil’s P/E averaged 11x over the last 5 years. Then oil shot up on the back of the Iran war, and Exxon is now trading at almost twice that P/E.

We’re not saying Exxon is overvalued. Oil is a critical business and Exxon is no doubt exceptionally well run. But the optics of this comparison say something important about how dramatically sentiment can swing.

Have these two companies’ fortunes really changed that much over the last six months – when Nvidia’s P/E was twice that of Exxon – or is this one of the great mispricings of the decade?

Chart 5. Aussie Small Caps Marked Down

For over a year now, we have been beating the drum about how cheap US and global small caps have been versus large caps.

But one of the great untold stories of the last couple of months is just how cheap Aussie small caps have become.

At a 13.9x price-to-earnings ratio (one-year forward earnings), the only two other times they have been this cheap in the last decade are:

March 2020, when the COVID sell-off hit.
Very briefly in June 2022, during the fastest global rate-hiking cycle in 40 years, when the consensus call from economists was recession.

Perhaps even more stark is Australian small caps’ valuation relative to Australian large caps.

Over the last 20 years, Aussie small caps have traded at an average P/E premium to large caps of +0.7x.

Today they are trading almost 4 P/E points lower – the LOWEST in the 20 years of data available.

Source: Ophir. Bloomberg. ASX Small Ordinaries vs ASX 50.

A big cause has been the RBA rate-hike cycle. It started in early February after a sticky inflation reading for the December 2025 quarter (released 28^th January 2026).

Since that late-January CPI report, the ASX Small Ordinaries index fell -16.6% to the end of March, while the ASX 50 index has fallen just -2.4%.

With Aussie small-cap valuations at 13.9x, they are now only marginally above the 13x they bottomed at after the 2022 sell-off, and the 12x they bottomed at in COVID.

So it appears much of the RBA hiking cycle and Iran war fears are priced in.

Are they at their lows?

Who knows.

But, absent any unforeseen events, they historically haven’t been much lower.

And as the research tells us: the single best predictor of an asset class’s return over the long term is its starting valuation.

And on that score, Aussie small caps have now started to look cheap, especially compared to Aussie large caps.

As Buffett said: “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down”.

We think that applies well to Aussie small caps today. It’s our job here at Ophir to find the quality merchandise within small caps.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

Actual returns could differ significantly from any forecasts, estimates or projections provided.

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17 Mar, 2026

Letter to Investors - February 2026

Letter to Investors • 11 mins read

The three big events impacting markets today

In this Letter to Investors, we look at

Why the history of past conflicts suggests the record oil price spike caused by the US/Israel v Iran war may not last, and why that will be good for equities.
The momentous pivot in market leadership away from the large-cap growth stocks (the Mag-7), and what that means for the outlook for equities.
The role played ‘doomer’ scenarios around the impact of AI agents on software stocks and whether they are likely to be true.
The macro factors giving us confidence that small caps will continue to outperform.

The three major events impacting ‘top down’ investor thinking

Share markets generally had a pretty good February.

But wait, didn’t the S&P500 fall last month?

It did. It was down -0.8%. That’s its first negative total return month since the Liberation Day stinker back in April 2025.

But that’s just what was visible at the surface.

If we look deeper, the US share market in February was dragged under by the dead weight of the Magnificent 7 (Amazon, Apple, Google, Meta, Microsoft, Nvidia, Tesla). As a collective group, the Mag 7 slumped -7.3%.

But what if we remove the distorting effect of the Mag 7’s gigantic size? Well, on an equal weighted basis – where all 500 companies instead get a 0.2% weight each – for the month, the S&P500 was actually up +3.6%!

Most other major markets were also up, including

Australia (ASX200, +4.2%)
Europe (MSCI Europe, +4.1%)
The UK (FTSE 100, +7.0%)
Japan (Nikkei, +10.4%).

But then in early March, markets were rocked by the US/Israel attack on Iran that sent oil prices soaring and equities sharply lower.

We now have three big, overlapping forces that are creating rough seas and causing confusion for markets and investors:

The new US/Israel v Iran war that kicked off at the end of February.
A rotation in market leadership that has ended three years of large-cap growth-stock leadership by the Magnificent 7. This has been exacerbated by the fog hanging over software stocks from doomsday scenarios around the impact of agentic AI.
The evidence (predating the war above) of a mid-cycle acceleration in US economic and earnings growth.

Let’s look at each in turn.

The war: How long will it last?

Despite the multiplicity of effects listed above, you could be forgiven for thinking that we are in a single variable market. When it comes to the direction of daily financial market moves in early March, the state of the US/Israel versus Iran war, and its impact on oil prices, seems to be the sole influence.

The reasons for the US (with Israel) initiating the war aren’t entirely clear but include:

Stopping Iran from developing nuclear weapons.
Destroying Iran’s ballistic missiles and military capabilities.
Getting ahead of an imminent threat from Iran.
The US being forced to join Israel in the first strikes so they didn’t suffer greater retaliatory casualties; and
To replace the current Iranian regime.

Without a clear rationale, however, it’s hard to understand where the finish line might be and whether the war will be over in days, weeks, months or even longer (Iraq/Afghanistan anyone?).

The most obvious financial market impact of the war has been the stratospheric rise in the oil price after the Iran-controlled Strait of Hormuz was effectively shut down.

Some 20 million barrels a day of crude oil flow through the Strait each day – or about 20% of total daily global oil consumption. That’s one important choke point!

That disruption caused the oil price (WTI) to shoot up intraday on the 9^th of March to just shy of USD$120 a barrel. From the start of the year, the oil price has more than doubled.

If we use closing day prices, at writing, the oil price jump is almost equal to the post-1980 record rise seen in the first Gulf War in 1990.

In uncharted (oil) territory

While the first Gulf War may take the record (so far) for the largest percentage jump in the oil price since 1980, today’s war has seen the fastest – one week in early March recorded the biggest weekly jump in the oil price ever!

Source: Ophir, Bloomberg.

Just how dangerous is this situation?

Here are the three things that stand out to us from past oil spikes caused by geopolitical events:

The pattern is pretty consistent. Across six major geopolitical shocks – from the Iran-Iraq War in 1980 to Russia’s invasion of Ukraine in 2022 – oil prices often spike hard and fast … they then give the gains almost all back.
The current Iran shock is one of the most violent early moves we’ve seen. A near 60% spike in a few trading days puts the US & Israel conflict firmly near the top of the pack for speed and magnitude of the initial oil price reaction. Dramatic? Yes. Unusual? Only if it continues on from here.
The median tells us what to expect from here. Oil prices historically fell back to pre-shock levels in approximately 4-5 months. In the chart below, if history rhymes, the spike is largely done.

Source: Bloomberg. Ophir.

So while investors are worried about a prolonged disruption, history suggests that disruptions are temporary.

The most important factor is not how high oil prices go, but for how LONG they stay high.

The question we are asking ourselves now is: Is Iranian supply actually off the market this time? Or is the oil price spike just a fear premium?

If fears around the impact of the war on Iran’s oil supply are just that, fears, then we can use the median pathway of 4-5 months for prices to fall back to pre-shock levels as our roadmap.

We think US President Donald Trump will ultimately be persuaded to back down from the war if that is the only means to sustainably get the oil price lower.

Trump is facing a very important mid-term election this year and he won’t want to be adding cost pressures to consumers at the petrol pump or through rate hikes to combat oil price-induced higher inflation.

The playbook from past shocks such as this suggests they tend to see short-term, mean-reverting oil price spikes, which creates short-term negatives for equities, but then equities tend to bounce back over the next 3-6 months.

Unless the Trump Administration wants to perform a coup de grâce on its domestic economy, we suspect it will avert the worst-case outcomes on the oil and share markets.

And it seems the market agrees. Futures markets at present have the oil price (WTI) back down below USD$70 a barrel by the end of this year and dropping rapidly over the next few months.

The ‘Death of Software’ was greatly exaggerated (maybe)

OpenAI launched ChatGPT to the public on the 30^th November 2022. The launch triggered an incredible run for the Mag7, US large-cap growth stocks and the US share market in general.

2023, 2024 and 2025 saw the S&P500 put on 24.2%, 23.3% and 16.4%, respectively, each of those years.

When it comes to three-year market streaks in the U.S. since 1928, the run from 2023 sits well within the top decile (top 10). As Sinatra might say, “It was a very good year(s)”.

Source: Bloomberg, Datastream, Goldman Sachs Investment Research.

But for the last five months or so, the S&P 500 has been largely treading water between the 6500 and 7000 levels.

