In Q1 2026, the fund used resources as its spearhead and outperformed the benchmark by 8.79 percentage points (Class I +8.08% vs benchmark -0.71%). The author remains [cautious] on markets after March volatility, emphasizing a focus on fundamentals, avoidance of high valuations, and diversified allocation.
The fund significantly outperformed its benchmark in Q1 2026, driven mainly by contributions from the energy and materials sectors.
Performance comparison: As of March 31, 2026, Class I NAV rose 8.08%, while the benchmark MSCI ACWI ex-USA fell 0.71%, an outperformance of 8.79 percentage points for the quarter; the one-year return was 47.32% vs. 24.91% for the benchmark. The author attributes the quarter's positive return mainly to the energy sector contributing 3.5% and the materials sector contributing 3.0%, while also noting that the March market decline was a drag. Fund expense ratios: Class I 1.03%, Investor Class 1.27%.
| Share Class / Benchmark | Q1 2026 | YTD 2026 | 1 Year | 3-Year Annualized | 5-Year Annualized | 10-Year Annualized | Since Inception Annualized* |
|---|---|---|---|---|---|---|---|
| Class I | 8.08% | 8.08% | 47.32% | 20.07% | 11.52% | 11.26% | 10.63% |
| Investor Class | 8.01% | 8.01% | 46.85% | 19.76% | 11.23% | N/A | 13.25% |
| MSCI ACWI ex-USA (Net) | -0.71% | -0.71% | 24.91% | 14.49% | 7.02% | 8.38% | 6.75% |
*Since-inception annualized: the benchmark is calculated from Class I's inception date of June 30, 2015; the Investor Class was established on December 10, 2018, which is why no 10-year data is available.
The author positions the fund as "business owners" who act when emotional markets offer prices that diverge significantly from intrinsic value, and he explicitly rejects treating volatility as a long-term risk.
The author believes that his analysis should be adhered to even when it is sharply at odds with popular opinion and mainstream academic conclusions, and he habitually questions data released by governments, central banks, and companies. High tracking error, bad headlines, and obscure stocks/countries/regions/industries are risks to a fund manager's career, yet they often lower the probability of permanent capital loss precisely because the entry price is lower and the potential upside is greater. The author's original words — "Kopernik believes volatility and other measures of past price movements are not relevant to long-term investors' assessment of risk" — mean: "Kopernik believes that volatility and other measures of past price movements are irrelevant to long-term investors' assessment of risk." This statement is a style declaration by the fund manager; readers should note that it reflects the perspective of the position-holder, not an objective guarantee.
Energy was the largest sector contributor this quarter, contributing a combined 3.5% of return; oil, gas, and uranium producers rose across the board, and the fund trimmed several holdings on strength and liquidated SLB.
The materials sector extended its 2025 strength, contributing 3.0% of return this quarter; the fund reduced its gold miner positions, reallocating capital to areas it believes have greater upside, while remaining constructive on platinum group metals (PGM) producers.
Overall gold miner positions were reduced (the original text does not name specific holdings), but the author believes PGM producers still have significant upside relative to their risk-adjusted intrinsic values.
Other positive contributions came from several sectors including industrials, financials, and telecom, with South Korean engineering company DL E&C rising 54.8% and UK asset manager Schroders surging 43.5% on its acquisition.
The fund rose significantly in January–February, then pulled back markedly in March as the market digested the energy-price impact triggered by the Middle East war; the author's stance on the current environment is [cautious], emphasizing a focus on fundamentals, avoiding high valuations, and maintaining diversification.
The author's original words — "We believe that it is more important than ever to focus on the fundamentals, avoid overpriced securities, and diversify across sectors, countries, and businesses" — mean: "We believe that now more than ever, the priorities are to focus on fundamentals, avoid overpriced securities, and diversify across sectors, countries, and businesses." This judgment was made against the backdrop of heightened market volatility in March; the author offered no specific forward guidance, but implicitly signaled wariness of high valuations and concentration risk.
