Why does the fund hold so much cash? Not because it is bearish, but because stocks rose and it sold to take profits, so cash built up. These cash reserves are ammunition to buy bargains later. The authors argue cash loses value over time and inflation will lift commodities; many commodities such as nickel, lumber and uranium remain far below record highs and are buying opportunities. They recently put cash into LG Corp (parent trades 65% below the sum of its parts), Franklin Resources (asset manager at ~1% of assets under management, too cheap) and Centene (US healthcare company bought after a share-price crash).
Author's view: The elevated cash position is the result of profit-taking after gains, not a bearish signal; cash is dry powder waiting for discounted opportunities, and inflation will eventually flow into commodities (Stance: [Bullish]).
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Kopernik sets no cash position target; cash is merely a residual of the bottom-up fundamental stock-selection process and active discipline: when prices rise, trimming raises cash; when prices fall, cash is used to add positions. The author opens by responding to clients' common questions about cash levels and offers a seemingly contradictory answer: when asked whether cash is good or bad, the answer is "yes"—cash is a poor long-term investment, yet it is an excellent option in a disciplined valuation process.
The author compares cash to a call option: it has almost no expiration date, covers every industry and geographic region, and while the strike price is unknown, it can be actively chosen by the investor—the more disciplined the investor, the more attractive the strike price. In other words, the value of cash lies not in holding it per se, but in the ability it gives the investor to buy at cheaper prices. The author states the point directly: "The question isn't 'do we like cash?' The question is 'what can we get for our cash?'"
The author judges that the current environment is inflationary, and cash inevitably depreciates over the long run in such an environment; from the dollar's decoupling from gold in 1971 to Weimar hyperinflation, history points again and again toward paper money's purchasing power returning to zero. The article opens with a Voltaire quote: "Paper money eventually returns to its intrinsic value: zero." That is, paper money will eventually return to its intrinsic value: zero.
The chain of evidence is as follows:
The author observes that people are beginning to realize that money printing is currency debasement, and interest in stores of value such as precious metals is rising; "people are increasingly worried whether the cash in their hands still has value." This naturally leads to clients' question: given the view that the currency is depreciating, and just after a bout of massive global money printing, why is the cash position instead high? The author acknowledges that, to many, a high cash position either drags performance or means the fund manager is "asleep" and has found no new opportunities. But the author emphasizes: price is paramount, and cash is no exception—the key question is not whether one likes cash, but what one can get in exchange for cash.
After several sectors in the portfolio rallied strongly in 2025, the author chose to trim and take profits, and cash consequently rose; the Toyota Corolla analogy explains why the preference for "cash versus companies" changes with price. The article uses a Toyota Corolla as an analogy (not an investment): at a listed price of $29,000, which is a fair price, cash and the car are no different; if it is on sale for $15,000, the car is clearly a bargain, "even worth buying two"; if three days later the dealer buys it back at $40,000, then under the same conditions the preference returns to cash. The author says the same applies to stocks: when they rise a lot, they become less preferred relative to cash, so one trims and realizes profits; when the market performs well, the cash balance rises accordingly—exactly what happened in 2025.
The author asks: Korean stocks have risen more than 50%—should he like them more or less? What about gold miners? What about platinum-group-metal producers? To illustrate the market backdrop, the article includes three total-return charts (December 2024–May 2026), with the instruments involved as follows:
History also bears witness to the actual swings in cash levels. The author recalls that 2014–2015 was one of the worst stretches for value investors, and in 2015 cash balances “plunged.” In 2018–2019, value stocks were sold off again, and cash also declined noticeably. During the COVID panic, cash briefly went to zero (barely visible on the chart). At the end of 2024, resource stocks and Korean stocks inexplicably plunged, and large amounts of cash were put to work. Now the reverse is happening — in 2025, several sectors rallied simultaneously, and cash rose noticeably; although many stocks have retreated from their highs, prices still stand near the peaks reached in 2025 or early 2026.
| Period | Market Context | Cash Change |
|---|---|---|
| 2015 | One of the worst years for value investing | Plummeted |
| 2018–2019 | Value stocks sold off | Declined noticeably |
| 2020 pandemic panic | Market collapse | Briefly hit zero |
| Late 2024 | Resource and Korean stocks plunged | Heavy deployment |
| 2025 | Multiple sectors rallied at once | Rose noticeably |
AXIA Energia is a case study in how disciplined trimming and adding creates value: its ten-year return was lackluster, yet through sustained reductions and additions it became the best-performing stock in the portfolio over twelve years. The holding the author refers to is AXIA Energia SA (formerly Eletrobras), Brazil’s largest electric utility. Kopernik has held it since the firm’s inception; while there were phases of strong performance, its overall return over the past ten years was “unremarkable.” Yet through disciplined selling into strength and adding into weakness, it became the best-performing stock in the Global All-Cap portfolio over the past twelve years. The article states plainly that in 2025 a “buy-and-hold” approach to this type of stock would also have performed well, but active trimming and adding still added significant value. A chart footnote notes that the figure shows the total return of the company’s share price and does not reflect the performance of any particular stock in the portfolio.