The waters have been pretty calm of late if you were an index investor.

Like a duck on a pond

But like the proverbial duck on a pond, beneath the surface, the legs have been whirling. In the chart below, you can see the volatility of individual stocks within the S&P 500 index minus the volatility of the index itself.

Source: Goldman Sachs

And market leadership has been undergoing some momentous pivots.

Basically, the car (index) isn’t going anywhere lately, but the passengers (companies in the index) keep swapping around all the time and trying to fight for who is going to drive the car (index) forward.

While it was clear who was driving from when ChatGPT was launched at the back end of 2022 until about three months ago (the Mag7), that has become less clear recently.

Strong commodity and oil prices have seen energy and materials stocks jump into the driver’s seat to dominate.

At the same time, IT stocks, and software companies particularly, have been on a rollercoaster ride as AI has moved from the much less valuable ‘telling you stuff’ (ChatGPT) period, into the much more valuable ‘doing stuff’ for you (AI agents) phase.

This new phase, caused by the emergence of powerful new AI agents, has seen ‘doomer’ narratives emerge, suggesting that we will imminently see one person in a garage ‘vibe coding’ to create a whole leading enterprise software solution that will drive leading software businesses into bankruptcy and put everyone out of work.

As you know, those fears triggered a huge sell-off in SaaS stocks (The SaaSpocalypse) that had widened during the first three weeks of February.

Fortunately, leading voices such as Jensen Huang, founder of the world’s most valuable company, Nvidia, have provided some credible pushback against these most extreme narratives, and we’ve seen a reprieve bounce in software names since the last week of February.

We unpack the SaaSpocalypse in much more detail in this month’s Investment Strategy Note where we push back against the most extreme ‘doomer’ narratives.

A Deep Breadth – at last

What does the changing underlying structure of the market and leadership mean for our space and the recent outperformance of small-cap stocks?

In our last couple of Letters (here & here), we highlighted how breadth had been returning to global equity markets, particularly the US share market. For the first time in years, small-cap stocks have outperformed large caps more durably.

This has happened because the lagged impact of Federal Reserve rate cuts, along with household and business tax cuts in the US, broadened economic and corporate earnings growth, diminishing the reliance on Mag7-related AI capital expenditure.

There are macro indicators we are watching that are giving us confidence that this broadening has durability.

First one caveat. The following presumes that the global oil supply issues caused by the Iran war will be resolved soon. As we highlighted, there is a good reason to expect this to occur, but it’s not written in stone.

Market breadth – and the outperformance of small caps – is intimately tied with the business cycle, which moves in years, not days or weeks, and follows a typical pattern:

They start with lower inflation and/or softer labour market data.
That’s followed by central banks lowering interest rates. (This is exactly what happened from 2023 through to today in the US.)
Early business cycle data, such as mortgage applications, then start to improve.
Then comes improving business activity (purchasing manager indices – PMIs).
Followed by improving and broadening corporate earnings expectations.

The chart below illustrates the Institute of Supply Management’s (ISM) PMI of New Manufacturing Orders in dark blue and the breadth of S&P 500 company earnings revisions.

Source: Piper Sandler

As you can see, they move together in nice broad cycles lasting years and after a few years of both moving sideways.

They have recently both started trending upwards.

That same measure of PMI New Orders (now in orange below) also correlates quite nicely with the percentage of stocks in the US share market whose prices are trading above their 200-day moving average. (The more stocks trading above the moving average, the greater the market’s breadth.)

Source: Piper Sandler

In other words, as business activity picks up, so too does the number/breadth of stocks that are performing well.

Unless the current business cycle is knocked off course by an exogenous event (like a protracted war causing long last oil price disruption!), we can expect the trends that go along with it. That is, we can expect to see a continuation of broader equity market participation, with more stocks outperforming, including, importantly for Ophir and our investors, small-cap outperformance.

Should the oil price settle back towards its pre-war level in the near term, we expect equity markets to “go back to regular programming” that was in place early this year: increased breadth and with a tailwind behind the backs of small caps.

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11 Feb, 2026

Letter to Investors - January 2026

Letter to Investors • 12 mins read

The Great Currency Hedging Debate

In this Letter to Investors, we look at:

The record small cap outperformance run in January, and why we think the small cap renaissance will be sustained.
What is causing the big changes in market leadership, including the ongoing surge in gold and silver.
Why traditional software companies remain on our radar despite the recent fear-driven indiscriminate selling across the sector.
Whether, in light of the Aussie dollar ripping in January, investors should hedge their currency exposure to our global funds?

After ho-hum headline index returns of 1.4% for the S&P 500 and 1.8% for the ASX 200 in January, you might be thinking that not much happened to start 2026.

You’d be dead wrong!

Under the surface, there was a lot going on, and we want to touch on four key developments in this month’s Letter:

Record small cap run

The first is that investors had small caps front of mind.

While the S&P 500 was +1.4% in January, over in small cap land, the Russell 2000 was up 5.4%.

Global small caps (MSCI World Small Cap Index) outperformed global large caps (MSCI World Large Cap Index) for 16 consecutive trading days – the longest streak in the 30-year history of the data!

Source: Bloomberg. Global Small Caps is represented by the MSCI World Small Cap Index and Global Large Caps is represented by the MSCI World Large Cap Index.

As we’ve been saying for some time now, valuations, including relative valuations, are like an elastic band, and they can snap back fast.

Global small caps have been trading at the cheapest valuation to global large caps in 25 years.

Last month, we covered how we think the catalyst for this snap back for outperformance to start was Small Caps earnings expectations outperforming like they have been in recent months (link).

This broadening in earnings growth, particularly outside of the Magnificent 7 in the U.S., is happening as the U.S. economy looks to be in the early days of a mid-cycle acceleration.

At the time of writing in early February, another key leading economic indicator helps to confirm this with the Manufacturing Purchasing Managers Index (a key cyclical real-time barometer of the U.S. economy) seeing the biggest monthly gain since we were all released from COVID lockdowns in 2020.

This is important because it gives us confidence the small cap snap-back is not another short-term ‘head fake’; but rather a more durable broadening in economic and earnings growth that includes small cap land.

Gold glitters

You must have been hiding under a non-shiny rock to not hear about what’s been happening recently to the price of shiny metals – gold and silver.

In January, gold was up 13.3% and silver rose 18.9%. This was after they rose 64.6% and 148.0% respectively in 2025.

Move over share investing!

It could have been even better. Gold and Silver were up over 25% and 60% each at one point during January (!) before President Trump announced the new Federal Reserve Chair would be Kevin Warsh.

Markets view Warsh as a more hawkish choice for interest rates than his main competitors. In response, the U.S. dollar and bond yields rose in late January, which reduced the appeal of precious metals as a hedge against worries that too low interest rates would stoke inflation fears and dollar debasement.

All in all, still a great month for gold, and a bad one for any boyfriend planning on buying their partner jewellery.

This fed into a cracking month for the materials sector, which rose 9.5% in Australia (ASX 200) and 8.6% in the U.S. (S&P 500).

Materials was only pipped by the Energy sector, which rose 10.6% in Australia and 14.4% in the US after the oil price (WTI) surged 14% in January off the back of Iran conflict supply concerns and Winter Storm Fern in the U.S. disrupting production.

Software sinks

On the flip side, the IT sector globally and software businesses in particular have faced a bloodbath.

It started at the back end of 2025 and has picked up steam this year.

Domestically in Australia, the IT sector was down -9.4% in January, while it fell a much more modest -1.7% in the U.S.

This understates the carnage in the U.S., though, where the S&P 500 Software Index was down -13.1% on the month, nearly twice the fall of the next worst industry group.

What caused it?

Well, it’s a murderer’s row of suspects, including:

Claude’s new AI release
ChatGPT
Agentic coding
Fear of what’s to come from Elon Musk’s ‘Macrohard’ – which started as a joke on Microsoft’s name.

But broadly, investors have become petrified at how easy it might be for AI to replicate and improve on traditional software businesses, particularly those operating what was previously thought of as stable Software-as-a-Service models (delivering applications on the internet usually via subscriptions).

The victim list so far is a roll call of some of Australia’s best-known tech names, like Xero, TechnologyOne, WiseTech, Catapult Sports, Pro Medicus and Life360.

In the U.S., it includes names like Atlassian, Docusign, ServiceNow, Salesforce, Palantir and Adobe – all those names are down -20% or more so far this year, at time of writing.

The sell-off has been indiscriminate, with high-quality stocks tossed out with the low quality, and those with likely big moats against AI disruption getting carted with the rest.

