Conversations with Institutional Investors
Conversations with Institutional Investors is your gateway to in-depth discussions with the masterminds behind leading global investment firms, including key figures from pension funds, insurance companies, and sovereign wealth funds. Our podcast explores the evolving landscape of asset allocation, portfolio construction, and investment strategy, offering you firsthand insights from industry experts to inspire smarter, more innovative investment approaches. For further insights go to i3-invest.com. You can also subscribe to our complimentary newsletter at: i3-invest.com/subscribe/
info_outline
125: The Devolution of Neoliberalism – UTS Finance Department Roundtable
12/03/2025
125: The Devolution of Neoliberalism – UTS Finance Department Roundtable
In this special edition of the [i3] Podcast, in collaboration with the UTS Finance Department, we explore how the neoliberal model of economics, which largely ignored politics and focused on financial metrics, has eroded over time and made way for the rise of populism, which has exerted its influence on economies around the world. Why did the guardrails that neoliberalism provided slowly disappear and what are the consequences of this? Is there any model that will replace it? Political Economist Elizabeth Humphrys, Geopolitical Specialist Philipp Ivanov and UTS Industry Lecturer Rob Prugue delve deep into this fascinating topic as part of the Circle the Square roundtable series. __________ Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at __________ Overview of Podcast 00:00 – Introduction Wouter introduces the special i3 Podcast edition, produced with UTS Finance. He outlines the episode’s theme: how the post-war neoliberal guardrails that long supported economic certainty have eroded, creating persistent uncertainty in markets. He introduces guests Elizabeth Humphrys, Philipp Ivanov and Rob Prugue. 03:04 – Origins of Neoliberal Guardrails (Rob) Rob explains the emergence of post-WWII guardrails: Bretton Woods institutions, NATO, the World Bank, IMF and other frameworks enabling stability and collective economic growth. They created a predictable environment but gradually weakened. 06:05 – Australian Context & Rise of Neoliberalism (Elizabeth) Elizabeth describes the long boom after WWII, its collapse in the 1970s, and neoliberalism’s emergence. She explains how the Hawke Government in 1983 implemented major reforms—floating the dollar, tariff cuts, privatisation—enabled by strong political capital and union involvement. 10:09 – Global Perspective (Philipp) Philipp explains the Cold War dynamic: US-led order versus the Soviet bloc, with non-aligned states largely weak. Post-1970s Soviet stagnation and 1990s globalisation cemented US dominance, setting the stage for the “golden age” of the neoliberal order. 14:21 – Pax Americana and the Peace Dividend Rob discusses how guardrails encouraged discipline: countries deviating too far politically were penalised by markets. But global shifts, manufacturing loss and deindustrialisation gradually hollowed out these systems. 16:02 – Contestation of Neoliberalism & Social Impacts (Elizabeth) Elizabeth stresses that neoliberalism was contested from the start. She highlights social movements in the Global South, rising inequality, and sharp pain in Eastern Europe during rapid liberalisation. Domestic consequences—job losses, wage stagnation—fuelled political distrust. 22:03 – Globalisation, Inequality & a Multipolar World Wouter links globalisation to economic displacement. Philipp outlines four major geopolitical mistakes after the Cold War: Assuming China would remain benign Dismissing Russia Taking the developing world for granted Ignoring the power of nationalism and inequality 27:26 – Where Are We Now? Have the Guardrails Fully Collapsed? Rob argues that the guardrails can’t simply be rebuilt—political divisiveness and grievance-driven politics are now embedded. Trust in US institutions and commitments (e.g., AUKUS) is eroding. 30:45 – Are We Heading Toward Chaos? (Elizabeth) Elizabeth argues capitalism is resilient but political legitimacy is collapsing. The promise of neoliberalism—trickle-down prosperity, stable institutions—failed large groups of people, fuelling anti-politics, housing unaffordability and climate-related tensions. 37:17 – Beyond Traditional Politics Elizabeth notes the breakdown of mass-membership parties and unions. Declining voter turnout and low trust create fertile ground for populism and fragmented political identities. 40:13 – Global Fractures & Major Trends (Philipp) Philipp highlights five converging forces shaping today’s uncertainty: Economic fragmentation Great-power competition Societal divisions Climate change Technological revolution (especially AI) 45:28 – Technology as an Amplifier Rob and Philipp discuss how technology intensifies divisions but is ultimately a human-driven tool. AI raises the stakes of geopolitical competition, especially between the US and China. 53:14 – What Could Future Guardrails Look Like? Rob foresees three emerging forces: Rise of nationalistic policymaking Oligarchic influence filling the institutional vacuum A tri-polar world (US, Europe, BRICS) 55:24 – Can Australia Rebuild Guardrails? (Elizabeth) Elizabeth doubts that politicians currently have the vision for a new national project. She emphasises conflicts between economic growth, climate needs and powerful resource sectors. 59:24 – The Populist Base Rob asks whether a new base of disillusioned voters is forming. Elizabeth agrees: anti-politics creates a vacuum easily filled by opportunistic populists, on either left or right. 1:02:03 – Role of Media Rob highlights how politically aligned media ecosystems widen the vacuum and intensify division. 1:03:10 – Conclusion Wouter closes by noting the episode doesn’t provide solutions, but maps the journey from stable post-war neoliberalism to today’s entrenched uncertainty. Full Transcription of Episode 125 Wouter Klijn 00:00 Welcome to a special edition of the [i3] Podcast, produced in partnership with the University of Technology of Sydney's Finance Department, which includes the Anchor Fund, an educational investment fund managing real money, which is run by students and overseen by Associate Professor of Finance, Lorenzo Casavecchia of UTS. So this episode aligns with the second instalment of the UTS Circle The Square sessions, which are a thought-provoking series of roundtables on economic, financial and political ideas. You can find them on YouTube, and of course, [i3] is very happy to support them. So today we will delve into the neoliberal model, which, post-war, has provided guardrails for economics to operate in and allow investors to focus on the usual numbers, earnings, inflation and growth. But these guardrails have been eroding under the influence of various forces, including the rise of populism, and this has led to an almost permanent state of uncertainty. And of course, we all know markets don't like uncertainty. So how did we get here? What has changed, and why did a neoliberal model held together for such a long time in the first place? So this episode sits a little bit outside of our usual investment talk. It's more about the system underneath the data, applied political economics, and we're asking why the guardrails that once held in place neoliberalism have been thinned out and what is left behind. So I'm joined here today with three panellists. So first off, we have Elizabeth Humphrys, who is the Head of Discipline for Social and Political Sciences at the University of Technology Sydney. Elizabeth is a political economist who focuses on the impact of financial crisis and climate change on labour relations. She is the author of the 2019 book 'How Labour Built Neoliberalism'. We're also joined by geopolitical strategist Philipp Ivanov. Philipp has been globally recognised as an expert on international relations, particularly China and China-Russia relations, and he has worked in Russia, in China and the United States. So he will provide us with a global view on this issue. He's also an Industry Fellow at UTS. And finally, we've got Rob Prugue, who is an Honorary Industry Lecturer at UTS, but who most of you probably know as the former CEO of Lazard Asset Management for the Asia-Pacific region. He's one of the driving forces behind the Circle The Square roundtable series. So welcome everyone. Okay, so we're looking at uncertainty in markets, which, to a large extent, has been caused by the dismantling of the guardrails in which the political debate have moved. Now let's start at the beginning. What were those guardrails and what kept politics out of the market for such a long time? Rob Prugue 03:04 I think the best way to explain this is it's it's nascent, and where I least I see it began, and it probably began post-WW2, when the West in particular, needed to rebuild itself after near a decade long World War and the destruction that obviously it needed to be addressed, and having learned the lessons of previous mistakes such as League of Nations or working in a bilateral World, the West appreciated early on. In order to counter the Soviet force, it needed to unify, and as part of that, it needed to build a system that would rebuild an economy by lifting the ship rather than individually handing out life preservers and life jackets to sectors, or worse, certain people. As a result, guardrails were built to make sure that this was a system that benefited the totality, rather than specific groups, and over time, that worked well. This is not to suggest that neoliberalism didn't have its challenges. Of course, we had wars. Of course, we had economic cycles. Of course, we had large unemployment. But when you compare it to pre-1946, and the fact that you know now, the world had access to nuclear destruction, all things considered, neoliberalism certainly post-WW2 had its benefits, and that peace brought a national prosperity. The guardrails were there, not necessarily as instruments of curtailing growth, but think of it as. Golf rules. I'm not a golfer, but when you go out in the golf there are certain etiquette and rules that are applied. The guardrails have that. But then they built systems and infrastructure to again, manage that. It's as simple as the World Bank, Bretton Woods, World Bank and IMF, the United Nations, the international scope, the World Health Organisation, to name but a few. But then progressively, even domestically, you had these guardrails, and that despite its shortcomings relative to pre-1946, level allowed the West to unite as a group, allowed the west the formation of NATO, the formation, again, of these other organisations. And that benefited many, until it didn't. Wouter Klijn 05:53 Yeah, Elizabeth, if we go to you, do you want to provide a little bit of a local flavour to that and put it in the context of the local labour policies. Elizabeth Humphrys 06:05 Sure, I think for Australia and other what I'll call, like highly industrialised countries, not so much like just the what we would call the West. After the World War, there's this long period of growth, largely fueled by the rebuilding efforts in some ways, after World War Two, but that protracted period, like the, you know, in my work and in political economy we call the long boom, it sort of came to an end in the early 1970s with the oil shocks, issues around inflation and other sort of not just issues external to the economy, but perhaps contradictions within the economy that sort of came to the fore. And I would characterise that period as more taking, taking its its lead, perhaps from Keynesianism, like these are these bodies of policies are never implemented, as in a textbook, right? They're contested, they're partial. They vary between countries. But the end of that period, in the early 1970s really, for me, that's when neoliberalism starts to cohere, not just as an ideology, but as a political project that begins to be implemented in different countries, and it looks different in Thatcher's Britain, for example, or Ronald Reagan's us, to how it looks in Australia. And it's really only in 1983 with the election of the Bob Hawke government under the slogan bringing Australia together, that we start to see some of the kind of like Big Bang economic reforms that we associate with neoliberalism, like floating the floating the dollar, foreign bank, banks being allowed into the country, reductions in tariffs, privatisation, these sort of all flow from then. But what's really important to understand is these things are not just about what the ideology of an individual political party is, but often who has the political capital to implement those policies at that time. So even though, of course, Fraser was much more conservative than Bob Hawke on a range of issues, he didn't really have the political capital he was in a war with the unions to introduce the big reforms that were being called for via government, government inquiries, when Bob Hawkes comes to the table and that bringing to Australia together, slogan, it's really to the way I would term it, restore profitability of the system that the rate of profit from investment needs to be restored, or accumulation needs to be restored. And Hawk says we have the answer that, in collaboration with the unions who have been on the front foot in the 1970s demanding a bigger share of the pie, a bigger share of GDP going to workers wages vis a vis to profit. He says, we can help deal with this unrest. And really that's the political context for me that sees this weird situation where we both get the advance of neoliberal, what we would call neoliberal policies that I mentioned a moment ago, but also at the same time, a return to centralised planning, centralised wage setting and bargaining with the support of some of industry, the metal Trades Union, for example. Sorry, the metal trades industry body was really central, as was the metal Trades Union, into bringing in this new kind of arrangements under the hawk heating government, which, of course, longest labour or social democratic government, 13 years from 83 up until 1996. Wouter Klijn 09:51 Yeah. So if we then draw back to a global picture, and you know, Philipp, I introduced you as an expert on China and Russia relations, do. Can we even talk about neoliberal guardrails in those countries, but also broader? How do you see the global perspective from that? Philipp Ivanov 10:09 Yeah, well, I think from the from the End of the World War Two, just drawing on what drop told us, you know, you have this dynamic of competition. So you have the two geopolitical blocks. You have the US-led system, and you have the Soviet Union and its allies, and then you have a whole group of non-aligned states. Now we call them kind of geopolitical swing states, using the Goldman Sachs sort of terminology, but back then, they were called non-aligned. So the India and China can be in that category as well. Then us creates the international institutions that Bretton Woods institutions, but it's institutions that are mainly built by the West, but, but right at the beginning, in the 1940s and 50s, there was a genuine desire for this institution to include everyone, including the Soviet Union. So there's dynamics of competition on cooperation. Was still was still there the non-aligned states, and particularly big ones like China and India are quite weak and underdeveloped, so their role in international system is really not that important. So it's really the world is dominated by this, these two rivals, and then as Soviet economy and political system starts entering stagnation. In the 1970s you know, us, led bloc continued to prosper, and with that, the Bretton Woods institutions and the systems that you know that we today discussing as neoliberal systems, largely, you know, by the 1980s you know, the Soviet Union enters into this period of deep and as we now know, the final decline and and the US led system strived and prospered, and it enters its golden age, which is essentially 1980s and 1990s you know, the age of globalisation. And you know, of course, it's uneven. It's an unequal as the rest of for the rest of the world. But we see, you know, by the 1980s we see the sort of this golden age of US led order, including the political order as well that which has elements of neoliberalism. So you have the globalisation, both economic but also political and cultural. You have US Strategic Hege money, essentially, is only one prime one superpower. We have absolute primacy of the US dollar, you know, of US culture, to some extent, of the US, economic systems and rules and structures, you know. And then we start seeing the rise of China. But it's the rise that was back then, seen as benign, you know, the consensus was that the China will become the United States, just like the United States or any other democratic nation, as its economy became a market economy, you know, you we had, you know, from 1990s to about 2007 we have a stable and predictable Russia that relatively benign, with a few exceptions. And then you have convergence of most states, including what used to be called non-aligned states in the 70s, you know, around the US led system, largely with exception of maybe some countries like Afghanistan or Nicaragua and so. And then the rise of the technologies as well, which, you know, played a big role in that convergence, the internet and then social media. So then that's kind of where we ended up by 2005 or so, you know, when I think that order started to unravel. But I think that will be your next question, yes. Wouter Klijn 14:21 So to what degree is this, this framework synonymous with like, you know, what people refer to as the peace dividend, you know, Pax Americana and the great American Peace. Is that all overlapping? Or do you see this as a separate system? Rob Prugue 14:36 Any government that swayed too far away left or right from the guardrails, got penalised in the borrowing cost. So whether you're left or right, you had policies that you needed funded. Some of these policies couldn't be self funded through taxation. They needed to borrow money, and so there was a shared vested interest for since basically much. Of the post-war period, until the guardrails began to be dismantled. And within that dismantling of the guard rails, we now began to see certain sectors benefiting at the expense of the rest. And as that continued, we saw more and more disenfranchised so the rust belt of the US, they felt the pain as the factories were being closed and moved to China. Australia used to have some manufacturing. Now we're, you know, now we're mining and service, very little manufacturing. So you can see how this sort of morphed itself very slowly, one drop at a time, until that glass got full. Yeah. Wouter Klijn 15:47 So Elizabeth, if we take a domestic view at this, how did those guard rails sort of got eroded here? Because I think you tie it back in with some of the weakening of domestic institutions, Elizabeth Humphrys 16:02 Yeah, I guess, like, I come at neoliberalism in a more critical fashion. So when we're talking about the guardrails, the setting up of those guardrails, or the setting up of frameworks, was always contested in the first place. It's not like we can presume there's a shared interest, even between unions and business or the or even within the corporate sector, between finance and manufacturing, right? These things are always contested politically. So for me, I think we need to think globally that the implementation of neoliberalism had its antinomies. It had the negative things or the negative consequences. And some of this included from what I would call from below, right. So around 2000 we actually see the outbreak of mass social movements moving from the Global South, Latin America, from, you know, the the so called IMF riots, the water wars in Bolivia, into the streets of Seattle and eventually into the streets of Melbourne, contesting the roles of things like the World Economic Forum, the World Bank. We've got to understand this is nearly revisit as contested in both its implementation and it's sort of thinning, as we've been talking about. And the timeframe this happens on in different countries varies. So, you know, we bring up Russia and the Eastern European countries. Neoliberalism comes later in...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/39229895