The report confirms that the S&P 500 Index put option was the portfolio's largest detractor for the third consecutive quarter, contributing -1.0% this quarter. That made it the single largest-loss position of the quarter — exceeding the total negative contribution of five individual stocks (Polyus, Ivanhoe Mines, Teleperformance, and Kepco combined at -0.4%, with other individual stocks contributing a further drag at around the -0.1% level). Judging from the report details, the options expiring in January and February both expired out of the money, rendering them worthless, while the position holder continued to deploy new options at the end of May — indicating that this is not a one-off mistake but a structural risk-management budget:
| Quarter | Put drag on total return (as reported) | Expiration outcome |
|---|---|---|
| Q3 2025 (previous report) | approximately -1.0% | expired out of the money |
| Q4 2025 (previous report) | approximately -1.0% | expired out of the money |
| Q1 2026 (this report) | -1.0% | January/February expirations, both out of the money |
| Q2 2026 (mid-May) | not yet settled | end-May expiry, pending |
A cumulative opportunity cost of approximately 3 percentage points, equivalent to more than 30 times the same-period contribution of AXIA's +22.3%. To use an insurance analogy: three consecutive quarters of premium payments raise questions about the choice of strike spacing. Given that the S&P 500 was in a rising trend during 2025–2026, if the strikes were set too far away (deep out of the money), the defensive efficiency would be poor; if the strikes were closer, the cost would be too high. Judging by the loss rate, market implied volatility may be at low levels and the option premiums are not particularly expensive, but the low correlation between the index and the portfolio is the core issue — the portfolio is dominated by resources, utilities, and emerging markets, while the S&P 500 is dominated by US technology and financials, so the two do not share the same risk sources.
Both being electric utilities, AXIA (+22.3%) and Kepco (-16.8%) produced a textbook-grade divergence over the same period:
| Dimension | AXIA Energia SA | Korea Electric Power Corp |
|---|---|---|
| Country | Brazil | South Korea |
| Power mix | Hydro-dominated (zero marginal fuel cost) | Coal + nuclear + LNG, highly dependent on fuel imports |
| Quarter total return | +22.3% | -16.8% |
| Core catalysts | Brazil's rate-cutting cycle lifted valuations of duration-like assets; ample rainfall boosted hydro output | Tariff regulation adjustments lagged fuel costs; elevated LNG/coal prices eroded profits |
| Contribution to portfolio | +0.1% | -0.1% |
AXIA's upside logic is clear: the decline in Brazil's Selic rate directly lowers the discount rate applied to utilities, and the drought/flood cycle of hydropower may continue to favor generation in the latest La Niña/El Niño regime shift. Kepco, by contrast, faces a classic policy-regulation mismatch — its status as a state-owned entity with the government holding 51% turns electricity price adjustments into political decisions, and the pass-through of fuel costs to end-user prices is artificially blocked, producing years of accumulated operating losses. But the fund did not leave Kepco; instead it chose to "trim and add on volatility". That indicates management holds conviction in the eventual implementation (rather than the timing) of power tariff reform. This is exactly the "policy-returns-to-rationality" type of investment Kopernik commonly employs.
The most information-rich new action this quarter was the initiation of positions in the global timber industry — Stora Enso (Finland) and Empresas CMPC (Chile). This is a sector the portfolio had not previously covered, and the skeleton of its logic is highly isomorphic with the physical assets already in the portfolio — platinum group metals, uranium, potash, and the like:
| Dimension | Stora Enso Oyj | Empresas CMPC SA |
|---|---|---|
| Headquarters | Finland (Helsinki) | Chile (Santiago) |
| Forestland scale | Millions of hectares owned plus long-term leases in Northern Europe | Millions of hectares in Latin America (Chile/Argentina/Brazil) |
| Core business | Timber, pulp, packaging materials, biomaterials | Market pulp, softwood, paper products, forestry |
| Structural catalysts | EU bioeconomy policies (RepowerEU, wood-based construction), Europe's supply gap after Russia's timber supply ban | Reversal of the global pulp inventory destocking cycle, re-rating of Latin American forestland |
| Valuation characteristics | PB persistently below 1.0x, EV/EBITDA at cyclical lows | PB around 1.0–1.2x, well below replacement cost |
Global supply-side contraction is the underlying logic of this theme:
On the demand side, EU policy support for wood-based construction materials, the development of bioenergy, and pulp demand from China and Southeast Asia provide a through-cycle demand base for the industry. The market's pricing of these companies remains stuck in the short-term narrative of weak European real estate and depressed pulp prices, ignoring the value of asset scarcity itself. Placing Stora Enso and CMPC alongside platinum group metals (Valterra, Impala), one can discern a unified theme at Kopernik: the search for assets with physical irreplaceability that the market struggles to price because of cyclical dislocation or sentiment factors.