It’s interesting, because if history tells us anything with the internet, it’s that the software application layer of the internet made all the money – think Google, Meta, Amazon, WhatsApp, etc.

But with AI, there are essentially five layers:

Energy needs: Including companies like Constellation Energy that power data centres.
Chips needs: NVIDIA is the clear standout here in the semiconductor design and manufacturing space.
Memory/storage needs: Mostly in the cloud, in data centres with winners like Microsoft Azure, Amazon Web Services, Coreweave and NextDC.
Large Language Models: Like Claude, ChatGPT, Gemini and Grok, which are the most visible winners so far.
Application software layer: This is also where some hardware like robotics sits as investors debate what form factor the software will be delivered in – e.g. desktop/mobile/glasses/robot, etc.

There will no doubt be new AI-enabled application software companies that we don’t know yet, or haven’t been established, that will likely be big winners and household names in 5-10 years.

But to assume all of today’s traditional software companies are going to be losers and not be able to successfully integrate and leverage AI seems very shortsighted.

It really is an environment of ‘shoot first, ask questions later’ at the moment. So important is this topic that we’ve written this month’s entire Strategy Note about it, which we encourage you to read (link).

For now, the Materials, and particularly commodities outperformance, as well as software underperformance, have created headwinds for our style of investing and performance.

At the margin, we are typically structurally underweight Materials (which is a more cyclical/value sector) and overweight IT (which has more high-quality growth style companies). Andrew covers this in this month’s video update (link).

Importantly, though, it’s clear some of these traditional software businesses today that are able to harness the benefits of AI to increase their moats, along, of course, with new AI-related start-ups, will be some of the best performing in the years ahead, and they remain firmly in our investment ‘hitting zone’, which keeps us incredibly excited.

Big currency movements

Finally, anyone in Australia who has been booking their U.S. holiday trip at the moment will likely have been licking their lips.

In January, the Australian dollar rocketed above US$0.70 for the first time in a few years and is well above the sub-US$0.60 level it reached at one point last year.

Source: Bloomberg. Ophir.

While this is great for holiday makers to the U.S., it is a headwind to the performance for the Australian-dollar returns of the unhedged classes of our global small/mid-cap Funds, the Global Opportunities Fund and Global High Conviction Fund.

We do have a 100% currency hedged class of the Global Opportunities Fund available though (Class H), and it protected against the appreciation in the Australian dollar in January relative to all the major currencies in which we invest, including the U.S. dollar, Euro, British Pound and Japanese Yen.

Why did the Australian dollar increase against so many foreign currencies? Will it keep happening? And should you hedge it?

Given the U.S. dollar represents 60-70% of our currency exposure in the Global Funds, we’ll keep our focus here.

There have been two key factors pushing down on the U.S. dollar lately:

The Fed is expected to cut rates by more than any other major central bank (some central banks including in Australia and Japan are actually hiking.) That makes U.S. interest rate yields less attractive to foreign investors and therefore reduces demand for U.S. dollars.
With U.S. exceptionalism fading and risk sentiment improving as global growth improves, capital flows are shifting to more ‘risk on’ countries, including Australia.

Will this trend of an appreciating Australian dollar continue in the near term?

Sadly, the answer, if we are being honest, is that no one really knows with any high degree of confidence. (The RBA itself simply forecasts no change in its projections.)

Since 1983, when the AUD began freely floating against USD, it has averaged almost bang on US$0.75. Where we are today is pretty close to that average.

With official rates likely still pointing higher in Australia and lower in the US this year, as well as evidence of acceleration in growth helping to support commodity prices, there may be a little upside still to the Australian dollar.

That said we are pretty close to that long-term average and short-term forecasting of the currency is perhaps the most difficult of all asset prices.

Fortunately, in the longer term, it tends not to matter that much whether you are hedged or unhedged for currency movement in your exposure to overseas equities.

You can see this below, where the difference in annual returns between hedged and unhedged U.S. equity returns, from the perspective of an Australian investor, can be big – often in the 10%-30% range.

But when you get out to 10- and 20-year rolling periods, the difference is quite small (often 0-3% p.a.).

Source: Bloomberg. S&P 500 Index used for U.S. Equity returns and AUD/USD exchange rate used to compute unhedged returns.

There is one key benefit, though, of the unhedged Global Opportunities Fund classes: foreign currencies, and most notably the U.S. dollar, are negatively correlated with global share markets.

When share markets sell off, like in March 2020 after COVID first broke out, the U.S. dollar tends to rise, and the Australian dollar fell, offsetting the decline in an Australian investor’s exposure to the U.S. equity market.

For example, the currency-hedged maximum drawdown of the S&P 500 in March 2020 was -33.9% while the unhedged number was -24.3% as the Australian dollar fell from US$0.67 to around US$0.57.

That is why, long-term, most Australian investors have larger allocations in unhedged global equities than funds that provide currency hedging.

At the end of the day, the choice is yours! We’ll just be working our butts off, aiming for the underlying companies we invest in to provide great returns for you.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

All Ophir Funds are deemed high risk within their respective Target Market Determination documentation. Ophir does not guarantee the performance of the Funds or return of capital. An investment may achieve a lower than expected return and investors risk losing some or all of their principal investment. Past performance is not a reliable indicator of future performance. Any opinions, forecasts, estimates or projections reflect our judgment at the date this was prepared and are subject to change without notice. Rates of return cannot be guaranteed and any forecasts, estimates or projections as to future returns should not be relied on, as they are based on assumptions which may or may not ultimately be correct.

Actual returns could differ significantly from any forecasts, estimates or projections provided.

21 Jan, 2026 Letter to Investors - December 2025

11 Feb, 2026 Strategy Note - SaaSpocalypse Now?

21 Jan, 2026

Letter to Investors - December 2025

Letter to Investors • 10 mins read

The missing ingredient for small cap outperformance is here.

The 2025 narrative rollercoaster

With Trump 2.0 at the helm of the world’s largest economy, many investors expected 2025 to be a wild ride and boy, it certainly did not disappoint.

Shifting investor narratives were enough to cause whiplash, turning the morning headline check here in Australia into a real rollercoaster.

Consider just some of the questions that were crammed into a single year:

Is the U.S. headed for a recession?

Does Trump want to tank the U.S. economy to drive rates lower?

Does Trump want to run the economy hot, caring less about returning inflation to target?

Are we in a market bubble? Or maybe just an AI bubble?

Will the Fed Chair be fired, or will the Fed lose its independence?

How high will U.S. tariffs go, and what will that mean for growth and inflation?

Is rising U.S. imperialism hurting its investability?

Is World War III about to start?!

Are all our jobs going to be replaced by AI?

Despite all that, including a -19% drawdown in April after Trump’s Liberation Day tariff announcements, the S&P 500 put on a very healthy +16.4% in 2025. This followed gains of +23.3% and +24.2% gains in 2024 and 2023. It has been a very good few years for global share market investors, particularly those exposed to U.S. large caps, more specifically, mega cap tech companies.

New year, same winners

Perhaps the most surprising thing is that, despite the macro and political volatility dominating headlines, you were better off throwing your crystal ball in the bin at the start of 2025 and simply sticking with what had worked in 2024 and 2023.

As shown below, U.S. large caps again outperformed mid and small caps, while growth orientated stocks outperformed value.

On a sector basis, the winners were once again familiar, with Technology (think Nvidia, Apple, Microsoft) and Communication Services (think Google & Meta) coming out on top.

Source: Piper Sandler, Ophir.

BUT, we do not see 2026 as a “Connect 4” year where the same large cap growth playbook delivers a fourth consecutive year of outperformance. We unpack why a little later.

First though, despite U.S. and global small caps underperforming large caps again in 2025, we want to highlight what drove the larger than normal outperformance across our global funds.

2025 Ophir performance highlights

Enter the multi-factor performance attribution we have been sharing with investors over the last few years. In 2025, our Global Opportunities Fund returned +27.1% before fees (+25.6% after fees) compared with its benchmark, the MSCI World SMID Cap Net Return Index (in AUD) which returned +9.9%.

Global Opportunities Fund: Multi Factor Attribution

Source: Ophir, Bloomberg, Citi. Past performance is not a reliable indicator of future performance.

Crucially, this outperformance was not driven by tailwinds from industry or country skews, nor by a bias towards small companies relative to the benchmark. In fact, all of the typical factors or characteristics monitored by our performance attribution software detracted from returns in aggregate.

Instead, “Selection Effect” or stock-picking, accounted for more than 100% of the outperformance, contributing +30.6% of the +17.2% excess return.

As regular readers will know, this is great news.