info_outline
124: Fidelity's James Richards – Investing in Energy Transition Materials
12/01/2025
124: Fidelity's James Richards – Investing in Energy Transition Materials
In this episode, I'm speaking with James Richards, Co-portfolio Manager of Fidelity International's Transition Materials Strategy. James runs a strategy that invests in stocks of companies that are exposed to materials that will play a crucial role in the energy transition. And it's not all about copper or lithium. James keeps his investment universe wide and includes commodities, such as animal fats and wood chips. We discussed the spike in rare earth materials earlier this year. We also look at why this is a super-cycle, but unlike the previous, China-led one. And finally, we explore whether this strategy correlates with the Australian economy and its emphasis on materials and style factors, including value. Enjoy the show. Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at Overview of podcast with James Richards, Fidelity 01:00 What are transition materials? 04:00 This was an analyst-driven idea, based on common themes emerging in different materials, rather than a product team idea 06:00 This is a different supercycle from the China-driven supercycle 07:00 There is a school of thought that says iron ore is benefiting from the transition. I don’t really believe that 9:00 The energy transition will have an element of decommoditisation to it. There will be pockets of price premiums 11:00 Rare earth prices spiked earlier this year as generalist investors came into this market 14:00 In the first six months of this year, China has installed as much wind and solar as 90 per cent of all wind and solar ever built in the US. 17:00 Are we experiencing a uranium/nuclear renaissance? 21:00 This is not a commodity strategy; you invest in equities. Why? 24:00 We are looking to expand the universe rather than contract it, because we think the opportunity set is wider than even we envisaged. Chemicals is an interesting area. 25:30 Correlations with the commodity-heavy Australian industry. 29:00 You can see the way the world is heading, but when we get there is often unclear. You can lose a lot of money investing in a great demand stories that are just uninvestable at this time 31:00 Is this a value play? Disclaimer: The content in this podcast is for institutional and wholesale investors and is not for distribution to retail investors. This podcast has been prepared without taking into account any person’s objectives, financial situation or needs. It is provided for general information purposes only and is not intended to constitute advice of any kind. References to specific stocks is for illustrative purposes and is not a recommendation to buy, sell or hold those stocks. You should consider the relevant PDS and TMD for any Fidelity Australia product mentioned before making any investment decisions, available at . Full Episode Transcript Wouter Klijn 01:16 James, welcome to the show. James Richards Hi. Wouter, thanks very much for having me. Wouter Klijn So let's start at the beginning. What are transition materials and why should institutional investors care? James Richards 02:15 You know, I think that the transition is one of the big structural thematics of the next couple of decades, and transition materials are what I call a wide range of commodities and materials that benefit from the process of the transition, and in many cases, the demand driven from the transition, coupled with the fact that it is never been so difficult to bring on new supply of a number of commodities, will create the conditions where, you know what I think could be the next super cycle for a wide range of commodities. And this is a very, very investable thematic, in my view, Wouter Klijn 02:49 Before we get to the super cycle, can you tell me a little bit about where this idea came from? Because I understand this was more of an analyst driven idea to set up the strategy. Is that right? Yeah. James Richards 03:00 I mean, you know, I think normally ideas are born in this, in the product team, and, you know, then they go and find a portfolio manager, you know, this one is something that came out through, you know, hours and meetings and the sort of the work that we were doing around, around the commodity space, and the same themes, you know, started to come up again and again, first of all, in copper. But then, you know, we began to get increasingly excited when we saw the same themes coming up across a wide range of commodities, and, you know, as far afield as vegetable oil and animal fats. And it was then that we saw that there was a sort of wide ranging, quite diversified, investable thematic here. Wouter Klijn 03:41 So what's the story with animal fats? James Richards 03:45 Well, animal fats is so the renewable diesel chain, you know, particularly in the US, but also also wide. What are more widely, you know, is sealed by animal fats and vegetable oil. And you know, there is a, there is a fine, a finite supply of these things, and so you have to incentivize it. And the only way to incentivize new suppliers through price and, you know, the demand that is in there's been created by stricter regulatory standards and and stepping up of requirements, you know, really places a challenge on those supply chains. Wouter Klijn 04:22 Yeah. So is that in your portfolio animal fats and oils? James Richards 04:26 We certainly think that the vegetables animal fats is a very interesting long term thematic, Wouter Klijn 04:30 yeah. Okay, interesting. So coming from themes that you saw in copper and copper is, of course, a key material in electrification. So is this transition the story to renewable energy? Is it just about electrification, or are there themes involved in this as well? James Richards 04:51 So I mean electric, if you look at the sort of the current opportunity set, electrification is an obvious one. You know, it has various aspects. You know. Renewables is one obvious aspect. Electric vehicles is another. And if you think about sort of the grid requirements of the increased demand for electricity, you know that that that that also has some pretty found profound implications. But it's not just electrification. If you think about sort of hard to abate areas like like steel production, maritime fuels, aviation fuels, you know, the circular economy is a very is a very interesting area. You know, it's a much, much wider area than just electrification. Wouter Klijn 05:38 And I think you've mentioned digitization and urbanisation, as to key thematics that are related to the transition materials. In particular, James Richards 05:47 I think one of the one of the interesting aspects that you get here is that you get demand that is driven by the transition but then you have a lot of other structural demand drivers that are also facing in the same direction and pulling on the same commodity demand chains. And so, for instance, AI and data centres will drive demand for copper and other and other commodities, but also the industrialization of India and Southeast Asia as they start to hit levels where commodity intensity picks up quite dramatically. You know, they're essentially being competition with the transition and data centres for scarce supply of commodities and, you know, and that is quite exciting, I think, in terms of compromises will have to be made. I mean, if you look at the sheer population size in India, and you put a sort of average peak commodity intensity on it, like the numbers are mind boggling. And so, you know, compromises are going to have to be made. And the only way that you get those compromises made, and the signal that you get to to get substitution, and all the ways to get the numbers to work. You know, the only way you can get there is through price. Wouter Klijn 07:03 So there's a couple of big trends involved. You just mentioned one around the super cycle in commodities. So when you sort of look back over time, have we had some of these super cycles before? James Richards 07:16 I mean, I do have a history degree, but not much of a history student, so I'm kind of more focused on, on the most recent, which is, you know, the early, the early years of my career were with the China driven super cycle. And, you know, that was one of the reasons, where I saw, you know, clear echoes of what I was seeing, you know, today, you know, versus what I was seeing there are seeing above trend demand for commodities driven by China hoovering up, you know, pretty much every commodity in sight. And you know, decades worth of under investment in commodities at the time. So you had a relatively curtailed supply side. And that's really important is, you know, in order to make money in commodities, the supply side has to struggle to keep up with demand. And so, you know, commodity with 20% demand, keiger, you're not necessarily going to make money if the supply side is a lot, is it elastic? And so, you know that supply side is really, really important, but it is a different super cycle, I think, from from the China driven super cycle. In the the China driven super cycle, I think mainly had winners, whereas in this super cycle, I think, you know, there are clear winners and losers in terms of in terms of demand, you know, and you know, the transition kind of gives the clue to that in thermal coal, demand should decline over time. All demand should decline over time. You know, we're talking, we're talking longer term here. And you know, there are areas like, I think, although there are some demand benefits for steel, you know, the process of decarbonizing steel is quite, is quite difficult and expensive. And so I think there is, there's some difficulties around that. And you know, I'm in Australia, and you know, there's a school of thought which, which says that iron ore is benefited by the transition. I don't really believe that, you know, I think that the iron iron ore, and particularly lower grade iron ore, is one, is one of the commodities I have big question marks on on a 10 to 15 year view. Wouter Klijn 09:18 Why is that? Because you could imagine, that you know, steel is still used in some of the infrastructure. I mean, you know, you think of windmills, probably mainly carbon fibre, but there's still elements of steel. James Richards 09:31 Sure. But if you're, if you're going to produce low carbon, low carbon steel, you know, the the miners are working with the steel companies on technologies, but you know, there's a lot of unanswered questions around what the cost implications of those that are, what the capital implications of those are, and who's going to pay for it. And so I'm not I, I think that I find it difficult to see a world that doesn't use Pilbara, Pilbara, but I just don't know exactly what that world looks like. And. And what, and what the what the implications are for their position on Costco. Wouter Klijn 10:04 Yeah, yeah. So another element of this super cycle that is relatively unique to this one is there's an element of a de commoditization of certain materials. And I think it's an interplay where ESG credentials, geopolitical alignment and some processing capabilities can cause changes in prices and cause some price premiums. Can you explain that a little bit? James Richards 10:30 So it's something I believe in quite strongly. And you know there is, there's active debate, and you definitely come across people in the industry who disagree with my point of view on this, but, but my point is this is that, essentially, you know, as we begin to look forward for different things in a, you know, a tonne of commodity, of commodity product, the features that we that we need to promote, are going to have to be incentivized in some way. So if you want a low carbon tonne of aluminium, you're gonna have to pay a premium for that. And if you look at the producer's day, you get some people who do get premiums for that. You get you get some who don't. And there are some commodities where it's quite difficult to see these premium but we've seen a really interesting example this year in rare earths, where, you know, the world has priced rare earths for the immediate part, for the last few years on essentially the China price. And you know, supply chain security suddenly come right to the front of people's focus and and you know, the US government has done a deal with with a large US rare earth producer this year, giving a price floor which was very significantly above the China price. And so, you know, if you particularly in a world where you mind about the security of your supply chain, there are areas where you're gonna have to pay a differentiated price, I think, to incentivize Wouter Klijn 12:06 Yeah, so the rare earths were a bit of a outlier, I think, in recent times, where they spiked up, and I think more recently, came down a bit. But I remember you talked about like the teslaization of rare earth stocks. Can you explain it a little bit? James Richards 12:23 I've been doing this, this for 20 years, and I'm kind of used to generous participation in in in metals and mining being been sporadic and selective, and multiples generally being quite low. And you've seen, you know, so you've seen in various, in various spaces, this year, the the multiples suddenly expand dramatically, as as, I guess a wider investable public has come into the stocks. And, yeah, I mean, as rare earths were, were right at the forefront of attention, you know, the multiples did expand, you know, very, very dramatically, which is, you know, which is a lot of which is very pleasurable all around, Wouter Klijn 13:07 yeah, so did you do some profit taking on that? James Richards 13:09 I think Fidelity would really like me not to answer that. Wouter Klijn 13:16 Fair enough. So rare earths are intricately linked to China. And I think we've seen in a number of transition materials, where, where China comes up. I saw somewhere a statistic that I already control 70% of global mineral refinery capacity. That makes you think, are there geopolitical elements that you have to be aware of when you invest in this space, because obviously there are some tensions between China and some of the Western developed countries. If they have a sort of a stronger strangle hold over some of these materials that can potentially impact valuations, there might be strategic considerations that come into play. Is that something that you keep in mind when you look at this? James Richards 14:02 I mean, absolutely. I mean, you know, rare earth, as you said, is a really good example. I mean, it's not 70% processing in rare earths. It's more like 90. And, you know, magnet making is also dominated by the by the Chinese. And, you know, I think, I think, given, the events of this year, people are very, very sensitive. You know, people have, certainly, over the last two or three years, have become a lot more sensitive as to where their supply chains are. You know, we've seen, we've seen several geopolitical events over that period increase that consciousness and and so if you, if you want trade routes to and supply chains to shift, you're going to have to incentivize that. And there are some areas, you know, and we talked about about rare earths, where the process of that incentive incentivization has begun, and you've seen stocks, individual stocks, benefit