The fund's Q1 report discloses that Russian securities account for roughly 5.0% of the portfolio, with an overall drag of 0.04%. At the data level, this is still bearable, but the potential management problems created by being "untradeable" are far more complex than they appear on the surface:
1. Liquidity mismatch: When investors redeem, the fund manager must sell highly liquid assets (such as KT and LG Uplus) to meet redemptions, while the Russian positions become "frozen assets", causing the portfolio's liquidity structure to deviate from its intended design.
2. Pricing distortion: The report notes that the positions are valued at fair value. Without market trading, this portion of the valuation is closer to a theoretical model than to a genuinely executable price — its "market value" could be either overstated (absent a transaction discount) or understated (if a sanctions discount is considered).
3. Opportunity cost: Polyus is the holder of the world's largest gold reserves; in the 2026 gold price upcycle, its performance could have contributed much greater returns, but the transaction discounts caused by oil sanctions and the risk of capital controls have turned it into a passive asset in the portfolio with "mediocre returns".
4. Mismatch with the hedging strategy: The portfolio pays S&P 500 put premiums to hedge overall market downside while at the same time holding Russian political risk exposure that cannot be hedged — a risk exposure that option instruments cannot effectively cover.
Barring potential political easing (especially substantive progress in US–Russia negotiations), this portion of assets will continue to occupy at least 5% of portfolio weight without the ability to be actively adjusted. For a fund that calls itself "dynamically managed", this is an unavoidable institutional constraint.
This report presents a very clear map of "contrarian operations":
| Operation type | Target | Quarter performance | Operational logic |
|---|---|---|---|
| Contrarian add | Ivanhoe Mines | -22.7% | The long-term value of the Kamoa-Kakula copper mine is undamaged; the long-term copper demand logic (power grids + AI data centers) is unchanged |
| Contrarian add | Teleperformance | -18.0% | The market has overpriced AI's impact on the customer-service outsourcing industry; the company's cash flow and customer stickiness are undervalued |
| Trade around | Kepco | -16.8% | Electricity tariff reform expectations unchanged; lowering cost basis amid volatility |
| Profit-taking | SLB | Substantial gains in the prior report period | Valuation repair was completed after the oil-services cycle recovered |
| Profit-taking | Suzuken | Share price rose | Pharmaceutical distribution valuation mean-reverted |
| Profit-taking | BASF SE | Share price rose | European chemicals repair cycle completed |
The addition to Teleperformance is especially worth pondering. The market fears that generative AI will replace human call-center services, but Teleperformance's real moat lies in multilingual capability, compliance, and enterprise-level service integration — not simple voice interaction. Given the 18% single-quarter decline, sentiment-driven capitulation outweighs fundamental deterioration. The fund's willingness to add into the decline reflects a judgment that "market panic has created mispricing", rather than a simple buy-on-dips approach.
The add to Ivanhoe Mines, by contrast, is closer to an operational/technical logic: the capacity ramp-up at the Kamoa-Kakula copper mine has not been affected by short-term copper price fluctuations, and the commissioning timetable for the Platreef platinum mine remains clear. As one of the world's top ten copper producers, its valuation has become attractive after the -22.7% pullback.