It confirms that our bottom-up due diligence is doing the heavy lifting, rather than returns being boosted by unintended factor exposures or “free kicks”.

Another stand out feature of the Global Opportunities Fund’s performance in 2025 was how it behaved in both rising and falling markets.

While the return profile remained consistent with our long term style, it was even better than usual.

As shown below, since inception “S.I” (October 2018), in months when the benchmark has risen, the fund has delivered, on average, around 140% of the benchmark’s return.

For example, if the benchmark rose by +1.0% in a month, the fund rose by around +1.4% on average. This highlights our tendency to outperform in rising markets.

Global Opportunities Fund: Outperforming in up markets & protecting capital in down markets

Source: Ophir, Citi. Past performance is not a reliable indicator of future performance.

On the flip side, in months when the market has fallen, the fund was down only around 95% of the benchmark on average.

Or for example, if the benchmark fell -1% in a month, we fall around -0.95% on average. This means, on average, we fall less in down markets.

The key takeaway here is that we generally outperform by more in up markets than we tend to outperform in down markets, while still delivering outperformance across both environments. This characteristic is shared across all Ophir funds.

In 2025, this profile was even more favourable. The Global Opportunities Fund captured almost 180% of the upside, well above the long term average of 140%. On the downside, it fell only 73% of the market on average, compared with the long term average of 95%.

The result was a smoother and more attractive experience for investors over the year, something we continually seek to improve.

And finally, on the topic of investor experience, we want to highlight progress in an important statistic called “Tracking Error“, a statistic closely watched by sophisticated institutional allocators, such as large superannuation and pension funds, which has almost halved over recent years – a great thing!

What is tracking error? Put simply, it measures the volatility of a fund’s monthly outperformance or underperformance relative to its benchmark.

For example, in December the Global Opportunities Fund (Class A) returned +1.6% compared with a benchmark return of -0.8%, meaning an outperformance of +2.4%. Tracking error measures how consistent or variable those monthly relative returns are over time [1].

Clearly investors want outperformance, but they also want that outperformance to be delivered consistently. More stable relative returns are generally viewed as more reliable than returns driven by a small number of exceptional months.

Looking at the rolling one-year returns for the Global Opportunities Fund, the volatility of relative performance (1 year tracking error) has fallen sharply to around 6 to 7% per annum, compared with around 12% per annum in the early years of the fund.

Importantly, this improvement has not come at the expense of returns.

Over the past three years, the fund has outperformed its benchmark by +10.9% per annum after fees, delivering +26.0% per annum versus +15.1% per annum. Since inception in 2018, outperformance has averaged +9.4% per annum after fees, with returns of +18.5% per annum versus the benchmark’s +9.1% per annum.

More outperformance, delivered more smoothly. That’s something every investor wants.

Global Opportunities Fund: Volatility of out/underperformance almost halved

Source: Ophir, Citi. Past performance is not a reliable indicator of future performance.

The Missing Ingredient: Earnings

There is no shortage of geopolitical risks for investors to digest, from ICE raids in Minnesota, to the toppling of a dictator in Venezuela, and the prospect of military action involving Iran and Greenland, to name just a few.

From an economic perspective, however, particularly in the U.S. as the world’s primary growth engine, there are several positives supporting ongoing equity market strength:

The lagged effect of Fed interest rate cuts with the potential for more to come;
Falling oil prices which effectively act as a tax cut for consumers;
Large tax refunds flowing to U.S. households, alongside accelerated depreciation for capex and R&D expenditure under Trump’s One Big Beautiful Bill;
Ongoing deregulation, with the likelihood of further stimulus and affordability measures ahead of the U.S. mid term elections in November.

Together, these factors have recently driven outperformance in more cyclical areas of the U.S. share market, such as transport, housing and manufacturing, helping broaden market participation beyond a narrow group of stocks.

Since the rates induced sell-off in equity markets in late 2021, small caps, one of the more cyclical and risk sensitive segments of the market, have underperformed.

This is illustrated in the chart below, where the red line shows the Russell 2000 (U.S. small caps) divided by the S&P 500 (U.S. large caps). It’s been heading south for a LONG time which highlights prolonged small cap underperformance relative to large caps.

While there have been brief rallies lasting days or weeks linked to hopes for lower inflation or interest rates, these moves have not been sustained.

What has been missing is the key catalyst investors expect lower rates to deliver: earnings growth. The gold line in the chart shows small cap earnings expectations relative to large caps over the next twelve months.

Source: Bloomberg. Indices indexed to 100.

As with individual stocks, earnings are the primary long term driver of index performance. From 2022 through to mid 2025, small cap underperformance closely mirrored their relative earnings underperformance.

There is now compelling evidence that this is changing.

When combined with improving momentum in early cycle sectors, a supportive economic backdrop and broader market participation, this emerging earnings outperformance represents the final ingredient needed to support sustained small cap outperformance.

It has been a long wait, but as small cap specialists, we believe this shift sets up a favourable tailwind for the asset class in 2026 and beyond, and ultimately for the Ophir funds.

[1] Technically tracking error is calculated as the standard deviation (volatility) of monthly out or underperformance.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

Actual returns could differ significantly from any forecasts, estimates or projections provided.

16 Dec, 2025 Stock in Focus - Zeta Global (NYSE: ZETA)

11 Feb, 2026 Letter to Investors - January 2026

16 Dec, 2025

Letter to Investors - November 2025

Letter to Investors • 11 mins read

Investing in the share market: Go all-in or stage your entry?

In this Letter to Investors we look at

The importance of ‘factors’ in driving short-term market moves.
How a radical reshaping of interest rate cuts in November led certain factors, particularly growth, to underperform during the month.
How these factor dynamics temporarily affected our Ophir Funds performance in November, and how they’re now unwinding … assisting with outperformance in our Global Funds at writing in December.
We also look at the vital topic of whether to invest your money all at once in the market (lump sum) or in staged investments (staged market entry) over time.
As part of our analysis, we look at which strategy – lump sum or staged – has outperformed over the last 50 years.
And we then factor in risk/volatility and examine how staged investing is really like an insurance policy.

Last month, a very well-known Australian businessman said he wanted to invest in one of our share Funds.

But then he asked us: “Should I invest all at once, or stage it in over time?”

A great question – and one every investor faces.

And in this month’s Letter to Investors, we want to share our answer.

But first, we’d like to touch on November’s performance. All of our Funds underperformed during the month. But we are not concerned.

Why?

Factor facts

While earnings drive share prices over the long term, so-called factor headwinds or tailwinds can sway performance in the short term.

What are these factors?

There are an almost unlimited number of ‘factors’ professionals track these days. But essentially, they are various characteristics shared by certain groups of shares, including:

The size of the company (small caps, mid-caps, etc)
How liquid its shares are
How fast their earnings are growing
The stock’s valuation (cheap, etc.)

Professional investors often crowd in and out of these ‘factors’ at different times based on when they think the macroeconomic or market environment is going to suit a particular factor.

A radical move

November was one of these months where we saw big factor moves.

The precipitation factor? (pardon the pun).

The U.S. Federal Reserve.

Heading into the end of October, markets thought the Fed was a sure thing to cut rates at its next meeting in December.

But then Chair Powell poured cold water on that idea at his post-meeting press conference on October 29.

As a result, over the first three weeks of November, the market switched to expecting a higher-for-longer interest rate environment.

The probability of a December rate cut crashed from 100% to about 30%.

For those who don’t track market pricing for these probabilities, for such a brief period, this is a radical move.

Probability of Rate Cuts

Source: Bloomberg for FOMC meeting at 10th December 2025. Data as of 30 November 2025.

Growth hit

The new higher-for-longer expected rate environment triggered winners and losers amongst various factors:

Growth, liquidity and beta underperformed.
Low volatility and lower valuation stocks outperformed. (The chart below shows factor moves for U.S. small caps in November.)

Higher interest rates, particularly if unexpected, impact the valuations of growth-orientated stocks more as they have more of their lifetime cash flows further out in the future, and when you discount those future cash flows with a higher interest rate to determine their valuation today, that results in a bigger valuation drop.

U.S. factor headwinds in November

Source: Bloomberg for the Russell 2000 index long-short factors. Data as of 30 November 2025.

You will get some further idea of the relative factor performance of growth versus value-oriented companies in the U.S. in November in the microcaps chart below.

While we don’t really fish as low down the market capitalisation spectrum as microcaps, it shows that growth-oriented microcaps underperformed their value counterpart in November by the fourth most of any month in the last 20 years!