A high cash ratio does not mean bearishness; it is the result of taking profits after a rally. The author expects that when a downturn arrives, this cash will be deployed. For investors, the actionable implication is that cash positions accumulate as markets rise and are released as markets fall; their fluctuation is a feature of the process rather than a signal of conviction. A note on institutional bias: this is a defensive argument from the holder’s standpoint — the author uses “cash is a residual” to justify elevated cash, but the text also concedes that many stocks remain near their 2025/2026 highs and that current entry points are of limited appeal; “the next opportunity” must wait for prices to provide the answer.
The article uses the uranium case as real-world evidence: the discipline of holding cash and averaging down through volatility is a source of excess return in active management; after the portfolio’s large gains in 2025, the author chose to convert positions that had become expensive into cash. The article recalls that the uranium position was opened several years before the thesis paid off, but precisely because cash was available, it was possible to keep averaging down through the decline and build the position to its maximum at the bottom; fortunately, the thesis eventually paid off, and even counting the lean years, the entire investment still worked out well. The conclusion drawn is that well-managed volatility is a friend of the active manager. In contrast, today valuations have stretched to new historical highs, so volatility should be expected; even in a rising market, buying low and selling high in volatile stocks creates meaningful relative value beyond a simple buy-and-hold.
The author invokes the words of the late value investor Charles de Vaulx to underscore this logic. de Vaulx first cautions: if you believe your stock — however cheap it is — will not temporarily fall when Mr. Market decides to make a correction, you are fooling yourself. The line that immediately follows is, “When that happens, your cash becomes ammunition for future bargains.” — that is, “when that happens, your cash becomes ammunition for future bargains.” The author then states a preference for “cash vs. real assets”: fiat currency is a good medium of exchange but a poor store of value; what they want are assets that are “needed and relatively scarce.” The author sums up this rotation logic as: buy things when they are cheap; when they are expensive, swap them for cash, then redeploy that cash into other things that are cheap relative to cash. The strong 2025 performance left Kopernik’s portfolio with a higher cash balance, which did not surprise the author — several major parts of the portfolio had become expensive, especially Korean stocks and gold miners; after trimming positions with large gains, cash naturally rose. Unless the market produces another big rally, the article expects cash levels to drift lower as opportunities surface.
The author argues that the “Cantillon effect” of nearly two decades of excessive money creation has not yet flowed into commodities; apart from gold, most commodities remain far from their historical highs, and now is a buying opportunity. Commodities have for years accounted for a significant weight in the portfolio. The article points out that investors have long ignored assets that are “needed and scarce,” which is surprising, but that very neglect provides abundant opportunities. The chart speaks for itself: from January 2007 to May 2026, the S&P GSCI index was mired in a prolonged slump in dollar terms, materially underperforming the U.S. dollar index. In 2025, spot gold prices and gold-miner shares surged; Kopernik trimmed its gold positions while redeploying cash into areas where it sees greater upside: base and industrial metals, timber, and energy. Many commodity prices are still far below their highs, and the author says they are again taking advantage of the opportunity.
The author cites the policy backdrop of almost twenty years: nearly two decades of wanton money printing and undisciplined monetary policy cannot be neutral, and inflation is likely to make its way into commodities. They often quote the 17th-century Irish-French economist Richard Cantillon: “The river, which runs and winds about in its bed, will not flow with double the speed when the amount of water is doubled.” — that is, “a river winding through its bed will not flow at twice the speed just because the volume of water has doubled.” In other words, it takes time for the monetary flood to transmit to commodity prices.
As of May 12, 2026, the comparison between major commodity prices and their historical highs is the article’s most direct evidence:
| Commodity | All-time High Price | Current Price | All-time High Date |
|---|---|---|---|
| Nickel (USD/lb) | $24.5 | $8.6 | 2007/5/15 |
| Iron Ore (USD/tonne) | $151.7 | $105.4 | 2011/12/31 |
| Copper (USD/lb) | $6.1 | $6.3 | 2026/5/11 |
| Potash (USD/tonne) | $851.3 | $405 | 2022/4/1 |
| Lumber (USD) | $1,686.0 | $344.0 | 2021/5/7 |
| Bloomberg Agriculture Index | $101.8 | $59.8 | 2008/3/3 |
| Brent Oil (USD/barrel) | $146.1 | $101.3 | 2008/7/3 |
| Uranium (USD/lb) | $137.0 | $86.2 | 2007/6/8 |
The article argues that these prices show the Cantillon wave has so far lifted only gold; inflation has yet to reach other commodities, making this a good time to buy in the author's view. The one exception is copper—its current price of $6.3 already exceeds its nominal all-time high of $6.1, and that high was just set on May 11, 2026.
