Cooper Investors founder Peter Cooper says immense government interference in financial systems and the business sector is creating winners and losers in the investment landscape.

By Joyce Moullakis
Source: The Australian
November 03, 2021

This is a trend he is closely tracking alongside how companies can monetise vast amounts of data. Mr Cooper – whose wealth is estimated at $679m on The Australian’s list of the nation’s richest 250 people – believes there are several dominant trends that will shape the next decade, including more government involvement across many sectors.

“Government – unlike just about any other time, or unlike any other time in my lifetime – is just all pervasive and … accelerating,” he told an online Hamilton Wealth client event.

“There are winners out of government and there are losers, and at this stage I’m thinking the loser side is slightly longer … government interference, whether it be monetary system, fiscal system or the business environment, is just, you know, incredible.”

Mr Cooper said asset management behemoth Brookfield and, closer to home, Macquarie Group were examples of companies navigating that environment well in areas such as infrastructure and real estate.

“We have, right under our noses in Australia, the world’s best arbitrageur of government activity and regulation,” he said.

He also highlighted an increased government presence and policies for healthcare, pathology, medical devices and aged care.

Mr Cooper, who founded Cooper Investors in 2001 and is the firm’s chief investment officer, is also monitoring how companies locally and globally adapt their technology and transform business models to position for future growth.

He identified local companies including Woolworths, Orica and Aristocrat as good examples of those investing in new economy technology opportunities.

Mr Cooper, who attended the webinar from San Francisco, is also bullish on companies that can monetise data as well as measure and use it.

“The data that governments and business now have at scale on their populations … is kind of new. The vastness and the ability to map that,” he said.

Decarbonisation was another key theme that would dominate the investment sector over the next decade, Mr Cooper noted, as the trajectory toward net-zero emissions continued but was balanced against supply-side disruptions and underinvestment.

Cooper Investors is an active manager with more than $13bn in funds under management across 11 investment funds. Prior to the pandemic, it would conduct 1500 site visits to potential and investee companies around the world every year, undertaking detailed qualitative and quantitative research on stocks across systems, culture and potential earnings.

“We are very keen on actually listening properly to management and observing their actions; we all know actions – not words – is the key to this,” Mr Cooper said.

Separately, cryptocurrencies were an area he was avoiding even though he was “observing it with great interest”.

“It might be a bubble of mega proportions,” Mr Cooper said.

“I’m not making any comment on what it’s worth; I’m not sure how to value it. But I think it’s an outworking somewhat of the free-money society that we live in and at the heart of that is the Federal Reserve.

“Breezing through New York in the last few days, you can see the manifestations of low interest rates or free money everywhere.”

Mr Cooper is upbeat on economic growth prospects across Asia, although he noted the firm was taking a cautious approach to its investments.

“Asia’s a very disparate and diversified area … for us, it’s really a rifle – not shotgun – approach to Asia,” he said, noting growth dynamics were starting to favour India over China. “China is just such a bigger economy developed much better and faster over the last 20 years, but the lines have now crossed so the Indian economy is going along at 7 or 8 per cent (economic growth) and China is sort of in the 3-5 per cent category now, in terms of GDP growth,” he said.

Cooper Investors invests globally but also targets specific themes. It launched the Family and Founder Fund in July 2019 which drew on a long-held belief that investing in founder-led, family-linked or employee-owned companies would deliver performance over the long term.

Its two-year rolling returns are 20.3 per cent versus 14.6 per cent for the benchmark MSCI AC World index, while since inception it has had cumulative returns of 52.3 per cent compared to 34.8 per cent for the benchmark.

“This proprietorial behaviour, whether it’s a family-owned company, a founder company or a culture of managers that have really worked out what it means to be proprietorial acting in alignment not only with the shareholders but customers and employees and other stakeholders, that is critical to value creation,” Mr Cooper said.

He highlighted home downsizing firm Lifestyle Communities as an ASX company putting customers at the centre of what they do. Lifestyle Communities managing director James Kelly is also one of the company’s founders.

The CI Australia Equities Fund has posted two-year rolling returns of 12.9 per cent versus 8.27 per cent for the S&P/ASX 200 Accumulation Index, but that gap narrows to 11.63 per cent versus the benchmark’s 9.14 per cent on a seven-year rolling basis.