quite significantly from that. And there are some where it hasn't so. And you know, China dominates with the world's processing of a number of metals. But, you know, you look at copper smelting, and and, and some other, some other processing industries, and you know, there aren't, at the moment, huge incentives being offered. And, you know, and the there is limited incentive to build new capacity in the West, and in the longer term, we're going to have to think about whether that's right or not, and how we change that. Wouter Klijn 15:32 Yeah, yeah. Now another potentially geopolitical, and definitely a political topic is the Trump presidency. Of course, we have seen the impact on, you know, the energy transition in the US, where less attention for for renewable energy. But how do you look at that in terms of investing in the transition materials? Does that impact your strategy a lot? James Richards 15:57 It's great. Stat in the in the bhp commodity review at mid year, you know, it said that. It said that China had installed, I think, as much wind and solar in the first six months of this year, equivalent to 90% of the wind and solar ever built in the US. And that is, I mean, mind blowing. And you look at quite significant rollout in other Asian countries, Africa is beginning to, is beginning to instal some meaningful amounts of renewable energy as well. And so you definitely have some gives and takes, and even in the US, like I'm not going to comment on policy, on policy, but you've seen some areas where which have been much, much stronger than than expectation, as well as some areas which are probably where our demand expectations have dropped a bit. Wouter Klijn 16:52 And what about the tariff war that we saw earlier this year? I remember you were speaking at one of our events in February, and there was a lot of questions around Trump, but a tariff war hadn't happened yet. And, you know, materials, commodities, it's a global trade. Did that get a bit of a knock from them? James Richards 17:11 Well, we obviously saw a lot of volatility in the in the first in the first half of this year. And you know, the lack of visibility was, I think, difficult for producers and customers were kind of feeling their way to a degree. But I mean, kind of, if you think about what you actually saw, speculation about copper tariffs led to a huge amount of the world's visible and invisible copper inventories heading to the US, tightening the global market and and and so and so, arguably, was copper positive. And you know, there's still a large, a large amount of inventory sitting in the US, which you know, would need shifting if it was to come available to China or the rest of the world. And you know, tariffs can create new profit pools and and as well, as well as reduce, reduce other ones. And so, like, I think, for an active portfolio manager, you need to watch change and when, regimes shift, you need to be mindful, but more often not, they create opportunities as well as risks. Wouter Klijn 18:26 Yeah, yeah, for sure. Now, Trump is not the only one that sort of affects the energy transition. We also seen a lot more demand coming from the rise of artificial intelligence and use of artificial intelligence, especially data centres where, you know, they're quite energy hungry operations. How do you look at that? Is that affecting you? Think the transition could derail it? Could it, you know, delay it? What's your What, what's your take there? James Richards 18:55 I mean, it's, it's something that that we factor into the way we think about commodity demand and, and, you know, is, is it's nice to have in many cases, rather than utterly central to investment cases. And, yeah, as I said, I think earlier, like we see AI and and data centres as, as competing with, with other significant structural drivers for in some cases, you know, quite scarce supply of commodities. So, I mean, it's definitely, it definitely, for me, a positive, but it's one of a number of positives. It's not the it's not a main driver, and it's not massively significant, particularly in copper today, so and so the relevance is still to come. Wouter Klijn 19:41...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/39173300
info_outline
123: Cbus' Linda Cunningham – Pricing Risk in Debt Investments, Private Credit and the Impact of Retail Investors
11/17/2025
123: Cbus' Linda Cunningham – Pricing Risk in Debt Investments, Private Credit and the Impact of Retail Investors
Note: This episode was recorded before the release of ASIC's Private Credit Surveillance Report 820. The ASIC report mentioned in the podcast relates to the Private Credit in Australia Report 814, released in September 2025. In this episode of The [i3] podcast, I'm speaking with Linda Cunningham, who is the Head of Debt and Alternatives for Cbus Super. We talk about some of Linda's core beliefs when it comes to debt investing, including the banking 101, to be very careful when borrowing short and lending long at the same time. We discuss the importance of cash flows and ensuring the ability of a borrower to pay their interest. We discuss liquidity mortgage funds and private credit funds aimed at retail investors, as well as the occasional funky fee structure. We even talk about how Linda once provided a loan to finance a catamaran called the soggy moggy. Enjoy the show! __________ Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at _____________ Overview of podcast with Linda Cunningham, Head of Debt and Alternatives, Cbus 03:00 My father was a bank manager and I wanted to get into banking at an early age 04:00 In year nine, I had a discussion with a teacher about the difference between a bank and a building society 05:30 Late 80s, the property market was booming, but interest rates were high. One of my jobs was to drive to Geelong and go through the credit files. One of the lessons out of that was how important cash flow is for a loan. Where is the interest coming from to pay you? 11:30 Matching liquidity profiles, the case of AXA products marketed to retail clients. “Having daily liquidity is great, until it is not” 17:30 You can finance anything, I’ve financed a catamaran, but it is about where it sits in the portfolio 18:30 Setting up the internal credit capability for Cbus. “You are coming from a bank and so you don’t think about who is going to communicate with the borrower what the interest rate is” 19:30 “I started in 2016, but we didn’t write our first loan until 2019” 20:30 Financing a catamaran, the ‘Soggy Moggy’. 22:30 Debt is not like equities; you can’t just go out and buy a ready-made portfolio 32:00 There is no pressure for us to allocate money [to loans], we can give that money to managers 34:00 On occasion, we are seeing some ‘funky [fee] structures’. 36:00 Private credit is not new; there have been mortgage funds operating in Australia for at least 30 years 38:00 What is getting more focus is: where is the private credit sector getting its money from? 40:00 I do worry about the flow-on effect from what is happening in retail products 41:30 The market is very competitive on loan transactions at the moment, are people pricing risk appropriately? 45:00 It takes someone really strong, who gets paid on funds under management, to say no to the funds, whereas at Cbus we don’t have that tension. I can look at other credit managers 49:00 On the internal front, we would like to do a little more construction deals. We think there is going to be a little more residential over the next year or so 50:00 We are not sure if in affordable housing equity is the way to go. But we do think that with debt you get an appropriate return for your risk Full Transcript of Episode 123 Wouter Klijn 01:16 In this episode of The [i3] podcast, I'm speaking with Linda Cunningham, who is the head of debt and alternatives for Cbus Super. We talk about some of Linda's core beliefs when it comes to debt investing, including the banking 101, to be very careful when borrowing short and lending long at the same time. We discuss the importance of cash flows and ensuring the ability of a borrower to pay their interest. We discuss liquidity mortgage funds and private credit funds aimed at retail investors, as well as the occasional funky fee structure. And of course, we delve into the state of the private credit market and ASIC’s recent comments on the sector. We even talk about how Linda once provided a loan to finance a catamaran called the soggy moggy. Enjoy the show! Linda Cunningham 02:06 Linda. Welcome to the podcast. Thanks for having me, Wouter. Wouter Klijn 02:09 So your journey started a bit unusually compared to maybe some of your peers. I believe you started in the industry when you were just 15 years old. How did that happen? Linda Cunningham 02:20 That's correct look, and I'm going to age myself here, but we are talking, you know, the early 1980s I had grown up. My father was a bank manager, so I had, from a very early age been exposed to banking, and by the time I was finishing year 10, I had a decision to make, which was, you know, Did I did I want to go on to year 12? Did I want to go on to university? I knew I wanted to end up in banking. Superannuation funds didn't really exist at that time, but I knew I wanted to get into the lending side of things, and I had the opportunity to actually start working in the local branch at the bank, a different bank to where my father was, and I enrolled to do a TAFE course. So I did a Gosford Teik, an accounting course three nights a week for four years. So once I finished that, I enrolled in doing my degree by we'll call it remote learning. In those days it was called by a correspondence. Yeah. So by the time I was 23 I had been working for eight years, three years in a branch and five years in the corporate banking area, yeah. And I had my degree. Wouter Klijn 03:40 Excellent. And I think there was an anecdote where you even on the school playground would discuss monetary policy or something. Linda Cunningham 03:49 Look, I do remember, in a commerce class in year nine, having a debate with my teacher about the difference between a bank and a building society. And apparently I was, I was quoting the Banking Act of 1959 in those discussions to tell him there was a difference, right? Wouter Klijn 04:09 Right. Not your average conversation, I think, for a teenager. Linda Cunningham 04:12 No. But look, it had been something that had always interested me. And look, I still now people have various dreams. One of my dreams is always rolling coins. So yeah, rolling up the 20 cent pieces and 50 Cent pieces into the pieces of paper. I can still do that in my head, Wouter Klijn 04:31 Very good. There's probably muscle memory comes into play with that one. So having started relatively young, you've seen probably a few financial crisises. I think the 1990 collapse of the Geelong based pyramid building society was one of them. Can you share some of your learnings from some of these downturns with us in terms of how it shaped your outlook on investing? Linda Cunningham 04:56 And look, that was absolutely a very interesting time to be in the lending space. I had moved from New South Wales to Victoria with my work. And, you know, late 80s, everything was booming in property, everything was booming everywhere. But you also had interest rates pretty high. And, you know, the market was, was, was very hot, and the bank I was working for had exposure to all of the pyramid associated companies. So there were actually four building societies there. And we were actually doing what these days would be called a warehouse loan. So we're effectively providing them, you know, with the loan, 80 cents in the dollar, based on a, on a on a pool of mortgages, and those loans, the underlying loans, would be some commercial property. They'd be residential. It'd be a whole mix of things. And one of my jobs I got to do was to get on the freeway and head to Geelong every few months and actually sit there and look through the credit files. There was you couldn't get them on Excel. You couldn't log into a data room. You'd actually go in and sit there in the premises and look through those credit files. And I think for me, one of those, the sort of lessons out of that was, was really how important cash flow is for a loan. You know, if you are, you know, in our case, we're expecting, you know, the borrower being, say, pyramid building society, to still pay our interest. But you know, if you've got a pool of loans that are in there, that are just secured against a vacant block of land or a non income producing property, where is the where's the income coming from, where's the interest coming from, to actually be able to pay you? And I think that was, that was probably one of the strongest sort of lessons that I actually had, was really how critical income is. And I would say that was even important. If you looked across, you know, the banks books at that time, and a couple of other names you've got to mention from that era. You can't not mention the state mortgages tri Continental, all of the state banks, like I work for State Bank of New South Wales, which actually was in a pretty good state, but we're probably still in that time whereby we actually had a large proportion of our property based loans, which were from an LVR perspective, we had breaches, right? And it was one of those situations where you we actually did okay, like those loans were were pretty good, because the income was still solid on them. The borrowers were still earning enough income from these assets to actually be able to pay the interest. But, you know, they suddenly went from having a loan to valuation of, you know, 60% to 80 or 90% breaching covenants, etc, just really because of the rapid change in interest rates in the market and the impact on on property values, Wouter Klijn 08:02 yeah, and I think that importance of knowing where the income come from and the underlying assets that sort of carries through through time. Because I think we recently spoken about a loan, and we won't name any names, but it basically looked like a term deposit. But when you looked under the hood, it was something very different, with very different liquidity profile, Linda Cunningham 08:24 Absolutely. And look, that's, that's not a new thing. You know, it has its place. It is just understanding how you're matching what you're what you're doing. I mean, we, we do do construction loans, and generally most construction loans, particularly you, if you're building, say, an apartment complex or something like that, your your only income, your only earnings that come in is when your pre sales of those residential apartments settle. So you are capitalising interest on on your loans. Now I think that's absolutely fine if you're understanding what you're investing in and understanding what you're expecting out of that investment, Wouter Klijn 09:09 Yeah, and as long as you understand the risk profile, because you know, if you expect the term deposit, then you find underlying assets that have maybe seven, eight, sometimes 30 year maturity rates, then that's quite a mismatch, of course, and it sort of comes back to what I think I've heard you talk about, this sort of banking 101, where you basically have said you never borrow short and lend long at the same time. Can you explain a little bit that philosophy and how that comes back today in your approach. Linda Cunningham 09:42 I mean, when you think about banks or or any form of money lender, you know the reality is you, you need to raise your funds from somewhere, and then you're lending it out. And most organisations, or most of those structures, banks, in particular, I mean, banks run raise funds for. From long term capital markets. They have equity in place. They have subordinated debt in place. They have term deposits from from people. But they're, they're consciously thinking about the overall asset liability matching. And I think that's, you know, that classic thing I worked at AXA, so I moved to AXA once I left banking. So I moved there in in 2000 or 2001 I was there for over 12 years. So that obviously covered the GFC as well. Yeah, and look, you know, AXA had what they referred to as an income the mortgage funds were income funds, Australian mortgage Income Fund. Those funds were providing commercial loans to small corporates. So you know, they were traditionally the sort of four to $20 million sort of size loans. Really good book, really good quality book. There are a few others in the market, like perpetual, very similar. I mean, probably 40% of the assets in that portfolio were actually your neighbourhood shopping centres. You know, the ones where you've got Coles, Woolworth, your chemist, your butcher, those sort of things. So good income producing assets. But those products were to retail and wholesale investors, and as part of the characteristics of those funds, they did have the ability to have daily liquidity, and that's great, until it's not. I mean, there was nothing wrong with those loans that were in that book. And for you know, the entire life of of that particular fund, it had been in net inflows every single month, up until September 2008 and then by 2008 you had the Australian Government introduced the deposit the deposit guarantee, straight away, that really reinforced for people, the difference between something like a mortgage fund or a private credit fund or any other sort of funds. And you've got to remember, these things have been around for decades. You started off with debenture funds and so on, suddenly realised that it's very different to being with the bank. And look, you know that that fund was, was frozen in October 2008 we at that stage, we had one problem loan across the whole period of time, one problem loan, but our investors had to wait, you know, three to four years to actually get their money