One of the largest factor headwinds – Growth vs Value

Source: Bloomberg. Data as of 30 November 2025.

Given the importance of the U.S. Federal Reserve in driving the direction of interest rate policy globally, this growth underperformance compared to value was broad based in the U.S. in November and also impacted the Australian share market.

Sticking with our edge

For Ophir, as a manager seeking to invest in higher-growth businesses (and why wouldn’t you in small caps, as that is where the next 10 or 20 bagger is found), this underperformance of growth naturally created a headwind for our performance in November.

In the last week or so of November, as further Fed Governors came out in support of an end-of-year cut, Fed rate cut probabilities for its December meeting headed back towards 100%. However, that led to only a partial recovery in the underperformance of smaller, less liquid growth businesses.

But now, at the time of writing in December, growth style companies in the U.S are continuing their recovery from the November factor underperformance, and as a result, our Ophir Global Funds have outperformed so far in December.

There will be times where having a growth factor bias will be like running into the wind; other times, it’s like running with a wind at your back.

But, ultimately, companies that consistently grow earnings faster than market expectations will be rewarded, and finding them is where we believe our edge is.

Market Entry – dip your toe or jump in all at once?

Back to this month’s key topic!

You’ve got a lump sum of cash, and you want to start investing in the stock market. You might consider ploughing it all in today. But then you worry: what if the share market then slumps?

Fortunately, there is a wealth of data available that can help investors make better-informed decisions.

Below, for the last 50 years of Australian share market data (ASX 300 index), you can see the average 12-month results for

‘Lump sum’ investing (investing all at once).
‘Staged market entry’ (four equal investments at the start of each quarter over 12 months).

Source: Bloomberg. ASX 300 total return used for Lump Sum option. ASX 300 total return and Bloomberg Ausbond Bank Bill Index returns used for calculating Staged Market Entry return. Bloomberg Ausbond Bank Bill Index return used for Cash return.

On average, lump sum investing wins.

This makes sense because share markets tend to rise over a year. Delaying your investment through staged entry is, therefore, on average, going to hurt you.

And, of course, just sitting in cash earning interest has provided the worst result – though investors today would love to get a 7.1% return from their cash investment![1]

Lump sum risk

BUT, that is not the end of the story.

The world does not live in averages.

As famed investor Howard Marks said: “Never forget the six-foot-tall man who drowned crossing the river that was five feet deep on average”.

If we look at the ‘risk’ to those average annual returns we saw above – or the spread of outcomes around those averages – we see that lump sum investing was the riskiest.

Source: Bloomberg. Data from 1975 to 2025.

You don’t have to be a brainiac to understand why.

The share market return is more volatile than keeping all, or some, of your money earning interest from a cash investment. So going in all at once means you could do either a lot better than the 14% average … or a lot worse.

Naturally, by potentially staging their investment, it’s the ‘lot worse’ outcome investors are thinking of protecting against.

Like an insurance policy

So next up is the really insightful data to help you make your decision.

We have chopped share market returns over a year up into 10 deciles – or in other words, 10 equal baskets from the worst 10% of annual share market returns to the best 10%.

We have then looked at how much more, on average, you’d be better off from staging market entry compared to lump sum investing.

Source: Bloomberg. Data from 1975 to 2025.

What you can see is that:

Staging makes you better off if share market returns are in the lowest return four deciles, or the worst 40% of returns.
However, more often, staging makes you worse off because it underperforms in the best six deciles or best 60% of returns.
There is also a ‘negative skew’ to staging. That is, staging makes you worse off to a greater extent in the best returning share market environments than it makes you better off in the worst returning share markets (i.e. -16.2% versus +10.2%).

The best way to think of staging market entry is like an insurance policy on your house burning down. Most of the time, you won’t need the policy, and it’s costing you money.

However, if your house burns down, or in this case, if you have unfortunate market timing and the share market falls after you’ve just started investing, then staging will have saved you money.

Why not just be a better market timer and only invest in a lump sum when you know the share market is going to go up over the next 12 months?

Sadly, that’s not possible.

Things like an expensive share market, or one that has gone up a lot over the past year, have virtually zero predictive power of what the share market is going to do over the next year.

And the longer you wait in cash for a ‘perfect’ share market opportunity, the likely longer you will have been sitting on the sidelines watching a rising share market go by.

A better-informed decision

So, as we see it, just like whether to purchase insurance for a house that might burn down, each individual needs to make up their own mind as to whether the insurance from staging your market entry – which will likely cost you money on average – is worth it for the peace of mind that it will have saved you money if share market returns turn out poor over the next year.

In our experience, for big, meaningful investments, many people choose to stage.

Ultimately, the choice is yours.

But hopefully, you are a little more informed now to make your decision.

[1] This seemingly high 7.1% average 12-month cash return is so high in large part due to the high interest rate/inflation years in the 80s and early 90s.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

Actual returns could differ significantly from any forecasts, estimates or projections provided.

13 Nov, 2025 Letter to Investors - October 2025

16 Dec, 2025 Stock in Focus - Zeta Global (NYSE: ZETA)

13 Nov, 2025

Letter to Investors - October 2025

Letter to Investors • 12 mins read

In this edition of our Letter to Investors, we look at what it takes to become – and to select – an award-winning fund, including:

Our fantastic win at this year’s Australian Fund Manager Foundation Awards
The vital importance of long-term consistency in becoming a top-performing fund
Why investing in the ‘best-performing’ fund of the year isn’t always a path to riches
Three elements that have contributed to the success of our Ophir Opportunities Fund (including a relentless focus on earnings)
Why we’re so excited about the outlook for our global small cap fund

Pounding the Rock – the Stonecutter’s credo

When nothing seems to help, I go look at a stonecutter hammering away at his rock, perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow it will split in two, and I know it was not that blow that did it, but all that had gone before. – Jacob Riis

The above quote is from The Making of an American, a 1901 book by the Danish American journalist Jacob Riis. It was about the idea that success often comes after long unseen labour.

NBA basketball team the San Antonio Spurs adopted it as a team motto under Hall of Fame and five-time Championship coach Greg Popovich.

It’s one that we love here at Ophir and one we’ll come back to in this month’s Letter.

Ophir awarded best Australian Small Companies Manager 2025

But first, we’d like to share some exciting news – the Ophir team took home a major win last month at the Australian Fund Manager Foundation Awards, where we were named Best Australian Small Companies Manager for 2025.

This is our favourite industry event for two reasons:

It’s voted by a committee of industry peers. It’s not a ‘pay to play’ awards night like some others, where you have to pay to be considered. Bias-free is the best!
It raises funds for community-based charities. This year the awards supported Odyssey House NSW and the Sydney Children’s Hospital Foundation.

As Andrew mentioned on the night, the award reflects a huge team effort – and it’s only possible thanks to the tremendous support and faith of our investors who trust us with some of their life savings.

This marks the first time our Aussie small-cap fund, the Ophir Opportunities Fund, has picked up the prize.

We’re extremely proud of its long-term performance. Initial investors have now made 18x their investment with the Fund clocking up +24.5% per annum after fees.

By comparison, the benchmark ASX Small Ordinaries Accumulation Index has returned 2.6x its initial investment, or +7.6% per annum.

That outperformance puts it well ahead of every other Australian equity fund launched since 2012 – as the chart below shows – when Ophir and the Opportunities Fund began.

How many years at the top?

You might look at the chart below and think, surely there are many years where you’ve had the top performing Australian Small Cap fund.

The reality? Just one – 2015.

Below is the ranking (according to Morningstar) of the Ophir Opportunities Fund out of all the Aussie small-cap funds each year, followed by the number of funds operating:

Year to date 2025: 5/211

2024: 2/207

2023: 26/192

2022: 58/184

2021: 42/173

2020: 39/160

2019: 10/146

2018: 94/140

2017: 2/123

2016: 109/118

2015: 1/107

2014: 19/103

2013: 3/99

2012 (from Aug): 2/98

What stands out?

First, there are a LOT of Australian Small Cap Funds! In fact, there are only 200 Australian small-cap stocks, so we now have more managers than stocks!

And while we’ve had strong results recently in 2024 and so far in 2025, we haven’t been at the very top every year.

Another way to look at our long-term consistency is through that familiar Year 10 maths favourite — the box and whisker chart.

In it, the ‘box’ shows the middle 50% of small-cap fund results, while the ‘whiskers’ stretch up to the best performers and down to the worst.

Box & Whisker Chart

Below, the Ophir Opportunities Fund’s returns are shown with the green “X’s” compared to all the other Aussie small-cap funds that were in operation each year.