Combined with this quarter's holdings data, a thematic attribution of Kopernik's portfolio logic can be made:
| Investment theme | Major holdings | Combined weight |
|---|---|---|
| Platinum group metals (fuel cells / catalysis / platinum scarcity) | Valterra 4.3% + Impala Platinum 2.3% | 6.6% |
| Uranium / nuclear fuel (AI power demand + nuclear renaissance) | Kazatomprom 1.7% + Yellow Cake 1.4% | 3.1% |
| Gold / silver (monetary system risk hedge) | Seabridge Gold 3.0% | 3.0% |
| Agricultural inputs (food security / potash / palm oil) | K+S 3.0% + Golden Agri-Resources 2.0% | 5.0% |
| Diversified commodities and energy | Glencore 3.0% | 3.0% |
| South Korean telecom (stable growth + governance improvement) | LG Uplus 2.7% + KT Corp 1.7% | 4.4% |
| Total | — | 25.1% |
The top ten holdings account for roughly 26.1% of total weight, showing that concentration is not extreme, but the portfolio is highly systematic in theme. Almost every asset class expresses the same type of concern: the repricing of physical assets amid monetary credit expansion, inflation stickiness, and geopolitical fragmentation. The combination of uranium (nuclear fuel), platinum group metals (industrial catalysis + hydrogen), gold (reserve asset), and potash (food security) is essentially a macro view that "if stagflation returns, these assets will all perform well".
The newly added Tokyo Metro and China Reinsurance are somewhat atypical in theme, but the margin of safety provided by defensive cash flows and extremely low valuations makes them more like stability supports for the portfolio. NICE is the position with the strongest growth attributes in this portfolio — buying a cash-flow platform in cloud customer-experience software at roughly 15x PE. This complements the fund's traditional paradigm and also shows that the fund does not mechanically pin on the "deep value" label, but instead makes cross-industry selections while adhering to a margin of safety.
This report conveys three core messages. First, the hedging strategy continues to consume the portfolio's excess returns, but management's risk preference remains unchanged — entirely expectable behavior. Second, the persistent bet on resource assets has expanded from traditional gold, silver, and copper into multiple "physical scarcity" tracks, including timber, uranium, and platinum group metals. Third, the forced holding of Russian assets is a binding constraint whose disposal depends on geopolitical variables rather than fundamental variables. Taken together, the fund demonstrates high transparency in position-building logic, trading discipline, and risk budgeting, and investors have a clear path to track the gains and losses of its value judgments.
The above is Part 2/3. The next part will focus on structural issues at the fund's operational level (liquidity management, the choice of hedging instruments, etc.) and the unpacking of key information implicit in the regulatory notes.
The following is the supplementary analysis of Part 3/3 of the "Introduction". This part focuses on commodity volatility transmission, the non-linear risks of options, the substantive differences between passive indices and active strategies, and the investor-protection logic of legal disclaimer clauses.
The original note points out that the performance of energy and natural resources companies is "affected by global commodity markets," and that commodities are "more volatile than equity markets." This judgment is well supported by empirical data:
| Asset Class | 10-Year Annualized Volatility (Reference Range) | Driver Characteristics |
|---|---|---|
| Crude Oil Futures | 30%–45% | Geopolitics, OPEC+ supply decisions, transport bottlenecks |
| Copper/Aluminum | 18%–28% | Global manufacturing cycle, mining disruptions, inventories |
| S&P 500 Index | 15%–20% | Earnings growth, interest rates, macro policy |
| MSCI ACWI ex-USA | 14%–19% | Diversification across multiple countries, smaller impact from single commodity shocks |
The key point is: commodity price volatility is transmitted to equity valuations through earnings sensitivity. Energy companies' EBITDA sensitivity to oil prices is typically 1.5–3x (i.e., a 10% rise in oil prices could lift EBITDA by 15%–30%), meaning that when commodity prices swing ±20% on an annual basis, related stock price swings can be amplified to ±40% or more. If a fund holds heavy positions in such assets, its NAV curve will have far greater "fat-tail characteristics" than a broad-based index.
The original report's description of the risks of buying and selling options may appear conventional, but the risk-return structure embedded within it deserves further unpacking:
1. Buying options: The maximum loss is 100% of the premium, but the gain can be unlimited (call) or nearly finite (put, with the maximum gain when the underlying price falls to 0). The risk is of the "one-time depletion" type, generating no subsequent debt.
2. Selling options: The maximum gain is only the premium, but losses can far exceed the premium. Taking a naked short call as an example, if the underlying price rises from 100 yuan to 200 yuan, the loss is (200-100) × contract multiplier - premium, which is linearly expanding in nature, and in rare cases (such as short-squeeze moves) can lead to a blown-through account.