back, because we had commitments in place for loans. And often loans will repay you early, but you can remember it's it's also GFC, it's hard to refinance. So borrowers weren't going to repay you back early unless they, you know, unless they wanted to. So, you know, I think that for me, really highlighted that aspect of, you know, borrowing short daily liquidity and offering a product or that, or investing in something at the back of that that is a longer term investment. Wouter Klijn 13:24 Yeah, yeah. Because, essentially, to provide that liquidity, then you either have to build in a cash cash pool, which will have a drag on returns, or you rely on new investors coming in, which is, you know, of course, not guaranteed, but, but those structures are still around, right? Linda Cunningham 13:44 Look Absolutely and we already use the word pyramid, but it is. It's one of those things I mean loans, private credit is good. Loans are good. You've got to remember, we're still talking generally at the top of the capital stack. So the asset class, I like, it's, you know, just making sure that investors understand what what they're getting in assets. These assets will produce income coming off them, so there's always a little bit of income coming out. But unless you're actually getting loans that are repaying during that period, or, as you said, new investors coming in to pay out the old investors. It works until, as I said, until it doesn't. Wouter Klijn 14:34 Yeah, no, that's, that's very true. I can remember that period. Actually, I was just starting at Morningstar, and suddenly all these funds started to lock up. And there was plenty to write about to tell you that, but it was a very interesting period, for sure. Linda Cunningham 14:50 Look, I remember it quite vividly. I mean, I was, I was involved in actually looking at some of the hardship requests that came through. And. That is absolutely devastating to see that, you know, there were people who had sold their home, and the advisor had told them to put it in this account because it was, you know, it's like a term deposit, or it's a cash account. Don't worry about it. And then they go to buy a new home and they don't have their money anymore. Situations where people who had saved a deposit had been saving it because the interest rate was that little bit higher, they'd been saving their deposit there they couldn't access their deposit. There were situations where people had been putting aside money for their wedding, money set aside for funerals, other family events that were taking place. And when you read the the hardships, provisions, I mean, that's, you know, it's very tough, and you feel for people who just haven't understood or haven't realised that this situation could happen, that when they do want their money back, they won't get their money back. So it is about, you know, is it right for the person and how much, how much they should have in those kind of structures? Wouter Klijn 16:11 Yeah, and that brings a very sort of practical face to liquidity. Because I can also remember, you know, this, you know, the famous book, The Big Short, where they're talking about these investments in subprime loans, and basically they put this trader forward as this genius trader, but his funds locked up. And you sort of justify that by Well, if you go out now, then you lose all your money, but if you stay for a while, then you make a lot of money, but the investors might have different liquidity requirements, so you can't just tell people like you're not getting your money back, right? Linda Cunningham 16:46 No, look, it is. It is just challenging. I, as I said, I think loans is great. I'm I'm too conservative. You know, it is about I like loans. I love looking at them, you get to see so many different asset classes across my career, working in banks. Look, I've done things from hotels to hospitals. I've done seed lots, I've done abattoirs, I've done a catamaran. There's some really interesting things that you can finance. Because the reality is you can finance anything but, but it is about where it fits into a portfolio. Wouter Klijn 17:32 Yeah. And that brings us sort of to the direct lending business, because you originally joined Cbus in 2016 to set up the direct lending business for the fund. What were some of the main challenges to get this off the ground? Linda Cunningham 17:49 Look, I would say it was, it was very much at the beginning of sea buses, internalisation journey, I probably thought that there would be, when I arrived that there would be more processes and procedures and things like that in place. The operational background that Brett Chatfield is is is very determined and very clear on what he wanted to achieve. So when I arrived, I spent quite a lot of time working with him in terms of, you know, just setting up the whole, the whole processes, the procedures, the Credit Framework, you know, the delegations, the whole process for a credit cycle. I mean, we do have, you know, a credit process and framework, which is, you know, 4050, page document that gets updated each year in terms of making sure that everyone in the team is consistent in how we think about, you know, the debt side of things, and what we look for, what you've got to address in your credit manuals or in your credit papers and things like that. So there was a lot of work that was was done in putting that in place. But also, you come from a bank, you don't even think about who is going to produce the interest statement for the borrower, who is going to communicate with the borrower and what their interest rate is. So there was a lot of work with our operations team to make sure that we could actually put those, those things in place. And of course, don't forget your regulatory things. You know, all of a sudden you're going okay. So do we have lending as a designated service on our AML KYC policy? Where are we on the regulatory side of things? So I started in the end of 2016 we didn't write our first loan until the beginning of 2019 Wow. ...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/39001640
info_outline
122: Fidelity's Maroun Younes and James Abela – SMIDs in a World of Large Cap Dominance, Are Things About to Change?
11/03/2025
122: Fidelity's Maroun Younes and James Abela – SMIDs in a World of Large Cap Dominance, Are Things About to Change?
In Episode 122 of the [i3] Podcast, Conversations with Institutional Investors, we speak with Maroun Younes and James Abela, co-portfolio managers of the Fidelity Global Future Leaders strategy, about the attractiveness of small and mid-cap investments, a $12 trillion market with significant growth potential. They acknowledge the recent underperformance of small caps due to market concentration in large caps, particularly in US tech, but point out that people are starting to wake up to the risks associated with those concentrations. Are we in an AI bubble, driven by these large caps? The conversation starts at a high level, discussing the importance of quality, value, transition, and momentum, and then we do a deep dive into specific investments, such as Arista and FICO-score provider Fair Isaac Corporation. We also come back to AI and see how it can be used by asset managers. ________ Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at ________ Disclaimer: The content in this podcast is for institutional and wholesale investors and is not for distribution to retail investors. This podcast has been prepared without taking into account any person’s objectives, financial situation or needs. It is provided for general information purposes only and is not intended to constitute advice of any kind. References to specific stocks is for illustrative purposes and is not a recommendation to buy, sell or hold those stocks. You should consider the relevant PDS and TMD for any Fidelity Australia product mentioned before making any investment decisions, available at . Podcast Overview 04:00 Large caps outperforming small caps in the US is unusual; historically small caps have outperformed over time. But people are waking up to the risk of concentration, both at a stock level and sector level 07:00 We are not too concerned about US exceptionalism, because we don’t see a huge break point going forward 07:30 It is always hard to tell whether we are in a bubble, but there are early signs of a formation (of an AI bubble). There is a lot of spending in this area and at this stage we don’t see that return on capex coming through 09:00 Fidelity webinar on AI 10:30 We have four focus areas: quality, which is the love quadrant, value is a neglected quadrant, transition is the quadrant of hope and momentum is the hot quadrant 13:30 We have guardrails for allocating to the different areas: 40 per cent quality, plus or minus 10, value 30 per cent, transition 20 per cent and momentum 10 per cent, 17:00 The case of Arista, looking for a catalyst to unlock value 20:00 Another case study, Fico credit scores 23:00 On selling discipline 28:00 We are not looking to make a big market call, but are looking to participate in the continued rally 31:30 We mainly have exposure to China in the healthcare sector. Most Chinese tech companies are too large for us 32:30 Getting compared to the QSML exchange traded fund 37:00 Looking but not buying; the case of Deckers and the Hoka shoe 44:00 White paper on Lessons Learned over the years 45:00 Using AI in our work; you can get to a working knowledge of a company in a matter of minutes For the Fidelity webinar, 'Navigating the AI boom: A framework for investing', please see . For the Fidelity white paper, 'Discovering tomorrow's global future leaders, today', please see Full Transcript of Episode Wouter Klijn 00:00 Welcome to the show. James and Maroun Thank you, Hi. Wouter Klijn So why small and mid caps? What got you started in this particular space of investing. James 00:21 Well, for me, I started in the Australian market, in Aussie mins and smalls, but we were asked by clients to move into the global space. That's where Marouns joined me to attack this global market, which is huge. The tractions are significant. There is a very, very big market. The size of the market is 9 trillion US, which is huge. So 12 trillion Australian so it's 5x the size of the Australian market. So the opportunity set is significant. The breadth and depth of stocks is very significant. So the number of stocks you can own in the universe, in each sector or in each theme, is quite broad and diverse. Valuations are very attractive, and one of the other key things is that they are still under researched, and in many cases, under appreciated for what they actually have in terms of quality. So that allows moon and I to find ideas that are often 15 to 20% EPS growth on 15 to 20% roes trading on very reasonable multiples, compared to things that are more discovered in large caps and the size we can now go up to is about 60 billion US, which is our universe scope, which gives us quite a long runway in terms of years of holding stocks before they are large caps. They're all the key attractions. So it is a very attractive space. Wouter Klijn 01:32 So we've seen a lot of concentration, in particular US equity markets. And we did see that earlier this year's small and mid caps have underperformed a bit. Are the two linked? Is the concentration in the market affecting the smaller mid cap space? Maroun 01:47 Yeah, absolutely. So they're two sides of the same coin. So you've basically had in the US market a concentration of maybe half a dozen stocks, predominantly in the technology sector, and they've been doing incredibly well. So they've propelled the market a lot higher, and they've they've allowed large caps to outperform small caps. That's quite unusual. Small caps historically, if you look back 25 - 30, years, small caps historically, have outperformed large caps. They're smaller. They're growing off a smaller revenue base. It's much easier for them to double and triple in size over time, but certainly over the last maybe five or six years, that's not been the case. So it has tempered some enthusiasm, I guess, in the past, for smaller mid caps. But I think you're also starting to see people now waking up to the risks associated with the concentration levels, both at a stock level as well as a sector level, and people actively now looking to diversify away from that. Wouter Klijn 02:44 Yeah. So you don't see it as a structural change. This, the small cap premium is still out there. It might be just a temporary dislocation. Maroun 02:51 I think so. If you look back in history, there has been periods in time where, where large caps have done quite well. If you look back to the nifty 50, back in the early 70s, there was that there was a handful of stocks that did incredibly well, predominantly at the top end. So we do go through periods every so often. I think this is another one of those episodes. Wouter Klijn 03:09 Yeah. So might be a nice buying opportunity then? Maroun Absolutely, yeah, we definitely think so, yeah. Wouter So we've looked a lot at US exceptionalism, a lot of talk around that, especially the Magnificent Seven. But you know, is it the broader market, or is it just the Magnificent Seven that are exceptional? Or do you see that also extended to the to the smaller mid cap space? James 03:35 Yeah, with US exceptionalism, it's a very big topic area. So what we focus on, I guess, in our world is returns, and the return profile of the mega caps is quite high. Still, during that 20% level, in terms of roa's or Reich's return on investor capitals, our index is still around a 15 to 16% level, which is quite high, and also the US in aggregate compared to the rest of the world, is very high. So 15 to 20% returns on capital, compared to the world average of around nines to 10s, whatever you want to call it like, the US, is 50% better on average, in terms of returns on capital to the rest of the world. So we are still, you know, half of our fund, at least, is in the US. There's a lot of talk about the US builds great businesses. The Chinese build great manufacturing, and European builds great regulation. It's a well known kind of cliche, but the fact is that the US does have great businesses, whether they're whether whatever you is you want to say, the cause of that is, and that's expected to continue, especially for the next few years. Yeah, so we don't think it is a one off, and it's not just the mag seven either. Mag seven are symptomatic of the US being a leadership marketplace, and we find that's why we find it very attractive, because in global mids and smalls, we've built a portfolio which has returns on capital of in the 20% range as well, and still a very reason. Or valuations. So, you know, we aren't too concerned about that concept of us exceptionalism, because we don't think it's there's a huge break point that's obvious coming forward. Wouter Klijn 05:10 So there has been a lot of talk around whether we are in an AI bubble or not, and whether the Mag Seven isn't a symptom of that. What's your take on it? Do you have any views on whether we're in a bubble, just in an expensive period. Maroun 05:22 Yeah, it's always hard to know whether you're actually in a bubble or not, but certainly there, there are signs, early signs of formation. There's a lot of spending going into this area, and at this stage, we're not seeing the return on that, that increased capex come through now it may still Come, come come further down the track, and in which case, all this spending is justified. And you know, things continue as they are, but when you're seeing an increasing level of CapEx, I mean, some of these companies in the mag seven are spending 10x the amount of CapEx they were 10 years ago. So they were capital like businesses, and now they're quite capital intensive. Businesses spending a lot more money, that money needs to earn an attractive rate of return, because one of the things these businesses have done historically is deliver very high rates of return. So when you're investing a whole lot more money and you're large and you're dominant, the hurdle rate for you to keep on growing becomes it becomes incredibly high. So I guess we'll see over time where this ends up being a bubble or not. But certainly there are some early signs that, you know this could head down that path. Wouter Klijn 06:31 Yeah, yeah. So most people talk about the mech seven when they think about AI and AI development. Are there any opportunities in the smaller myth gap space that stand out? Maroun 06:40 Yeah, so we're seeing quite a few of those, and we have a few of those in the fund itself. They don't dominate the headlines that they're not household names, but a lot of them are in what we call the enabler space right now. They're either doing things like advanced packaging and hybrid bonding or certain techniques such as power efficiency in industrial end markets. We go through this in quite a bit of detail. Recently, we did a webinar probably about half an hour. We went through AI in detail and what it means for our universe. And we even had our sector lead, that technology sector lead, dialling from Hong Kong through the webinar as well. So if people are interested, I'd encourage them to have a look at the webinar for quite a bit more detail, Wouter Klijn 07:23 Yep, and we'll put a link in the description. So let's have a look at your process, your investment process. There's four areas that you focus on, quality, value, transition and momentum. Why these four elements? James 07:38 They really allow you to keep a balance style through the whole sort of movements of the market. So markets can be like what I call quality momentum cheerleading. It can be a bear market, where value and transition kind of works much better. They can be very thematic elements of the market. So this allows us to be basically balanced, but