Calendar Year Returns Aus Mid/ Small Peers

Source: Morningstar Australian Mid/Small Caps (Blend, Value, Growth).

Note: CY12 is August 2012 to December 2012. YTD25 is January 2025 to October 2025.

Four Lessons Learnt

So, what are the lessons for us and investors in general:

You don’t need to be the best in any given year or even in many given years, to generate great returns over the long term. Being consistently good or very good is enough. We were near the top in a few years… with even a few positive outlier years.
When we reviewed the names and holdings of some of the top funds in any given year, they often tend to have a ‘factor’ or ‘sector’ bias, and that bias gets over-rewarded that year – shooting the fund to the top and outperforming the true stock pickers. Be wary of those funds. Those biases often reverse. Today’s hero can quickly become tomorrow’s villain if it’s not backed up by a sound and repeatable investment process with an ‘edge’ on the market. Often the top-performing manager in a given year will have a big skew towards (for example) things like lithium, gold, AI, a high-beta levered balance sheet in a risk-on environment, etc, only to see performance suffer when that bias falls out of favour.
Likewise, be wary of thinking reports in your favourite business newspaper about “this year’s best performing fund” offer a path to riches by investing with them. Far too many have poor performance in the years prior due to some factor that is out of favour. Their performance then pops when the factor mean reverts and they make the press – but you won’t read that in the article. “One of this year’s top performing managers has had a ripping year, after falling for each of the previous three years!”. At Ophir, we know our performance comes from stock picking not some big bias. That’s why it has been sustainable.
It sounds trite, but avoiding horrible years is also important to long-term success. If you fall -50% you have to make a +100% return just to break even. 2016 was clearly a poor year of returns for us with the fund. You just can’t have too many of them… and fortunately, we haven’t. Every fund will have them, even the long-term top performing ones. Share prices don’t always follow a company’s business success in the short run.

Three Elements of Success

Reflecting on our award-winning year for our Ophir Opportunities Fund, what would we put our success down to? Three things stand out:

Limited Capacity

If you have good performance, you can’t keep taking in money forever and a day. In funds management, size kills – especially in small caps. Take in too much money and you either have to:

Invest in larger companies. But they have more eyeballs on them, so it’s harder to get an edge on the market. We felt for Warren Buffett (but not too much!) for much of the latter part of his career having to manage hundreds of billions of dollars that could only be invested in the largest and most picked-over companies in the world. We are not foolish enough to believe we could find an edge investing in those businesses.
Own bigger stakes in the same-size companies. But that sees you incurring market impact costs to enter or exit. It also takes ages to get into or out of the positions, so you lose your ability to be nimble if your view changes quickly.
Own many more companies. But that dilutes your edge and outperformance potential as stock numbers blow out.

Of course, it could be a combination of all three. The history of funds management is littered with managers who had great initial performance, got too greedy, then saw performance suffer.

Put all your money in your funds

It’s easier said than done, and maybe it’s not for everyone, but we subscribe to the Charlie Munger view: “You show me the incentive and I’ll show you the outcome”.

Or as former NSW Premier Jack Lang said – a quote repeated by former Australian Prime Minister Paul Keating – “In the race of life, always back self-interest, at least you know it’s trying”.

It’s one of the reasons we insist that investment team members who join us only invest in the Ophir Funds – it’s the best way to ensure their complete focus at work.

And, finally, “Pound the Rock”!

We said we’d come back to it. Investing for us is about finding a process that works and trusting that process. There is a lot of noise in financial markets. Share prices don’t always track a company’s short-term success. You can get your analysis right, but you can’t account for all the thousands of different variables impacting a profit result. Some will go against you. That is life.

Even if you do all the work, get an edge on the market, and the profit result is better than the market expects, there is no guarantee the share price will go up in the short term.

As we’ve seen before from painful experience, you might be invested in a ‘consumer discretionary’ sector stock (take JB HiFi as an example), but investors suddenly don’t care about today’s earnings result. Instead, they’re focused on a possible recession around the corner and potentially poor future results. So they use the strong earnings news to exit the company, pushing its price down.

But as investing legend Peter Lynch says “A company’s earnings and stock price are 100% correlated in the long term”.

You’ve just got to keep pounding the rock and focus on getting the earnings result right. Eventually, the rock will crack and the share price – and ultimately the fund performance – will go the way you want.

An Easier Edge

It was fantastic to win an award recently for our original Ophir Opportunities Fund.

But as investors who have caught up with us lately have heard, it’s actually another Ophir fund that is receiving the most of our personal investments: the Ophir Global Opportunities Fund.

Why?

Simply, we think it will outperform the Ophir Opportunities Fund over the next five-plus years.

Global small caps are a lot cheaper than Aussie small caps at present. With one-fund-manager-per-stock in Aussie small caps, it could be slightly easier to get an edge on global small caps these days. Plus its also got some great runs on the board, returned +19.1% p.a. after fees since inception in 2018.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

As always, thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

Actual returns could differ significantly from any forecasts, estimates or projections provided.

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10 Oct, 2025

Letter to Investors - September 2025

Letter to Investors • 11 mins read

In this special edition of the Letter to Investors, we’re celebrating birthdays for our Ophir Global Funds by:

Showcasing their very good one-year returns and pleasing long-term performance records
Breaking down the unique factor driving our Global Opportunities Fund’s market-beating performance
Highlighting why ‘quality’ matters too, not just ‘quantity’ when assessing a fund’s returns
Taking you “inside baseball” on the quality metrics and explaining what they reveal about the Ophir Global Opportunities Fund

Our original Aussie Ophir Opportunities Fund recently celebrated entering its “teenage” years, after hitting its thirteenth anniversary.

But two of our “other children” – the Ophir Global Funds – also had birthdays this month:

The Global Opportunities Fund turned 7 years old, delivering a standout +45.1% over the year to 30 September.
The Global High Conviction Fund turned 5 years old, with an impressive +37.3% over the same period.

Both results sit well above our long-term target of +15% per annum across all Funds.

Of course, no investor should expect results like +45% or +37% every year, that would be setting yourself up for disappointment.

But +15% per annum is what we strive for and we’re proud to have delivered it, not just in our Global Funds but across all four Ophir Funds, over the long-term.

Ophir Fund’s Performance to 30 September 2025:

Source: Ophir, Citi. Benchmarks are: for the Ophir Opportunities Fund – ASX Small Ordinaries Index TR, Ophir High Conviction Fund – 50/50 ASX Small Ordinaries Index/ASX Mid Cap Index TR, Ophir Global Opportunities Fund and Ophir Global High Conviction Fund – MSCI World SMID Cap Index NR (AUD)

However, more pleasing than volatile one-year numbers are the longer-term returns from our Global Funds.

In particular, the older sibling of the two Global Funds, the Ophir Global Opportunities Fund, has now returned +19.3% per annum after fees since its birth seven years ago, beating its benchmark by 10% per annum.

A $100,000 investment in the benchmark would have grown by an additional $86,000, while the same investment in the Global Opportunities Fund has grown by $245,000 – nearly three times as much.

That’s the power of compounding at higher returns.

What’s Driving the Performance?

Below we share an updated version of the chart first introduced in our June Letter to Investors.

It highlights the factors behind the Global Opportunities Fund’s outperformance or underperformance compared with its benchmark.

Global Opportunities Fund – multi-factor performance attribution

Source: Bloomberg. Data as of 30 September 2025. Benchmark MSCI World SMID Index NR (AUD).

As in our June Letter, the chart shows that for the Fund’s performance in the year to 30 September, +32.4% of the +26.9% outperformance (45.1% minus 18.2%), in other words more than 100% of it, was driven by Selection Effect.

Put simply, our outperformance didn’t come from factors like company size, market sensitivity (‘beta’), or industry and country allocation.

It came from stock picking.

That’s important, because it means our results aren’t just the by-product of tilting the portfolio toward common traits that anyone with a Bloomberg terminal could replicate.

Sure, it isn’t hard to assemble a 40-stock portfolio of U.S. small-cap consumer discretionary companies with certain characteristics and hope for the best. But history shows there’s little evidence that any one factor consistently outperforms over time. And when it does, market prices adjust quickly, wiping away the edge.

Instead, our outperformance comes from the long hours spent on the road, away from our families, meeting companies and digging into their ecosystems – competitors, customers, suppliers, even ex-employees.

This work helps us understand each company’s unique drivers and whether they’re likely to deliver results better than consensus expects.

We believe this, at least in part, is where our enduring edge over the market is.