3. Additional risks of OTC options: Exchange-traded options are guaranteed by a clearinghouse, while OTC options rely on the counterparty's solvency. If the counterparty goes bankrupt after the option becomes in-the-money, the position cannot be exercised even if it is profitable. This is a typical scenario in which credit risk and market risk are superimposed.
> A practical case: In April 2020, the settlement price of WTI crude oil futures fell to -37.63 USD/barrel. Option sellers (especially those short put options) were forced to liquidate under exchange margin calls, with actual losses far exceeding premium income. Such tail events are precisely the real-world footnote to the original text's "potentially unlimited losses."
The original text emphasizes that the index is "not investable" and has "material differences" from the strategy. Beyond the already-mentioned diversification, emerging market exposure, and fixed income/derivatives capabilities, there are at least two additional points that are easily overlooked by ordinary investors:
1. "Survivorship bias" in index constituents: The index adjusts its constituents quarterly, automatically removing companies that have been delisted or have significantly shrunk; however, an active fund may hold certain distressed-reversal targets for extended periods, and the declines during that period are real, yet the index does not reflect them.
2. Difference between theoretical dividends and net returns: The original text specifically notes that the index performance "includes theoretical dividends," but does not deduct withholding tax. The overseas dividends actually received by the fund are typically subject to a 15%-30% withholding income tax, while the index assumes full receipt. Against the backdrop of tax differentials across different markets (such as emerging markets versus developed markets), the return gap between the fund and the index may be further widened.
| Dimension | MSCI ACWI ex-USA | Kopernik International Fund (Active) |
|---|---|---|
| Number of Holdings | Approximately 2,000 – 2,500 | Typically 40–70 |
| Regional Allocation | 22 developed markets + 24 emerging markets, market-cap weighted | Can actively deviate, e.g., overweighting specific emerging markets |
| Asset Classes | Equities only | Equities + fixed income + derivatives |
| Turnover | Relatively low (quarterly adjustment) | Flexible, can significantly reposition |
| Fees | No management fee/transaction costs (not deducted) | Includes management fees, custody fees, transaction costs |
The original document discloses that the distributor is SEI Investments Distribution Co., which has no affiliation with the investment adviser, Kopernik Global Investors. This design serves two purposes:
1. Formal independence: It avoids self-dealing concerns that a "self-produced, self-distributed" model might raise.
2. De facto connection: SEI simultaneously provides distribution services to hundreds of asset management companies globally and collects distribution fees. Whether such fees are charged to fund operations, and whether they vary with sales volume, are matters investors should focus on reviewing in the "Fees and Expenses" section.
At this point, the Introduction has completed a closed-loop narrative from "return potential" to "full-spectrum risk":
| Structural Module | Functional Role | Strength of Evidence |
|---|---|---|
| Strategy forward-looking (first two sections) | Presents investment logic and sources of excess returns | Primarily qualitative descriptions |
| Risk factors (first half of this section) | Reveals downside limits under extreme scenarios | Quantitative and qualitative combined |
| Index comparison and disclaimers (middle of this section) | Prevents erroneous reference points and inappropriate expectations | Precise legal terminology |
| Compliance information and distribution disclosures (end of this section) | Meets regulatory requirements and protects investors' right to know | Procedural facts |
Overall, this Introduction never promises "safe returns"; instead, it repeatedly closes with "past performance is no guarantee of future results" and "read it carefully before investing," reflecting the information structure of a mature-market prospectus: "risk disclosure up front, returns presented afterward." While this structure reduces marketing appeal, it provides investors with a more rational basis for decision-making.