also have guard rails that makes sure we're not too extreme in one particular style factor, specifically like quality, is quality compound. It's a high return businesses that are long duration value. Businesses are typically lower valuation, but at least the balance sheets are good, and they're not in some strategically declining marketplace. We're happy to hold those if they're just out of favour. Transition names can be turnarounds. They can be cyclicals on the recovery. Or they can be innovators, and then momentum can be top of cycle, cyclicals top of cycle, thematics or or things that are just like in in a hot sort of thematic as well. So that those four elements is how we think about it, that we think about it in terms of risk as well. So that allows us to think that your blind spots and your winning spots tend to be governed by where the stocks are on that journey. So we have different sort of funny names, like qualities a love quadrant Valley is a neglected quadrant transitions. The quadrant of hope and momentum is like all like the night club quadrant or the hot quadrant. It's where things are. Yeah, lots of fun and things are going up. Wouter Klijn 09:03 Is that how you label stocks as well? These are the hot stocks, and these are, James 09:07 well, they get labelled in qvtm, so they get labelled by that, but it's your brain definitely is wired to where that is. So for example, the quality quadrant is love quadrant. Like a long term marriage or a long relationship, you get very comfortable. You get very complacent. So the risk is in, this is business. So this is, you know, competition, capex, complacency, arrogance is what can set in when you're a high quality stock. If you've got something that's unique, and we've found things that are unique have 20% returns for, say, 10 to 20 years. That can happen if you are offering something very unique, but you have to work very hard for that to work for 20 years. Wouter Klijn 09:43 So does that help you in managing, sort of, also the risk of, like, you know, falling in love with a stock or, yes, developing bias? James 09:48 Exactly. So at the individual stock level, yes, you are trying to manage the stock, individual stock risk. And then at the portfolio level, you're trying to manage factor exposure risk, and you're not. Trying to, for example, in 23 and 24 Those years were very much quality momentum markets where a lot of it was generating alpha from PE expansion or earnings upgrades. So what you end up having, you're managing risk at the stock level and the portfolio level, and what you also then have is a spread of businesses that are like four sort of types as well. So quality compounders, which are those beautiful compounder stories, cyclicals. So your value transition, momentum, kind of triangle, cyclical, mid cycle, top cycle. Then you have your innovators, which go from transition to momentum when they're going from generally low returns to high returns. And sometimes they can move over into quality if they can sustain that for many years, and you've got your thematics, which are generally momentum. So there's these four types of stocks that you can can own, and they they're on very different journeys. What they're doing in terms of share prices and returns and multiple expansion is very, very different, but that we've made alpha in all of those categories, those four stocks types that I mentioned. So we do it for stock picking, for risk, to make sure our heads in the right space, but then also to make sure the portfolio is generally balanced all the time in a market that can do well in up markets and down markets. Wouter Klijn 11:16 Yeah. And do you have certain ranges that you move in between quality and value and momentum, or do we try to get a style neutral type of… James 11:24 Yeah, we have a guardrails. It's based on a 25 year back test. It's 40/30, 20/10 actually. So quality, 30 plus or minus 10. Value, sorry, 40 plus or minus 10. Value, 30 plus or minus 10. Transition, 20 plus or minus and a momentum, 10 plus or minus 10. And as long as we're within those ranges where then our rolling three year out performance, you know, should always be positive. That is the goal. And that was based on a 25 year back test using the UBS HOLT system. Wouter Klijn 11:52 So value has been sort of unloved for quite a while, until, sort of the Ukraine war happened. How do you hold on to that allocation? Because it can be quite painful, I think sometimes during the cycle, Maroun 12:07 yeah, yeah, it's, it's different types of value, so a lot of it is cyclical. So you can have energy going through a different cycle that's not tied to the broader, you know, value versus growth. We've made money in energy. We've made money in insurance, getting in and out again. Insurance has its own cycle, depending on when there's catastrophes and when you have a hardening or an increasing in premiums and a softening that's taking place. A lot of these things are really related to demand, supply dynamics within their tight little within their tight little industry, because supply is quite lumpy. It comes on in chunks. And so you might get periods where a lot of supply comes on and you get an oversupply, and the respective prices for the industry drop, and then you get a period of no new money coming in, because returns are quite low and lots of companies are losing money, and then you get a demand spike, and that actually pushes up pricing, and supply has got a lag response. So we're not looking to play the quality versus value macro cycle. You know, when we're looking at cyclicals and value names, we are looking at them at a stock by stock or industry level basis, Wouter Klijn 13:22 so quality, value and momentum are probably, you know, well known style factors, style approaches. Transition is a bit different, though, and when you talk about transition, you're not talking about the energy transition. What do you mean exactly by transition? Yeah, Maroun 13:38 Look, I think James alluded to a little bit in one of his earlier responses, but transition really is we're talking about a change in the business model. So it could be a turnaround. You could have had a business that's been underperforming for a long period of time. You get a new CEO come in place, there's a cost cutting programme. Potentially there's divestment of non core assets. The business is going to refocus on areas that it competes well in, and forget everything else. So that would be a transition name. You could also be a biotech stock or an early stage technology name. And you're going through that journey of you're still loss making now, but you're building up scale, and in another six to 12 months, you're going to hit that profitability mark, and you're going to be break even self funding, and then, you know, on that path to increasing margins and returns over time. So when we're talking about transition, it's not the energy transition, it's a fundamental transition, or a fundamental shift in the business itself, either the business model, or just moving through that life cycle. Wouter Klijn 14:46 So you recently wrote a piece on a case study that you invested in Arista, which is a networking equipment company. Now there was sort of an interesting situation there where there were concerns around whether there would keep. Their main client, or whether they were potentially cut out of that ecosystem. And you went there, you talked to management, and you got a clear picture. But is that the type of transition you're talking about, or is it? Is that just a catalyst that you're looking for when investing in particular companies? Maroun 15:16 Yeah, so Arista itself, we actually classified it as a quality name, not a transition name. It was a high quality business that had been doing incredible margins and returns over a long period of time, and it had been outgrowing the broader market. So for us, it was a long term quality compound. But you're absolutely right, the opportunity was caused by this location, and that this location was so Arista, at that point in...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/38855450
info_outline
121: JANA's Mary Power – Offices Market Woes, Liquidity and Blended Approaches to Property
10/13/2025
121: JANA's Mary Power – Offices Market Woes, Liquidity and Blended Approaches to Property
In this episode of the [i3] podcast, I'm speaking with Mary Power, who is the Head of Property Research at asset consultant Jana. We cover the struggles of the property market in the early 90s, when Mary started out in the industry, and the learnings from that time. We take a look at how investors have dealt with 13 consecutive rate rises, starting in 2022 and we cover portfolio construction issues, including blending listed and unlisted property assets, the convergence of real estate and infrastructure, while Mary also predicts that up to 50% of Australian property money might be reallocated to international assets as super funds grow bigger. ________ Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at __________ Overview of podcast with Mary Power, JANA 03:00 Getting into the industry 04:30 The early 1990s was a dramatic period in the office market and as a young person in the industry that experience was fascinating 07:00 I think we have turned a corner in terms of unlisted property 8:00 In June 2022, we headed into 13 interest rate rises, which was a significant head wind for the property sector. 10:00 The REIT sector is very sensitive to interest rates 11:00 Are REITs equities or properties? 12:30 Property people don’t price off the cash rate; they price off the 10-year bond rate 14:00 The Melbourne property market is still a little bit difficult 16:00 People aren’t getting their forward projections of labour seating in offices right 19:00 I think it is very hard to promise quarterly, ongoing liquidity in a portfolio with large assets 25:00 There is a big push for the build-to-rent sector to mature in Australia 31:00 Super funds could move up to 50 per cent of Australian property money offshore Full Transcript of Episode 121 Wouter Klijn 02:01 Mary, welcome to the podcast. Mary Power 02:04 Thank you very much, pleasure to be here. Wouter Klijn 02:07 So you've been with Jana for more than 15 years. What got you into property investing or property research in the first place? Mary Power 02:16 Oh, I might have to let you in on a little secret. I I've actually had two stints at Jana. I was actually at Jana in the between '94 and 2000 as well. So yes, I was how did I get into property? It's a great question. I had a friend whose father was a valuer, and I commenced the property valuations course at RMIT, and he got me a cadetship at Urbis, known as at Cox then, and I was hooked. I was enjoyed it immensely. And love the idea of the commerce and the built form coming together. Yeah. So I, I really enjoyed it. And I, I joined at a time when the property market was exuberant in the late 80s, and then it went into the early 90s, which was the recession we had to have. So I saw the best and the worst at the time. And I always say I learned all my skills over those eight or nine years. Wouter Klijn 03:12 Yeah, and apart from the environment at a time, has the investment side changed much? I mean, do do the valuation practices change the deals, change the structures. What's that like? Mary Power 03:26 It's a great question. In fact, a lot of it's changed, and a lot of the fundamentals remain the same. So lots of change, lots of so if you went into the early if you went into the early 90s and we had that recession, which absolutely impacted the office sector. In Melbourne alone, there were six office buildings that were built, and they would have been built on, not with pre commitments that you would have today, so built by developers who then had to entice tenants in. So a mill, we say, a million square feet, or square metres of Office became was built, and then the rest became vacant. So vacancy rose to about 25% and in fact, rents halved. So it was a really dramatic period in the office market. And it was, you know, as a very young person learning it was, it was, it was fascinating. What had happened over that period. We didn't have a Funds Management basis. Then the I think, as we headed into the 90s, I think amp and national mutual were about the only funds managers that were available. Most of property was held within a Balanced fund. And of course, over the course of the next few years. If you fast forward to 2025 the Mercer survey is, in fact, about 94 billion. That's without Goodman, I think that adds another 18 billion on. So, you know, you're a very substantially funds management platform has emerged over that period, over that last 30 years. And you know, it. It now consists of specialist sector managers plus diversified managers. So it's been amazing. Wouter Klijn 05:05 Yeah, sounds like the office sector has gone through a few problematic periods and more exuberant ones, because we've seen, of course, with covid and as well that it got strongly impacted we were working from home. Did that experience earlier on help you going through the covid period? Mary Power 05:26 I think covid, I always say covid was a black swan event. No one had, noone had predicted it, but the balance sheets and corporates and and employment data was all in good shape. It wasn't the same. In the early 90s, we had very high unemployment, up to 11% most people I knew had someone had lost their jobs, and these were very smart people, and we had a lot of corporate issues going on in the early 90s. That wasn't the case in covid. We were in pretty good shape going into the into the covid. So I think whilst it was annoying, and we hadn't seen it before, it was nothing like what I'd seen in the in the early 90s. So that gave me some comfort at the time, yeah. And of course, we had, you know, the new phenomena of working from home, which was something we hadn't had before. And of course, you know, various states had different lockdown periods. Melbourne had a very severe lockdown period. And of course, it's taken some time for people to return to the office. Yeah. Wouter Klijn 06:28 Fair enough. So if we fast forward to today's environment, I looked recently in sort of the superannuation returns for the full financial year, and spread out by the different asset classes. And what sort of struck me is that unless that has been relatively poor performer in recent years, last two years, negative, this year, low, single digit, but at the other side, first time it's single digits again with positive results, have we turned the corner there? Mary Power 07:01 I think we have, and I think you know what happened in 2020? Was covid occurred, and there was this, you know, significant lockdown over quite a long period of time. Never good for the built form that have leases in place. They have contractual leases in place, but you still need people to buy things at shopping centres and office buildings to be occupied for those leases to be sustainable and and of benefit to the tenant. So I think that was very difficult period. I mean, I'm would, I would call the Property Council at the time, they had to negotiate with tenants, 1000s of and come up with a code of conduct of how to interact with a tenant during this, you know, significant period of disruption. And to their credit, they did do that within a reasonably short period of time. On the other hand, infrastructure asset had one contract with talking about 1000s of contracts through the property sector. So it was, it was very, a very difficult period, but I think they did a great job. And then, of course, we headed into in June 22 the start of 13 interest rate rises, which, of course, was a significant headwind to the property sector, because it had performed quite well, even through covert up until the mid, mid 2022 and then we started facing into to higher interest rates. And the higher interest rates, in fact, had been quite difficult for cap rates at the time as a differential. So we know what happened. Cap rates expanded, capital values went down in most cases, the income line, the leasing line was was not too bad that that sort of stood up. You know, it was really the rapid interest rate rises 13 right? Interest rate rises in a short period of time. That really was the problem for the property industry, yeah. Wouter Klijn 08:50 And then if you look at the listed side of the property sector, somehow they did much better. So I looked at Australia's property that increased by 13.8% and then I think international listed property went more than 9% why is there such a strong difference between the listed space and the unlisted space over that period? Mary Power 09:12 So I think, you know, the listed is highly correlated to equities, so you have a big influence. You know, I go back to March 2020, and the a rate sector fell by 46% so that was a very, you know, that was a very stark fall compared to what the unlisted property index was doing at the time. So the A rates are, you know, they've got some interesting characteristics. For instance, the Goodman group makes up about 39 40% of the a rate index. So that will rise and fall depending on on how government have performed over over a period of time. So I think the other thing is that, you know, the a the rate sector, while it is very much correlated to to equities, it's very interest rate sensitive. So you get interest rate, you know, interest rate. Cuts like we've had attractive, very attractive for for the rate sectors, you know, good for repricing of debt. Good indicate, lead indicator. And I think, yeah, the rates can be a good lead indicator for unlisted property. Yeah. Wouter Klijn 10:15 So do you subscribe to the idea that REITs are equities in the short term and property in the long term, or are they just always equities? Mary Power 10:24 Yeah, I think that's a