The author discloses recent cash deployment into three areas: emerging-market conglomerates, asset managers, and U.S. Medicaid managed-care companies. The common thread is valuations the market has compressed to extremely low levels.
International conglomerates: The author revisits the judgment from early 2025—conglomerates are portfolios of businesses that should be valued on their own merits. In recent years, investors have habitually lumped them together and attached negative labels, leaving exciting opportunities for those willing to do the necessary fundamental analysis. The author believes this still holds in 2026, with many emerging-market conglomerates trading below book value. A larger holding in the portfolio is LG Corp: on the author's sum-of-the-parts valuation, the parent is 65% cheaper than the sum of its parts—one can either buy LG Chem, LG Health, LG Uplus, and LG Electronics separately in the market, or do the work of analyzing this complex company and buy the parent at a 65% discount.
Asset managers: The article notes that many asset managers trade below 1% of their assets under management (AUM), while the author considers roughly 2.5% of AUM a reasonable level. Franklin Resources Inc. is a "powerful franchise business" currently trading at "highly depressed valuation multiples."
U.S. healthcare: Centene Corporation and Molina Healthcare Inc. are two Medicaid managed-care organizations whose shares crashed last year; the author took the opportunity to add both to the portfolio, and recent market volatility led them to trim exposure. The article cautions that if volatility persists, sector weights will rise and fall as opportunities emerge. The accompanying share-price chart (April 2024 to May 2026) shows both companies falling deeply over the past year-plus. For all four companies (LG Corp, Franklin Resources, Centene, Molina), the article explicitly discloses that Kopernik held positions as of May 12, 2026.
Valuation data provided in the article as of May 12, 2026:
| Company | Valuation Metric | Value |
|---|---|---|
| LG Corp | P/B | 0.58x |
| LG Corp | EV/S | 2.26x |
| Franklin Resources | P/B | 1.35x |
| Franklin Resources | EV/AUM | 1.01% |
In Kopernik's process, cash is the "residual" when prices do not cooperate. The author acknowledges that cash is a poor long-term investment but emphasizes that it provides optionality in the short term, and stresses that the portfolio still has over 80% invested in stocks. The author states in the conclusion that cash is a byproduct of a highly disciplined investment process; they do not believe investors should be fully invested at all times, but rather let stock prices determine whether cash is worth deploying. They agree that cash is a poor long-term investment while arguing that it offers "wonderful optionality" in the short term. Investors tend to hold cash at the wrong times: too much at cyclical bottoms out of fear, too little at cyclical tops due to pressure to stay fully invested. Today, despite an elevated cash level, more than 80% of the portfolio remains invested in "very high-quality companies trading at highly attractive prices." The article closes with the historical record: when opportunities have arisen, they have consistently put cash to work, and they hope current volatility continues to supply opportunities to deploy more cash soon.
Under the holder's assumptions, the actionable takeaway is to treat volatility as a buying trigger rather than a reason to exit, and to use cash to wait for discounted assets; the specific discounted areas favored are commodities (ex-gold), emerging-market conglomerates, asset managers, and Medicaid managed care. Readers should note, however, that this is a narrative from a position-holder's perspective—the author uses "80% of the portfolio remains invested" and a "track record of putting cash to work" to temper external concerns about high cash levels, and the judgments on LG Corp, Franklin Resources, and others rest on proprietary valuation models that should be read as self-justifying logic rather than independent conclusions.
| Position | Direction | Author's stance in one sentence | Key Data |
|---|---|---|---|
| AXIA Energia SA | Add/Reduce | Disciplined adding and trimming has made it the best-performing stock in the portfolio over twelve years | Overall returns over the past 10 years have been flat; held since inception, value created by trimming into strength and adding on weakness |
| LG Corp | Hold/Observe | The parent is 65% cheaper than the sum of its parts, an emerging-market conglomerate worth the analytical effort | P/B 0.58x, EV/S 2.26x, 65% SOTP discount |
| Franklin Resources Inc. | Hold/Observe | A strong franchise currently trading at a deeply depressed valuation multiple | EV/AUM 1.01%, P/B 1.35x; the author believes a reasonable level is around 2.5% of AUM |
| Centene Corporation | New position/Reduce | Added to the portfolio after the share-price collapse, then trimmed exposure during volatility | Medicaid managed care; share price has fallen sharply over the past year-plus |
| Molina Healthcare Inc. | New position/Reduce | Added to the portfolio after the share-price collapse, then trimmed exposure during volatility | Medicaid managed care; share price has fallen sharply over the past year-plus |