Quality, Quality, Quality

When it comes to investment returns, quantity is what most people look at first. How much did you generate? Did you outperform or underperform? After all, you can only spend the returns you make.

But quality matters too.

Why? Because quality determines whether a manager’s returns are repeatable (or just luck) and how reliably they are delivered.

Some managers shine only in certain environments and struggle in others. That’s not the kind of consistency most investors want.

To measure quality in our Funds — here using the Global Opportunities Fund as the example — we track a range of key statistics.

The first three rows of the table below cover quantity: Fund returns, benchmark returns, and the difference between them (excess returns).

Then we move on to the quality measures, which reveal how consistent and sustainable those results really are.

Ophir Global Opportunities Fund Key Metrics:

Benchmark: MSCI World SMID Cap Index NR (AUD). Inception October 2018. “S.I.” stands for Since Inception.

But those measuring quality include:

Standard Deviation

This measures volatility, that math term you might remember from high school, and shows how bumpy the return journey has been for the Global Opportunities Fund compared with its benchmark.

The higher the standard deviation, the bumpier the ride. And with a concentrated portfolio, that’s to be expected. Our benchmark covers nearly 5,000 small and mid-cap stocks globally, while the Global Opportunities Fund holds only 40–50.

That extra volatility is essentially the price of admission for trying to outperform such a broad universe of stocks.

Tracking Error

Now this might sound like a wonky finance term, but it’s simple: instead of measuring the volatility of the Fund’s returns, it measures the volatility of its outperformance or underperformance each month.

Everyone would love a nice, smooth outperformance ride every month. Bernie Madoff was one of the few people to produce that, and he went to jail! (because in reality his numbers were made up).

In reality, if two funds deliver the same headline performance, most investors would prefer the one that spreads it steadily across months, rather than giving it all in a single burst with flat or negative months elsewhere.

That’s what tracking error reveals: how smooth (or wild) the outperformance ride has been. And unless you’re a thrill junkie, the lower the better.

Batting Average

No, Aussie cricket fans, this one didn’t come from us. It’s borrowed from the Americans and their love of baseball.

Batting average measures the percentage of months the Fund has outperformed its benchmark. For example, a 75% batting average means outperformance in nine of twelve months.

Like tracking error, it’s a measure of consistency. In baseball, a .300 average (30% hits vs at-bats) is considered excellent.

In funds management, the benchmark is higher: a manager typically needs at least a 50% batting average to outperform over time.

Higher is better, and at above 60%, our Global Opportunities Fund is generally excellent.

Upside/Downside Frequency

This metric takes batting average a step further. It shows how often the Fund outperforms when the market is up (upside frequency) and when the market is down (downside frequency).

Think of it like a baseball player: “Sure, you’ve got a 30% batting average overall. But what’s your average when you’re facing a fastball versus a slow ball?”

Some batters struggle against certain pitches, just as some fund managers struggle to outperform in down markets or during selloffs.

For our Global Opportunities Fund, the Upside Frequency is higher than the Downside Frequency. In other words, we outperform more often in rising markets than falling ones, but still tend to outperform in both environments.

Upside/Downside Participation

This metric goes one step further. Instead of showing how often we outperform in up or down markets, it reveals by how much.

To stick with the baseball analogy: “It’s not just whether you hit the fastball or the slow ball — it’s how many bases you get when you connect.”

Since inception, the Ophir Global Opportunities Fund has shown:

When the market rises +1% in a month, the Fund has risen +1.43% on average (143% upside participation).
When the market falls –1%, the Fund has fallen only –0.96% on average.

In short: we outperform by more in up-market months than we do in down markets.

And that’s a good thing, because over the long term, markets rise more often than they fall. In fact, 63% of the months for our benchmark have been up since our Global Opportunities Fund started in 2018.

Celebrating a Great Birthday

As unfair as it might feel to put one of your “children” under the microscope on their birthday, we hope this has given you a clearer view of the quality behind the Global Opportunities Fund’s returns.

Since its launch in 2018, the Fund has delivered +19.3% per annum after fees, beating its benchmark by +10.0% per annum. It ranks No.1 in Australia for performance in the Global Small/Mid Cap asset class since inception (Morningstar data).

Yes, the ride has been a little more volatile than the market, but that comes with running a concentrated portfolio. And while we’ve outperformed the market more than half the time on a monthly basis, the real story is that we’ve done so more often and by a greater margin in up-market months than down ones.

And with that, we want to sincerely thank the whole Ophir team for making this a great birthday to celebrate.

There will, no doubt, be tougher birthdays ahead, and we must remember that. As a retired CEO once told us, the times you remember most in your working life are the tough times, and how you came through them together.

2022 was one of those times. And looking back on our 13-year journey, it’s the year we’re most proud of, because we came together, we got better, and we pulled through.

Finally, a heartfelt thank you to you, our investors. Without your support, there would be no birthdays for our Funds.

As always, thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

Actual returns could differ significantly from any forecasts, estimates or projections provided.

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8 Sep, 2025

Letter to Investors - August 2025

Letter to Investors • 13 mins read

Optimism Dies Hard

In this Letter to Investors, we look at:

How share market breadth is back, with small caps posting a stellar August
The extreme valuation differential between small and large caps that suggests smalls are strongly placed to outperform in the next 5-10 years
The outlook for small caps for the next 12-18 months based on four scenarios (which scenario is most likely, and which is best for small caps)
How small caps are one of the most attractively valued asset classes anywhere in the world today, and
Why all this makes us confident that our Funds are poised to deliver 15%+ average returns in the coming years

Ophir Fund Performance – August 2025

Before we dive into the Letter, you’ll find a detailed monthly update on each of the Ophir Funds below.

The Ophir Opportunities Fund returned +10.3% net of fees in August, outperforming its benchmark which returned +8.4%, and has delivered investors +24.0% p.a. after fees since inception (August 2012).

The Ophir High Conviction Fund (ASX:OPH) investment portfolio returned +6.3% after fees in August, underperforming its benchmark which returned +7.0%, and has delivered investors +14.8% p.a. after fees since inception (August 2015). The ASX listing returned -1.9% for the month.

The Ophir Global Opportunities Fund* returned +4.9% net of fees in August, outperforming its benchmark which returned +2.1%, and has delivered investors +18.8% p.a. after fees since inception (October 2018).

The Ophir Global High Conviction Fund* returned +4.1% net of fees in August, outperforming its benchmark which returned +2.1%, and has delivered investors +14.7% p.a. after fees since inception (September 2020).

*Refers to Class A units.

Welcome to the party, pal!” – John McClane

It’s Christmas Eve 1988 in Los Angeles.

Terrorist Hans Gruber and his band of German thugs have just crashed Nakatomi Plaza’s Christmas party and are looking to rob the joint.

What Hans didn’t count on, though, is that NYPD cop John McClane is making a surprise visit to the Plaza to reconcile with his estranged wife Holly who is attending the party.

After tossing a terrorist out of a window onto an unsuspecting LAPD cop car below, McClane yells his classic line to the startled driver: “Welcome to the party, pal”.

Source: Die Hard (1988).

It was, of course, action hero Bruce Willis as McClane who delivered the line in the cult classic and holiday favourite, Die Hard. Suddenly, Arnie’s Terminator quip of “I’ll be back” had some competition for best 80s action movie one-liner

August reminded us that, despite the laundry list of macro risks, investors’ optimism too “dies hard”.

During the month, investors couldn’t be held back, and even small-cap investors got a “welcome to the party” this month.

August saw the market add more gains to the rally from April’s post Liberation Day share market low.

The S&P 500 in August was up +2.0%. U.S. small caps put on a whopping +7.0%, boosted by Fed Chair Powell opening the door to a September rate cut.

Following in the footsteps of its U.S. big brother, ASX large and small caps put on a very similar +2.7% and +8.5% respectively (ASX100 and ASX Small Ords).

Small caps to trounce large?

Share market “breadth is back baby” I can hear John McClane say.

Regular readers will know we’ve been highlighting how the epic small-cap-market underperformance over the last 4-5 years has made small-cap valuations globally versus large the cheapest in a generation (25+ years).

The mega-cap tech companies have body slammed the rest of the market for much of the last decade.

The chart below shows the different size (large/mid/small) and style (value/core/growth) segments of the U.S. share market since 2017.

The mega-cap tech poster childs, the Magnificent 7, are all large-cap growth businesses.

(Source: Piper Sandler & Co.)

But based on history, the extreme valuation differential we see now means that it’s highly likely small caps will trounce large caps over the next 5-10 years.

So what will the next 12-18 months look like?