great question. I think over the long, long term, you'd think that they do. You do have a quite a strong correlation, you know, to property over the long term. I think though, you need to be able to withstand having them in the portfolio. You do need to be able to be aware of the volatility. So if you're sitting there in March 2020 you have to ask a trustee or a fund how you know how comfortable you are with a 46% drop in your rate portfolio over that period. Because I think the way we structure a diversified portfolio is we try to buffer, we try to include asset classes like property and infrastructure and private equity that actually buffer equity market risk, so it actually allows you to have strong equity market exposure, but realise that in a downturn in equity markets that you've got these other unlisted assets that actually provide a buffer and should not decline as far As your equities do Wouter Klijn 11:21 Yeah, so we've just seen a quite controversial cut in interest rates from the RBA. And then I think there was a lot of comments that I didn't cut the time before that, but now we just seen that inflation figures came out, and they are sort of, I don't know if spiked is the right word, but it went from 1.8 to, I think, 2.9 What are your thoughts around that? Is that an indication that that won't be cut for a while? And how does that affect the property sector? Mary Power 11:52 Yes, always cautious on commenting on interest rate cuts. But look, I'd like to think that there, you know, are some more coming. I think the benefit of of the cash rate being cut is obviously in the debt markets, so very attractive for pricing of debt. So that's a that's a big positive property. People don't generally price off the cash rate. They obviously price off the 10 year bond rate. So the 10 year bond rate at, you know, 4.29 4.3 has been reasonably sticky above that 4% mark. There was some excitement when it got under under four, you know, you know, more than 12 months ago now 18 months. But I think you know, to get true increases, it would be great for that 10 year bond rate to come down. The only other benefit, of course, is, of course, the cash rate with with gearing and debt, allows you to be accretive, especially when the markets have bottomed. So you know that that is an attractive feature if you add gearing onto your base, base return. Wouter Klijn 13:01 So we've seen a lot of volatility in recent years, and I think you've spoken in the past about the importance of cell evidence stabilising to get a better sense of where the sector is. Is that happening? Are we getting to a more stable environment? Mary Power 13:19 Your short answer is yes, the MSCI Mercer unlisted survey for property is indicating that this is a third quarter of positive returns. So that's fantastic. So yes, we are. I think there's pockets, there's sub markets. Now it's not everything. Not everything is on the, on the on the rise, and I think our one call out at this moment would be the Melbourne office market at this stage, again, back to covid, longer to come out. You know, had severe lockdowns, longer time returning to work. And there has been some punitive tax, taxes that have been introduced into Victoria around the foreign owners surcharge, and that has deterred offshore investors from coming into into Victoria. So we've seen lot less sales in Victoria than anywhere else. So the sales evidence allows the valuers to actually have some some sort of basis for undertaking evaluations. Melbourne is still a little bit difficult. Yeah. Wouter Klijn 14:21 So those numbers that we mentioned earlier about this that they're not unless Should we take them with a grain of salt then in the unlisted space, or have there been enough transactions that we can get a good sense of what happened there? Mary Power 14:34 I think we're in a reasonable place with with where we're at with valuations now and going forward, and the other the real green shoots for property are the fact that there's a lack of supply. So what kills property supply in a recession like the early 90s? Now, we haven't, we're not. Hopefully we're not gonna have a recession. And supply is is very muted. Is muted? Yeah. Yeah. So that's really positive, and so is the sustainability the tenants are requiring that. That's very important. So not every building is the same. So the universe of, you know, desirable buildings has actually shrunk on the basis of sustainability. And that, again, you want to be in those buildings. That's a good thing, yeah. Wouter Klijn 15:21 So you mentioned that the Melbourne office market, and it seems that there's more and more companies that sort of either referring the working from home or reducing the number of days that you can do that is that supporting the office market. Are we seeing some more positive numbers coming out there? Mary Power 15:40 Yes, yes. I believe so yes. And I think, you know, again, with this lack of supply, people are actually got their forward projections a bit wrong. You know, I was over in the UK, there was a big investment house over there that had been in Canary Wharf was coming back to London, and they miscalculated by some enormous amount of seating, whether it was 3000 seats or something. And instead of being able to go into one location back in the city, they actually had to spread it out across a number. So people aren't necessarily getting the getting the forward looking Labour Employment seating arrangements, right? So it's putting more pressure on, on building, on certain buildings, within certain sub locations, yeah, so that's a positive thing, because it'll drive rents. It will drive rents, and that will drive returns. Wouter Klijn 16:32 Yeah, yeah, yeah, that's interesting. So we talked a little bit about, you know, the unlisted and the listed space, but some of the recent developments we've seen as well, that fund has started sort of blending both listed and unlisted exposures. And partly that seems to be, you know, where they have the relationship and the expertise, they tend to go direct, but then in other markets where they might be less familiar with or don't have the relationships, they might have more listed holdings. What is your opinion on that sort of blended approach, and how do you implement it? Mary Power 17:07 Well, well, it often circles around two things. One, liquidity, they need some level of liquidity. And the second is that there has been a pushover a few years now for where funds have had an unlisted exposure that may have some gaps in it, and they call it a completion portfolio. They may complete the overall exposure on the exposure side with supplementing with some listed so let's say they're underweight industrial they may have gone across the globe and bought industrial stocks and use that as their proxy to build up that that exposure. I think that can work. It depends on your time frame. And back to your earlier question about, you know, is property is, is listed rates more like property on a longer term basis? Yes? I think the answer is yes. And I think if, but then you've got to marry that up with a fund's ability to absorb the risk of volatility in, you know, periods of stress, like we saw in covid. So it really comes down to the perception of risk and return and that level of bullet tolerance to volatility. Wouter Klijn 18:17 What does it mean for the liquidity profile? Is that harder to manage, because, obviously listed space is much more liquid. How do you manage that? Mary Power 18:24 Well, that is a very topical question at the moment, because there are, you know, funds that are looking to change their liquidity mechanisms, rather than one long Cliff event, they're looking for quarterly liquidity, or allowing investors potentially quarterly liquidity with a cap, not just, you know, they can get at any stage. I think it's very hard to promise liquidity ongoing quarterly with large assets in a portfolio, because I don't know practically how that works. I think people that need liquidity should almost be sticking with REITs. Yeah, the only other areas that I've seen is where they've actually buttressed some debt exposure alongside the unlisted that allows some runoff characteristics as as loans are realised, and that will give some some level of liquidity going forward. Wouter Klijn 19:18 Another development that we've been looking at is, is there starting to become an overlap between infrastructure and real estate assets? And for examples, we've seen situations where there's empty land on at airports or at ports, and perhaps that can be developed for property purposes. What do you see there? Mary Power 19:45 Yeah, definitely, definitely. I think going forward, there will be a blurring between property and infrastructure, and I think it will be possibly, sort of viewed through the lens of the cash flow. Because I think one of the things that. Uh, even this last period of the last five years has demonstrated is that, you know, the cash flow needs to be able to withstand things like capital expenditure, and that's a dint to the cash flow. So if you look at infrastructure, mainly it's contracts, and they're pretty stable, and you can actually increase the gearing quite substantially. Property you need to be able to allow for these capex requirements, whether it's incentives or actual expenditure on the on the building. So I think where you start to get some purity in the cash flow, like you do almost with infrastructure, that'll be very interesting area of interest Wouter Klijn 20:39 in the past, infrastructure property either set in separate asset classes or were an alternative asset class. But we see these days more the rise of sort of mid risk in these assets being labelled as mid risk. Is that sort of an indication of that trend that I coming closer together? Mary Power 20:57 Yeah, I think that's that's really important, because I think what's happening is that, you know, illiquid assets now, particularly in property infrastructure, almost need to compete for a place in the portfolio on a whole of portfolio perspective. So if you've got an infrastructure investment and a property investment, you need to look at those on a risk and return basis. So, you know, I think that blurring and that...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/38402130
info_outline
120: Stanford University's Ashby Monk - The Future of the Pension Industry
09/29/2025
120: Stanford University's Ashby Monk - The Future of the Pension Industry
In this episode, I speak with Ashby Monk, who is Executive & Research Director at Stanford Long-term Investing, a part of Stanford University in California. Ashby has been advising most of the large superannuation funds in Australia on governance, organisational efficiency and knowledge management. He is a regular visitor to our country, and has been here 55 times. We discuss the future of the superannuation industry and the role of innovation. Unsurprisingly, this means that we spend a fair amount of time talking about artificial intelligence and the changes it might bring to the industry. Ashby is of the opinion that it will be transformational, while initial problems such as hallucinations are quickly being dealt with. What does AI mean for the super industry? Well, consultants might be in trouble as AI systems will come to play a critical role in providing alternative views or in red teaming. Asset managers, too, will come to feel the heat, and boards might want to add directors with deep technological knowledge. Enjoy the Show! ________ Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at ________ Overview of Podcast with Asby Monk, Stanford University 03:30 I’ve never met a pension fund with an R&D unit. 09:00 I’ve seen Australia as the future of pensions 10:00 People in Australia don’t quite know how cool it is, the member first culture 12:00 There is no professional School of Investing in the world; it is an apprenticeship 16:00 The secret sauce for a pension fund is in understanding your own advantages, weakness and goals 20:00 You can have a culture of knowledge sharing or a culture of secrecy and I don’t think you need to do much more than to say those words to understand what is implied 22:30 What attracted me to the asset owner industry is that it is a mission-driven culture 26:00 The AI boom…, everybody acknowledges that particularly our industry is going to be transformed 28:00 AI for knowledge management; the hallucinations are starting to go away. We are very close 32:00 Red teaming with AI; ask to replicate what your analysts are doing to see if you get a different view 33:00 Consultants might be in trouble, unless they move fast towards AI 34:00 Anybody who provides advice…, even me, you could probably ask an AI: ‘How would Ashby respond to this idea?’ 36:00 The big asset managers that we can think of right now, their existence is threatened 37:30 There are about eight Australian super funds that can be world role models 39:00 I often ask: ‘Who on your board has technological expertise?’ and the answer is often ‘none’. 41:00 Deep thoughts to conclude "" by Ashby Monk and Dane Rook, 2023 Full Transcription of Episode 120 Wouter Klijn Ashby, welcome to the show. Ashby Monk 02:27 Thank you so much. It's an honour to be here. Truly. I think that if I didn't have my job, I would want your job. Wouter Klijn 02:35 It's pretty fun. Ashby Monk 02:39 Yes, you know, because the investment Innovation Institute almost sounds like my life's work, but you've already got it, so I'll have to find something else. But it's, it's a it's a pleasure to be here, in large part because I think you and I are working on very similar things. Wouter Klijn 02:57 Thank you very much for that. And you also have your own podcast, which has an interesting name of ‘Don't get fired’. Why did you choose this title, Ashby Monk 03:05 Don't get fired Podcast, yeah, so that is meant to celebrate the heroic nature of innovation and institutional investment. Oftentimes, I'm sure you're aware the pathway to doing creative things, especially as it relates to the asset owner side of things, that pathway generally flows through a courageous person that is deciding, I'm going to do things differently, and in the process, generally takes career risk. And so the don't get fired podcast is meant to be somewhat funny, but it's also meant to acknowledge, like, we don't have standard pathways of innovation in this industry. You know, I've never met a pension fund with, like, a well formed R and D unit. Oftentimes, it's just a person who is ready to take on a challenge and and I think we do need R and D units, and so the podcast is all about different pathways to innovation. Wouter Klijn 04:06 Yeah, yeah. It's interesting because I think that's my cat. Ashby Monk 04:13 Hello Kitty. That's a perfect that cat wants to talk to us about innovation, Wouter Klijn 04:16 Exactly, but yeah, no, it's, that's, that's interesting because I listened to your last episode with Mark Delaney, and he made a reference to that where, I think, before he joined the superannuation industry and became CIO, now of Australian super, he worked for an insurance company. And he said, he sort of made his remark that at the beginning, when he worked, there was one of the most innovative companies in Australia, and then over time, they became scared of innovating, and it actually ended up collapsing. And he for part of it was because of a lack of innovation, which is basically goes to the core of your premise with the podcast. Ashby Monk 04:57 I mean every, every, long-lived organisation faces this challenge around how much to exploit and how much to explore. So you exploit the assets, you have to generate performance, and then you also have to explore in order to, you know, go out and find new things to exploit in the future. And there's a balance, and I think it was the Winner's Curse, or the winner's winner's dilemma, maybe, where those organisations that are very successful often end up in a pattern of exploitation, and then that ultimately sows the seeds of their demise, those organisations that go on for generations. So these family owned companies that you know, go hundreds of years into the future. They build very deliberate innovation practices and and the funds that you and I study, these are funds that have stakeholders rather than shareholders. We know these funds are going to live for centuries. You know, like obviously, many of the super funds are fairly new on that time scale, but University endowments, sovereign funds, etc, they're looking out 100 years into the future. Those organisations are going to have to balance that exploitation, exploration dilemma. And I'm not sure most of them are ready for that. Wouter Klijn 06:24 Yeah, it's sort of a fine balance between sticking with a winning formula and doing enough innovation to stay relevant, I suppose. And you're right, the super funds are relatively young, so maybe they are a bit scared to, you know, do too much innovation and and mess it up, but, yeah, it's a developing industry, but one of the things that I thought was quite interesting when when you spoke to Mark, is that you mentioned you've known him for 13 or 14 years. And I know you have been advising a number of funds here in Australia, but your interaction with the funds goes back quite some time. How did you first get involved with the Australian funds? Ashby Monk 07:04 Well, my mentor, my academic mentor, is a guy named Professor, Gordon Clark, who is Australian who, I think you probably know Gordon, I think he still comes down to Melbourne once a year, for a month. He might even teach a class at Monash, one or two classes every year. And really, he was the one who introduced me to the Australian superannuation industry. And as somebody you know, obviously very interested in the future of pensions, you can't help but be blown away by what's