Q4 2025 - Shifting markets and a look at the future

Dear Shareholders, 2025 turned out to be a fantastic year for The Stewardship Fund. We outperformed the S&P with returns of 19.81%, bringing our total return to 72.3% since the launch of The Stewardship Fund. This great performance (by our fund and the overall market) has me thinking about the future. Stock prices are clearly elevated, but I remain convinced that the only real way to “win” in the long run is to remain invested. It is very important here to recognize that staying invested does not mean ignoring risk.

In October, 2025 Howard Marks published a Memo titled “A Look Under the Hood.”1I found his insights extremely helpful when looking at measuring performance and risk. In this episode Howard discusses the goals investors should be looking to achieve. Setting healthy goals is essential for achieving long-term results; however, unhealthy goals can lead to disaster. Let’s take a common unhealthy goal as an example: beating the market over the coming year. This goal of “beating the market” in the short term is incredibly dangerous and has lead to financial ruin for many investors. On the surface, this seems like a worthwhile goal, but, when we look “under the hood” the behavior this goal leads to is deeply problematic.

The problem is that if our goal as investors is to beat the market, historic bull markets, such as the one we are in, will inevitably lead to outsized risks in order to beat the market. As an example, it is quite easy to beat the market during a bull market if you simply use leverage and buy the entire market! If the market goes up 10% this year I will roughly double the performance and look like a genius. The problem is that if we only evaluate performance of a manager in a bull market, the winners will typically be those who are taking an outsized risk. Likewise, if we only evaluate performance during an extended bear market, we will likely conclude that the best managers are those who are highly risk averse, or those who like betting against the market. Howard argues that the only “good” way to evaluate the skill of an investment manager is to look at an investor’s performance through a full market cycle. Only in this context will we see how a prudent investor is able to manage risks during the bull run while taking advantage of opportunities during the bear markets.

I say all of this to emphasize that while I am happy we have seen great returns over the past few years, our goal is not to beat the market. In fact, currently I think it is prudent to be more cautious and focus on managing risk, as it is highly unlikely that the next five years will be as good as the past five.

1 https://www.oaktreecapital.com/insights/memo/a-look-under-the-hood

Risk Mitigation Strategy

We have established that there are elevated risks in the market due to excessive valuations, so the next question is, what do we do about those risks? After evaluating many strategies to cope with an overpriced market I have landed on my preferred strategy. The current plan is to remain heavily invested in the market, focusing on quality companies that are not overvalued, while simultaneously managing the risks through some long-term hedging. While hedging is not our normal strategy at The Stewardship Fund, the type of hedging we are employing at this time essentially functions as “insurance” for the entire market. If we see a large drawdown of 20%, 30%, 50% or more, these types of hedges will protect a large portion, if not all of the portfolio, and will provide a great deal of cash to deploy during the drop. The cost of this insurance is giving up a few percentage points of gains during the bull market as we purchase more “insurance” each quarter. I believe this is a fair tradeoff considering the record run we have had, the current overvaluation in the markets, and the historic precedent for large market drops when we see prices reach these types of levels. I have developed a five year plan for this strategy that I have begun implementing. I will keep you updated as we progress into the future.

As you can see from the chart above, Q4, 2025 ended with another solid quarter of growth. If you had invested $10,000 with The Stewardship Fund on day one you would now have $17,230 as of 1/1/26. The rate of growth may slow a bit as we implement our risk mitigation strategy, but I fully expect good things in the years to come! Below you can see a pie chart of our current portfolio as of 1/31/26. Long-time readers will likely notice that our largest two positions, Google and EDP, now make up almost 50% of the entire portfolio. This high concentration is primarily due to stock price gains over time, especially in Google. In the past, one of my biggest mistakes has been to sell winners too soon. I sold Apple years ago after a nice gain, before it proceeded to rise hundreds of percent further. I even sold Meta too quickly since the fund purchased it at great prices early on. I am watching Google closely, but I also want to do a better job of letting my winners “run” rather than taking gains prematurely. The risk mitigation strategy I have developed also helps me feel much better about holding such a large position in the portfolio.

Conclusion

2025 was a wild and exciting year, and I expect 2026 will bring many new challenges. We are off to a strong start so far in 2026 (well over 4.53% return before fees/expenses so far), but we have only just begun the journey of this year. I look forward to serving you in the months to come.

God Bless,

Bobby Boyd

CEO of The Stewardship Fund