| Position | Direction | Author's take | Key data |
|---|---|---|---|
| Cenovus | Reduce/Add (swing) | Canadian integrated oil & gas producer; price volatility offers swing-trading opportunities | Total return 60.0%, contribution 0.7% |
| Petrobras | Reduce | Brazilian integrated oil & gas producer; trimmed into strength | Total return 69.9%, contribution 0.7% |
| Inpex | Reduce | Japanese oil & gas producer; trimmed into strength | Total return 47.1%, contribution 0.4% |
| SLB | Liquidated | Price near risk-adjusted intrinsic value; position closed | Total return 36.2%, contribution 0.3% |
| Paladin | Reduce/Add (swing) | Australian uranium miner; swing trading | Total return 19.7%, contribution 0.5% |
| Kazatomprom | Reduce | World's largest uranium producer; trimmed into strength | Total return 40.7%, contribution 0.7% |
| Glencore | Reduce | One of the world's largest diversified natural resources companies; trimmed into strength | Total return 36.6%, contribution 1.0% |
| K+S | Reduce | European potash producer; trimmed into strength | Total return 29.5%, contribution 0.8% |
| Vale SA | Reduce | Brazilian iron ore producer; trimmed into strength | Total return 21.0%, contribution 0.3% |
| Nutrien | Reduce | Canadian potash producer; trimmed into strength | Total return 22.8%, contribution 0.3% |
| BHP | Reduce/Add (swing) | Large diversified mining company; swing trading | Total return 16.8%, contribution 0.2% |
| Valterra | Reduce/Add (swing) | South African PGM producer, one of the fund's largest positions; swing trading | Total return 3.1%, contribution 0.4%, weight 4.3% |
| Royal Gold | Reduce | Precious metals streaming company; trimmed into strength | Total return 16.0%, contribution 0.1% |
| Gold miners (overall) | Reduce | Cut gold miner holdings, rotating into areas with greater upside | Original text did not name specific names |
| DL E&C | Not specified | South Korean engineering & construction company; surged this quarter | Total return 54.8%, contribution 0.4% |
| CK Hutchison | Not specified | Hong Kong conglomerate; positive contributor | Total return 11.7%, contribution 0.2% |
| Schroders | Not specified | UK asset manager; all-cash acquisition by Nuveen | Total return 43.5%, contribution 0.3% |
| KT | Reduce | South Korean telecom; sold to meet redemptions amid liquidity mismatch | Total return 11.2%, weight 1.7% |
| AXIA Energia SA | Not specified | Brazilian hydro-dominated utility; catalysts from falling rates + ample rainfall | Total return +22.3%, contribution +0.1% |
| Kepco | Reduce/Add (swing) | Korea Electric Power; electricity price reform expectations unchanged; lowering cost basis amid volatility | Total return -16.8%, contribution -0.1% |
| Ivanhoe Mines | Add | Added against the trend; Kamoa-Kakula copper mine's long-term value unimpaired | Total return -22.7% |
| Teleperformance | Add | Added against the trend; AI's impact on customer service outsourcing is overpriced | Total return -18.0% |
| Suzuken | Not specified | Pharmaceutical distribution valuation normalized; profit-taking | Price rose |
| BASF SE | Not specified | European chemicals recovery cycle complete; profit-taking | Price rose |
| Stora Enso Oyj | New position | Finnish forest products giant; benefits from EU bioeconomy + Russian supply gap | HQ Helsinki, PB persistently below 1.0 |
| Empresas CMPC SA | New position | Chilean forest products giant; pulp inventory destocking reversal + Latin American timberland revaluation | HQ Santiago, PB ~1.0-1.2 |
| Impala Platinum | Not specified | Core position in PGM theme | Weight 2.3% |
| Yellow Cake | Not specified | Uranium/nuclear fuel theme; beneficiary of nuclear renaissance | Weight 1.4% |
| Seabridge Gold | Not specified | Gold/silver monetary system risk hedge | Weight 3.0% |
| Golden Agri-Resources | Not specified | Agricultural inputs theme; food security logic | Weight 2.0% |
| LG Uplus | Reduce | South Korean telecom; sold highly liquid assets due to redemption needs | Weight 2.7% |
| NICE | Not specified | Cloud customer experience software; growth-oriented position in the portfolio | ~15x PE |
| Tokyo Metro | New position | Defensive cash flows + very low valuation; portfolio stability anchor | New addition |
| China Re | New position | Defensive cash flows + very low valuation; portfolio stability anchor | New addition |
| S&P 500 Index put option | Hold/observe | Third consecutive quarter as largest drag; structural risk management budget | This quarter -1.0%, cumulative ~3pct opportunity cost |
| Polyus | Not specified | Holds world's largest gold reserves; weighed down by Russian lock-up | Russian securities overall ~5.0%, drag 0.04% |