happening in Australia. So I would argue the accumulation side of the equation is basically solved in Australia. Now, the de accumulation, the retirement side of things, there's still some challenges, and people are working on those challenges, but the superannuation industry, by and large, feels like the future for the rest of the world defined contribution, so you're not taking that longevity risk pooled, so you're getting the best asset management the lowest cost. And then also there's the regulatory aspects, where you know you have to contribute, so there's that mandate, and so that combination of everybody contributing professional management and really getting this accumulation running puts Australia in a very rare community in the world where it feels like you got your pensions organised. The Canadians seem pretty good, but those are mostly DB plans and so we all wonder what happens when the nanobots get injected and we live for 200 years? How are we going to manage that? They would tell you that they can manage that through maybe renegotiation. But in the Australian case, you won't have to. People are just going to have to work for longer because there won't be as much money there. And so, you know, obviously I'm, I'm talking like a true Stanford engineer. People are going to live forever with nanobots, but, but really, politicians everywhere are trying to figure out how to manage the unfunded liabilities for old age retirement security, and so you have that there. And so I know there's a long winded answer, but going back 14 years, I was introduced to the Australian super folks. And really, as sad as this is to say out loud, I think I've been back 55 times. Wow. I owe a lot of trees to the world. I got to plant some trees, but that's largely because I've seen Australia as the future of pensions. Wouter Klijn 09:42 Yeah, yeah, it's an interesting system, because my background is Dutch, so I grew up in defined benefits schemes as well, and I know that my dad retired in his late 50s with 70% of his last earned wage for the rest of his life. So that's that's not really working, if you and is he still going? Lift to 100 he's still going. He's still there. Ashby Monk 10:04 Yeah, pretty great if you can get it, Wouter Klijn 10:07 yeah, although it did require along the way some adjustments, like they did realise at one stage it wasn't affordable, so they had to make some adjustments as well to the benefit formula. Ashby Monk 10:17 But you thought just one thought, well, we're on the Australian uniqueness. Because I think, you know, people in Australia don't quite understand how cool it is the member first culture. The it may frustrate you as a superannuation fund that your members can stand up and leave and go to a different superannuation fund, but it also means, when you're talking to your board of directors and you're saying, we need to do this innovative thing, it's for the member the board listens. When you go to a fund that has a monopoly over their asset base, over their membership, they don't necessarily have to listen to that. And so, you know, the Australian superannuation industry is not only the future, but it's the most innovative. It's in competition with each other, and there's been some deviations recently where there's the my super, there's the you know, the different benchmarks that feel like maybe they are making the innovation less palatable, but compared to the rest of the world, the Australian industry feels dynamic and in constant renewal. Wouter Klijn 11:28 Yeah, yeah. It's interesting to see where that will go with the especially the performance test, because I think the main reason behind it was to force some of the smaller funds to merge. But we're almost getting there. So is that still going to be relevant going forward? Because, as you said, there are some, there are some restrictions to what it put in place with tracking error and peer awareness. So yeah, that will be interesting to see whether that gets solved or not. Ashby Monk 11:57 And if it's solved, does it just put you like, let's say pure awareness becomes a, in quotes, problem. Doesn't that just make you the same as the American endowments that stare at each other all day long, or the Canadian pensions, you know, like, by the way, like this right now in the rest of the world is an industry that 100% herds the way best practices are communicated in this industry. I'll remind you, like there is no professional school of investing in the world. It's an apprenticeship. The way best practice gets communicated is by peer imitation. Follow the leader. And so right now, Australia is becoming the leader in many domains. And then the question I think you and I are asking is, how do we keep that innovation going so that you're not just exploiting the assets you've developed over the last 10 years, you're continuing to explore, but most of the other funds are are exploiting, you know, like the Yale models everywhere, Wouter Klijn 13:00 yeah, but especially as well going into retirement, because, as you said, I think accumulation has probably been more or less solved. Retirement hasn't, and it almost seems that some of the solutions that are also palatable to members almost have an element of defined benefit to it, where funds can pull again and an income stream is being formed, and one that is not relying on, you know, an insurance type of arrangement. Ashby Monk 13:30 But even there, you know, you've got organisations in Australia that are really taking retirement seriously, whether they're hiring a chief retirement officer, or they're naming their new fund with the word retirement in the title, right? And so in that sense, like I'm really excited about this future of mass customised deaccumulation. I know that's a mouthful, but you can imagine technology enabling people to communicate scenarios, goals, you know, health status, things like that, and start to build portfolios that meet your retirees where they are well, of course, managing the you know, the downside risks that Come with living much longer than you expected, but I am really excited about moving beyond just annuities or the simple defined benefit structures. And I think in Australia, where you have so much data on your members, you might actually be able to use this innovation mindset to build the future of retirement, the accumulation Wouter Klijn 14:41 And that sort of ties in with what I wanted to talk to you about as well with long term investing. Because, you know, these are problems that have a very long term horizon, and sometimes, you know, we do get a little bit stuck in, you know, what's the next quarter of earnings? You know, is this manager under or out? Performing, but there's some fundamental questions that lie beneath a successful pension system. And basically I was talking in a previous podcast to Eduard van Sheldon, who has been sometimes your collaborator on some papers, and he's now involved with fclt Focusing capital on the long term. And so for this might be a nice extension of that concept, because… Ashby Monk 15:25 Are we in competition with FCLT at i3, you know, if I, if I'm here as your representative, do you see that as you know your your competition, or are they part of the family? Wouter Klijn 15:41 We're all friends, aren't we? But, but I thought it was interesting because it ties back into some of your ideas that you put in a paper around investor identity, which I think has also been part of your work with some of the Australian funds here on basically, not so much identity as you know, what do we stand for? But more? What can we do? What is our operational capabilities? What is our skill? And I sort of was amused by the fact that you describe it in the sense of how you put a chocolate chip cookie together, yeah, which my daughters love. So I see a lot of that. And sort of this, this idea of, how do you cook up your own risk adjusted return? Yeah, to stay with that analogy is that where you think the secret sauce is? Ashby Monk 16:29 So the secret sauce is in understanding your own advantages, weaknesses and goals. So that's the first thing to just throw out there. The identity was meant to say, after travelling the world for 20 years and consulting, but then also writing books and papers, this realisation that, first, most of academia is not paying attention. So we've got 10,000 business schools. The last I checked, there's no professional schools of investing in the world, but to understand how CalPERS or ADIA or Future Fund or New Zealand superannuation fund, how they make decisions and operate and optimise for their stakeholders, it's not necessarily the kind of thing you learn in A Business School. Singapore's GIC. The G stands for government. And so in many cases, you really need to understand how you operate inside government. And so all of this is to say we didn't have models of Investment Management. And I mean that isn't from an academic model perspective, to allow people to understand, hey, this is how I should run my fund again, the role of models like the Canadian model, the Yale Model, the Australian model, the Norwegian model, the Dutch model. These were ways to be inspired, but there's nothing that says the Canadian model should or needs to be implemented in Australia, right? The Canadian model is a defined benefit model, a Crown Corporation model, the Australian model might be an industry fund model and a defined contribution model. And so understanding those details are critically important. And so we wrote this paper about the investor identity, which has a thumbprint in the middle, fingerprint, ultimately, to say, Yeah, we may produce returns with the same core ingredients, but there is no, you know, there is no chocolate chip cookie that is the same, perfectly, the same from kitchen to kitchen, from batch to batch. Frankly, no chocolate chip cookie is the same. And so acknowledging that broad differentiation and that your people are going to be different. If you're in Juneau, Alaska, or if you're in Abu Dhabi, your culture will be different. If you're a member driven fund sitting in Melbourne, or your public pension plan in Iowa, your technology will be profoundly different if you're sitting in Silicon Valley versus sitting, I don't know, in Oslo. You know, the thing we wanted to at least acknowledge. And so the identity is meant to be an irreducible model of the inputs and enablers that long term investors use to drive return, and I can talk you through them. But ultimately, it was really meant to be a model that allowed boards of directors, CEOs, heads of strategy, heads of asset allocation, to begin to think about this is our organisation. These are the inputs we have. Here's what's good, here's what's bad. Here's an asset allocation or an implementation we can pursue and have high conviction that will outperform. Wouter Klijn 19:47 Yeah, I'll put a link for the paper so people can go really in the weeds. But I thought what was quite interesting as well that you gave some practical examples of how this model can be applied to investors and. To their long term strategy, and one of them looked at private markets, and they decided that maybe they needed to have more exposure to private markets. And then when they actually went through the exercise of what is our capability, what what is the expertise of the people we have, that they found some gaps in technology and expertise that they realised they had to pluck first before they could, you know, spend the money. And that's, I quite like, the fact that it's a very practical framework as well, where it's not just, you know, people in boardroom talking about great thoughts, but actually still doing the same thing that it always done. There are some practical implications of this. And you also describe that within the core ingredients, there are ways to improve it. And you give three high level elements, there governance, culture, technology. And I wanted to pick out one of them, because I think culture is sometimes not always well defined, but you say at one point it is Shadow governance. What do you mean by that? Ashby Monk 21:09...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/38248700
info_outline
119: Janus Henderson's Richard Brown – Small Caps in a Concentrated World
09/15/2025
119: Janus Henderson's Richard Brown – Small Caps in a Concentrated World
In this episode of the [i3] Podcast, I'm speaking with Richard Brown, who is a Client Portfolio Manager with Janus Henderson Investors. And today we are going to talk about global small caps. We look at whether small caps are affected by the increasing concentration of the equity markets, particularly in the US, where technology stocks have dominated returns in recent years. We talk about catalysts for unlocking the current small cap discount versus large caps, including the rate environment and the current business cycle. And we take a look at a few case studies of where to invest and where not, involving fuzzy pandas, Italian industrial stocks and JB Hi Fi. This episode was sponsored by Janus Henderson Investors, and as such, the sponsor can make suggestions for topics, but the final control remains with the Investment Innovation Institute. __________ Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at ________ Overview of Podcast with Richard Brown, Client Portfolio Manager, Janus Henderson Investors 02:00 The appeal of small caps and the case for egg producers 08:00 Does the concentration in equity markets and the increasing value of the Magnificent Seven require you to adjust valuation models for small caps? 09:30 The small cap discount to large caps has reached quite an extreme by historical standards 11:30 More clarity on the direction of rates would help small caps 13:30 There is an opinion that if rates stay higher for longer, then that would be bad for small caps. That is something we fundamentally disagree with. 14:00 The consensus view that small caps have underperformed as rates have gone up, that just hasn’t been true versus history 18:00 About 30 per cent of small cap companies in the US has had a negative EPS over the last two calendar years 20:00 The two catalysts for small caps: clarity on rates environment and confidence in business cycle 23:00 Are the future small caps all about AI? 26:00 Examples of AI small caps; filling in doctor’s insurance papers 36:00 Healthcare, REITs and the dangers of playing the sector game 41:00 Examples of what not to invest in: the case of an Italian industrial company 43:00 Fuzzy panda, short-selling and meme stocks 45:00 Is there a small cap premium in the Australian market? Maybe, but JB Hifi has been one of our strongest performers Full Transcription of Episode 119 Wouter Klijn 00:00 In this episode of the [i3] Podcast, I'm speaking with Richard Brown, who is a Client Portfolio Manager with Janus Henderson Investors. And today we are going to talk about global small caps. We look at whether small caps are affected by the increasing concentration of the equity markets, particularly in the US, where technology stocks have dominated returns in recent years. We talk about catalysts for unlocking the current small cap discount versus large caps, including the rate environment and the current business cycle. And we take a look at a few case studies of where to invest and where not, involving fuzzy pandas, Italian industrial stocks and JB Hi Fi. This episode was sponsored by Janus Henderson Investors, and as such, the sponsor can make suggestions for topics, but the final control remains with the Investment Innovation Institute. Richard, welcome to the podcast. Richard Brown 02:10 Hi Wouter. Thank you. Delighted to be here. Wouter Klijn 02:14 So why small caps? How did you get involved in this particular area of investment? Richard Brown 02:18 Look, I think small cap is one of the most interesting areas you can be involved in, in capital markets, in truth, huge inefficiencies available for active stock pickers. You know that can certainly peak at peak interest. But you also end up looking at some very bizarre and unusual areas of the market. You know, egg producers, other companies working in particularly niche areas of the market. And you know that that that sort of area of small cap has always sort of piqued my interest and draw me to this area within within investment. So, yeah, I've been working with in the equity market since 2010 and really for the vast majority of that time, it's been with a focus on the small cap area. Wouter Klijn 03:00 So is there a current investment egg produces? Richard Brown 03:04 Well, actually, after a long standing investment there, we've actually had to just take profit after we saw some very strong returns driven by a strong pricing environment that states on the back of an outbreak of bird flu over there. But so I was quite sad to leave that investment, but it was a good one to us. So that's a good reason to be selling a stock. Wouter Klijn 03:24 Yeah, it would be interesting doing due diligence on a company like that, but maybe we can bring it a little bit to a higher level the current environment for small caps. I mean, I think markets are in a very interesting stage at the moment anyway, because we've seen a huge concentration in the US markets. We have it a little bit here in Australia, with a lot of money going into one particular bank, CBA, that seems to crowd out a lot of stocks. How do you look at the current environment for small caps in sort of in that environment where you have this domination of the Magnificent Seven. You got other stocks in, you know, Taiwan with TSMC. Do they still have a chance? Richard Brown 04:07 Yeah, I think so. And you know, undoubtedly, this is a question that comes up time and time again recently, because the vast majority of asset allocators attention are towards the mag seven. And look, that's hardly surprising, as