Four Scenarios

You thought breaking Holly out of Nakatomi Plaza was tough, well short-term forecasting is the investment equivalent!

So, for this month’s Letter to Investors, we thought we’d lay out the four most likely near-term economic scenarios for U.S. small caps, which given their 65% odd share, is also likely to drive small caps globally.

The four scenarios we see immediately ahead are outlined below from most to least likely, with our best estimate for their likelihood in brackets:

1. Fed normalises rates, low growth continues (40%)

This is the most likely scenario. We’re in good company because it’s the consensus of market participants and economists.

As you can see below, the market is pricing that after being on hold so far this year, the Fed will get off the fence and recommence its rate-cutting cycle at its next meeting on 17th September (blue line).

Source: Ophir. Bloomberg.

For us as stock pickers, this is typically a good environment.

Market returns might be more modest. But when economic (1-2% forecast above) and corporate earnings growth are low, higher-growth companies that we focus on (and are experienced in finding before the market) suddenly become rare diamonds and get bid up by the market.

Scenario 1 bottom line: Moderate market returns (including small caps); best outperformance opportunity

2. Fed normalises rates, growth booms (30%)

The next most likely outcome is rates normalising lower and helping kick off an economic boom later this year and next.

For most businesses in the U.S., rates have been uncomfortably high for many years. It shows as sluggish aggregate earnings growth outside the Magnificent 7.

Combine that with Trump’s One Big Beautiful Bill – including its immediate expensing of Capex and R&D and deregulatory agenda – and some economists see U.S. real GDP boosted to near 3% next year.

This would ignite rocket fuel under the risk-on and cyclical parts of the share market, including the housing, energy, financial, materials sectors … and small caps.

For investors, these are the exciting types of environments where you make 20-50% in a year from the small-cap market.

But while great market returns in small caps could be expected, it would be a more challenging environment for us to outperform.

Why?

Because we tend to be underweight the most cyclical sectors of the share market, particularly energy, financials and materials.

Cyclicals tend to have fewer of the structural-growth businesses that we like to focus on (low-growth regional banks dominate the financial sector in the U.S.).

We also don’t have expertise in forecasting the underlying commodity prices that dominate short-term moves in energy or materials businesses.

Source: Piper Sandler

Still, in this scenario, our investors are likely to be happy because small caps will probably have ripped big time; and we’ll be happy to just keep up with that boom.

Scenario 2 bottom line: Best small-cap market returns, will be tougher for us to outperform

3. Fed cuts quickly as recession arrives (25%)

The consensus of economic forecasters puts the probability of a U.S. recession in the next 12 months in the 25-30% range (Bloomberg).

That may sound high until you realise the forecasts never get below 15%, because recessions occur, on average, about one in every seven years.

So, while recession risk is a little elevated – mostly due to risks from U.S. tariffs and a still-restrictive Fed policy rate – a recession is not the most likely outcome expected from most in the “dismal science”.

But if one did occur, then undoubtedly share markets would fall as they always have in U.S. recessions. This is the worst-case outcome for market returns in both large and small caps.

Just because the recession probability is elevated, though, there is no point getting too defensive by doing things like going to cash for two main reasons:

It’s not the most likely scenario and the cost of foregone returns could be huge if the likelier scenarios above play out; and
Even if a recession is on the cards, it’s virtually impossible to predict the exact timing of the market downturn (and subsequent recovery) that historically has always accompanied it, like you’d need to in order to be better off than just staying invested.

Nine out of 10 times in a recession small caps fall more than large caps. But there is a good case to be made that may not happen if a recession occurred today.

The last recession where large caps fell more than small caps was the Dot.com-related recession in the early 2000s.

Large caps fell more because they were so much more expensive than small caps.

Ring a bell, anyone?

Today, small caps are the cheapest versus large since just before that Dot.com recession. So it’s a real possibility that, if a recession were to rear its head today, large caps would fall more than smalls in a sell-off.

The sectors that do well in a recession are “stability” sectors like health care, consumer staples, utilities and real estate (see table below).

Source: Piper Sandler

The other group of companies that outperform in a recession are businesses whose earnings are beating market expectations. These are our forte.

And while we tend to invest less in utilities and real estate, the health care and consumer staples sectors are firmly in our wheelhouse and provide us with plenty of opportunity to outperform.

Scenario 3 bottom line: Worst market returns (though small caps may outperform); moderate outperformance opportunity

4. Inflation ramps and Fed raises rates (5%)

What happened to all that inflation we were promised by the market pundits from Trump’s tariffs?

If it turns out that material inflation is still on the way – even though the Fed playbook is to look through tariff-induced inflation – we could see higher interest rates if it feeds into higher inflation expectations.

We think this is the least likely scenario, though it’s not completely off the table.

But the Fed will have a high bar for it to decide to reverse its forecasts for rate cuts, even putting aside Trump’s pressure to stack the Federal Open Market Committee (FOMC) with sycophants to get them lower.

Investors could see this as a mini replay of what happened in 2021/2022 when rates rose, markets sold off, and small-cap growth-oriented businesses felt the worst of the valuation squeeze.

This time, though, instead of rates lifting from zero, they are already at 4.5% today in the U.S.

We are not sure the U.S. economy could handle much higher rates without causing a more serious slowing in demand and inflation.

Also, today, U.S. small caps trade on a below-average 16x price-to-earnings ratio (PE). That’s a far cry from the two standard deviations expensive 22x they traded on prior to the 2021/2022 sell-off, so they likely have less downside risk.

Source: Ophir. Bloomberg

Regardless, this scenario would likely see markets fall, though not likely as much as in the recession scenario.

It would be hard for us to outperform, though, as the faster-growing small caps we invest in would have their valuations impacted more.

Lucky it’s the least likely scenario, with probably a 5% or lower likelihood.

Scenario 4 bottom line: markets likely fall, worst outperformance opportunity

An exciting time to be a small-cap investor

Now that’s a lot of different scenarios and only one, or perhaps even a variant of one, will play out. But it’s good to understand the risks, though not be frozen by them. That’s investing.

The first two scenarios are the most likely in our view and great for Ophir investors.

The third is bad for investors, but we think there are quite good prospects that we will perform better than large caps.

The fourth is the worst but least likely.

But this is the short term: the next 12-18 months.

Investors in our Funds should have a minimum time horizon of at least five years.

And on that score global small caps are cheap. They are one of the very few asset classes you can say that about today and that’s great news.

So, as we look out over the next five years we remain confident we can achieve our internal target of 15% per annum on average – a level we have met or exceeded in all our Funds.

Valuations in our part of the market are attractive.

The team is experienced, stable and locked in.

And we remain as hungry as ever to deliver great returns for ourselves and our investors.

As John McClane might say “Yippee-ki-yay”!

As always, thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

Actual returns could differ significantly from any forecasts, estimates or projections provided.

11 Aug, 2025 Letter to Investors - July 2025

8 Sep, 2025 U.S. Reporting Season - Winners, Losers & 6 Key Themes

11 Aug, 2025

Letter to Investors - July 2025

Letter to Investors • 16 mins read

In this Letter to Investors, we explore:

How long markets can continue to ignore U.S. tariff dramas, as they did in July
Why employment and politics have significantly increased the odds of a Fed rate cut
The promising signs that small caps are shifting from facing ‘headwinds’ to ‘tailwinds’ (helped by rate cuts)
Why we’re untroubled by the Japanese market’s impact on our Global Opportunities Fund’s relative performance in July, and
Some great news for the Ophir Funds in Morningstar’s latest performance rankings
An uncovered gem – a US$6.6bn portfolio company exposed to the AI thematic with no analyst coverage.

Ophir Fund Performance – July 2025

Before we dive into the Letter, you’ll find a detailed monthly update on each of the Ophir Funds below.

The Ophir Opportunities Fund returned +3.0% net of fees in July, outperforming its benchmark which returned +2.8%, and has delivered investors +23.3% p.a. after fees since inception (August 2012).

The Ophir High Conviction Fund (ASX:OPH) investment portfolio returned 3.4% after fees in July, underperforming its benchmark which returned +3.6%, and has delivered investors +14.2% p.a. after fees since inception (August 2015). The ASX listing returned +2.6% for the month.

The Ophir Global Opportunities Fund (Class A) returned +2.4% net of fees in July, underperforming its benchmark which returned +2.8%, and has delivered investors +18.2% p.a. after fees since inception (October 2018).

The Ophir Global High Conviction Fund (Class A) returned +1.3% net of fees in July, underperforming its benchmark which returned +2.8%, and has delivered investors +14.0% p.a. after fees since inception (September 2020).