it gets given this huge AI innovation wave that we're really only just beginning to understand. But for me, what's quite interesting is, you know, a lot of people preface that discussion by saying, well, small caps have underperformed large caps, and I think it's quite important to pick that apart, because what we focus on is really the operational performance of small caps, and that's what attracts us to this area, because it's been very strong and high growth for a long period of time. And actually, if you look at this period of so called underperformance versus large caps, actually that operational performance has been fine. It's been very solid. It's been roughly on the same trend as what we've seen over the last sort of 50 or 60 years. Yes. So it's really a case of those returns in large cap being super normal. And for me, you know that that's certainly something that I find quite reassuring as a small cap investor, that if we just continue plotting this sort of steady course, this AI innovation wave is going to, is is going to is going to chug along there in the background. But you know, small caps can still play their part, and indeed still are for asset allocators in their portfolio. Yeah. Wouter Klijn 05:29 So we've seen strong returns in equity markets in recent years, and I think it hasn't happened too much in history that the s, p5, 100 at three consecutive years of double digit returns and four years is even rarer. But what do you think this environment does to the valuation of small caps? Does it? Did you need to adjust how you evaluate small cap models in this current climate? Richard Brown 05:55 No, we are quite dogmatic in our approach in truth. So our valuation models are totally unchanged. And really what we do is we focus on looking for high return businesses that have positive incremental returns that are not yet reflected in their underlying valuation. And we would do that at the crop of markets, and we would do that even when markets maybe appear to be overheating. So indeed, that hasn't really changed the way that we're valuing stocks at this moment in time. And you know, when we take a step back and say what the valuations look like for the asset class as a whole, like you say, it's been a it's been a period where a number of other asset classes have been making new all time highs and potentially reaching bubble territory in certain areas of the market. So small cap, we're on roughly our long run average, if you're just looking at forward forward PE and that's true of most regional markets as well as global small cap markets as a whole. So what that has ultimately meant is that the small count, small cap, sorry, discount versus the large cap area, the market has reached really quite bizarre, extreme by historical standards. And you know, the real catalyst for that came through the aggressive rate cycle that we saw through 2122 if you look back prior to that. And again, this applies to most regional small cap markets across the world. Small caps were trading on a premium versus large cap, because that strong, operational, higher level of earnings growth that small caps tend to achieve was 10 tended to be rewarded with it with a higher valuation. Yeah, as we stand here at this point in time, we've had that aggressive rate cycle come through now, now a massive discount applied to the small cap space. So I think is a good time to be looking at it. Wouter Klijn 07:39 So is there any sort of market event or as a catalyst that might unlock the discount and bring it more in line with historical averages? I mean, you were talking a little bit. Maybe we're getting to bubble territory in large gaps. Do we have to wait for sort of a correction in those stocks? Or could there be something else that would bring the discount closer to historical averages? Richard Brown 08:03 Yeah, it's a great question, and in truth one that we've sort of been scratching our heads about a little bit already over the course of the last 12 or 18 months, as we would have expected that valuation discount to already been narrowing, but we haven't really seen that at all yet. For us, it's really going to come down to two main catalysts, I think, to see asset allocators really move back into this space. And the first is clarity over the direction of rates. And that's something I think is worth digging into in a little bit more detail, actually, and it's and its impact on the small cap market. And of course, when you look at rate forecasts at the moment, I mean, they're changing almost daily with the latest unemployment numbers or CPI pruned out of the US, or indeed, whatever next press statement we get out of the White House with regards to the lineup of the Fed, but I think more clarity on the direction of rates is one which is going to act like a trigger, as well as more confidence in the economic cycle overall. You know, small caps are more cyclical in nature versus their large cap years. So we do need to see more confidence that GDP growth is going to be be solid or strong into the future. And I think that's going to catalyse that return to the asset class and narrowing of that valuation. Wouter Klijn 09:12 And what is your sense about the rate environment? Because we saw here in Australia a situation where the RBA, the Reserve Bank, the central bank here has just cut rates, but the decision before that, they left it neutral, and they got a lot of commentary around not cutting in that meeting and leaving it to the latter one. But then, more recently, we've seen inflation figures coming out that are well surprised on the upside, and were far higher. From memory, it jumped from 1.9 to 2.8 and I think we've seen in the US similar sort of worries about the inflation rate there with the US tariffs. It does change this day to day, but do you have a sense of where it might go? And of course, also then the impact on. Small companies who, as you said, you know, they tend to suffer a little bit when rates go up. Richard Brown 10:04 Yeah, yeah, absolutely. And, you know, as you've outlined there, I think it's rarely been as complicated as and on a knife edge with each of these announcements, it's actually quite nice seeing my bond colleagues actually having to do some work for once, having sort of just sat around for two decades, having a very boring period for them in their markets. Look, if you were to push me out, the view of our team is that the direction of rates is still down. We don't think that we're going back to zero. And a lot of people's conclusion from that is in a higher for longer rate environment, that will not be good for small caps, and that is something that we fundamentally disagree with. And the reason for that is we think that there's a few lessons here from history. So if you look back at the last time rates stayed at the these higher levels, well, the most recent period was back in the mid 2000s a fantastic time for small versus large. And then if you go back even further, even before I was born in the early 1970s when rates were sustainably much higher for much longer fed Fed funds rate peaking at 19% through the late 1970s and into the early 1980s again, really strong time for small versus large. So I think the sort of current consensus view is small caps have underperformed as rates have gone up. That just hasn't been true versus history. Now, what could be the reasons for this? For us, it very much boils down to the funding on the balance sheets of these small cap stocks. A lot of them have far greater levels of floating variable rate debt rather than fixed rate debt, so and shorter duration. So what you tended to see there is the small caps were feeling this funding pinch much sooner than their large cap peers, and that's why they've underperformed on the way up. It also means that actually, if we see that reversal and rates begin to come down a bit, they'll feel that that funding benefit a lot sooner. What actually matters if rates just stay higher for longer, isn't whether you've got fixed or variable, floating rate debt. It's actually your your debt pile overall and there. And this is, I think, a common misconception, again, driven by a lot of the exaggerated statistics coming out of the Magnificent Seven market, which is a huge net cash area of the of the large cap sphere, small caps actually have less leverage than large caps overall. So in a buyer for longer rate environment, small caps actually should be in a relatively good place to be able to handle that. The one caveat, obviously, is in a higher for longer rate environment, you you need pricing power, and that's something that we spend a lot of time trying to identify. And start by identifying those stocks with a high ROE or an improving high and an improving roe. And indeed, you've got to be careful in terms of the valuation you're paying, because the cost of capital, of course, matters again. So for us, those those two things are critical when we're selecting our stocks, but for the asset class as a whole. Think small caps are actually in a good place with regards to higher for longer. Wouter Klijn 13:05 Yeah, that access for capital is quite important for small caps. And it made me think as well, we've seen sort of conversations around companies staying private for longer, taking longer to go to a list on the on the market, particularly sort of during the low interest rate environment. Has that changed the small cap universe at all? Has that had an impact at the margin? Richard Brown 13:31 Is what I would say there. And undoubtedly, stocks are staying private for longer, VC funding in that space, particularly in the tech area of the market, that is a phenomenon that that has continued, and at the margin, that is a niggle and the frustration, because some of those stocks might present quite interesting stock opportunities for your diligent stock picker. What I would say is it, it matters even less for us, I think, and that is, a lot of those stocks are stocks. Probably we wouldn't be particularly attracted to we're looking for companies with a very long history of profitability, very consistent operational performance, and a lot of that funding and stocks staying private like I say, come from more the sort of unicorn type stocks that we see out of the tech area of the market, so probably stocks that would interest us a little bit less than and the other thing that I would say on the matter is, and you know, I've heard this narrative a few times. I've wondered if it's being pushed a lot more by VC or private equity rather than your your average listed small cap manager. But look, there's 4000 stocks in our investment universe. The fact that a few more aren't coming to that market isn't really meaningfully reducing the number of stocks that we can go out and find that look very interesting and priced in effectively. So no, I think you know, it's a niggle at the margin, but not something that particularly frustrates us. Wouter Klijn 14:58 So you mentioned the importance of profitability. Does that mean you avoid unprofitable companies? Or are there some selective opportunities? There? Richard Brown 15:07 No, that's right. So we do. We avoid unprofitable companies, which has become an increasing influence, especially with regards to our US allocations. Right now, at this moment in time, roughly 30% of US small cap. Yet, you heard that right? 33 0% of the US small cap market is it's got negative, negative EPS over the course of the last two calendar years. So that's quite concentrated in a couple of sectors, healthcare, biotech and tech. And there's many a good manager that will go into that area and pick the winners, those ones that are going to turn from negative earnings growth up to 100 baggers because they've put a sensational turnaround in or found a wonderful new drug. But that's just not something that we think our skill set is well aligned to. Is the truth. And if you look back through history, those companies with strong operating cash flows over the long term have tended to outperform the average stock with all cash generation. So for us, it's an area that we avoided, and continue to avoid now, in truth, that does present one risk to us and one risk to our strategy, and one that we're always keen to highlight to anyone that wants to invest with us. And that is, you know, if we do see rates going back to zero, this cohort stocks is probably one that's going to perform quite nicely, so we've got to be aware of that. It's something that we've got to watch in the market as it comes through. But over most market cycles, I think you're going to be paid to avoid that area of the market in general. Wouter Klijn 16:38 Yeah, fair enough. What about the merchant acquisition activity in the market? Obviously, that that has some potential to unlock value also takes companies out of the small cap space. What are your thoughts around that? Are we moving forward with it? Richard Brown 16:55 Yeah, this, this has been an area that's been, I think, relatively subdued in recent years, but there's still been a persistent tail. Tailwind for the area. You know, just by the simple arithmetic of small caps, there's many, many more buyers of the stocks I own versus, you know, no one's going to be able to buy in video of this world. So by that sort of, you know, just pure maths means that the small cap area of the market is going to continue to continue to benefit from this, but it's benefited less over the course of the last few years. You know, CEOs CFOs haven't been, or haven't had the confidence. You know, they've just seen their their funding go through the roof, so the first thing they think about isn't going out and making a new acquisition at that point in time. So again, it's linked to the, you know, the two catalysts I described earlier on for the small cap asset class as a whole. If, you know, we see a bit more clarity on rates, or indeed, rates coming down a little or more, you know, confidence on the cycle as a whole. I think you see that that boardroom confidence increase as well. And M A activity improved. And in truth, through, you know, we've been running this global small...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/38150530
info_outline
118: National Reconstruction Fund's Mary Manning – Supporting Australian Manufacturing, Quantum Diamonds and Cyber Security
09/01/2025
118: National Reconstruction Fund's Mary Manning – Supporting Australian Manufacturing, Quantum Diamonds and Cyber Security
In this episode of the [i3] podcast, “Conversations with Institutional Investors”, we speak with Mary Manning, Chief Investment Officer of the National Reconstruction Fund Corporation, a recently established $15 billion fund that has been set up to promote the manufacturing industry in Australia. We speak with Mary about the investment objectives and how to balance investing in innovative new technologies, such as the fund's investment in quantum diamonds, that is industrial diamonds, not the fancy ones, with the risk profile of the fund, Mary reveals that they have over 900 applications for funding and are now looking for the best opportunities to invest, but also how to balance the strategic asset allocation and avoid being exposed to too much equity holdings. We also discuss what sets the NRFC apart from other government funding and investment vehicles such as the Clean Energy Financing Corporation and the Future Fund. Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at Overview of the interview with Mary Manning: 02:00 What is the National Reconstruction Fund Corporation? 08:00 Focusing on the seven sectors of priority: red tram 13:00 One of the risk of having a broad mandate is that you are trying to do everything all at once and not achieve much at all 15:00 We need to be a self-sustaining organisation, so we need to have some sort of dividend income stream 17:30 We have made 10 investments to date; the largest is a $200 million investment commitment in Arafura Rare Earths Limited to help finance the Nolans Project in the Northern Territory 19:30 Investing in quantum diamonds 21:30 The point of the NRF is to manufacture things 23:30 We get a lot of dual-use technologies that overlap between defence and enabling technologies 26:00 We do have certain funding targets for the seven sectors, but you might also notice that they don’t add up to $15 billion 28:30 We do have some restrictions, but they are not necessarily old economy. We have a focus on manufacturing and some of that includes old economy type businesses 34:30 A great problem to have is that we’ve had over 900 proposals (for funding) 36:30 The Act does not allow us to have control positions 40:00 There is some confusion about what the NRF does and what the Clean Energy Finance Corporation does. 44:00 When I started it was a bit like drinking out of a fire hose for quite some time. Full Transcript of Episode 118: Wouter Klijn 00:00 In this episode of the [i3] podcast, “Conversations with Institutional Investors”, we speak with Mary Manning, Chief Investment Officer of the National Reconstruction Fund Corporation, a recently established $15 billion fund that has been set up to promote the manufacturing industry in Australia. We speak with Mary about the investment objectives and how to balance investing in innovative new technologies, such as the fund's investment in quantum diamonds, that is industrial diamonds, not the fancy ones, with the risk profile of the fund, Mary reveals that they have over 900 applications for funding and are now looking for the best opportunities to invest, but also how to balance the strategic asset allocation and avoid being exposed to too much equity holdings. We also discuss what sets the NRFC apart from other government funding and investment vehicles such as the Clean Energy Financing Corporation and the Future Fund. Let's get started. Mary, welcome to the show. Mary Manning 02:18 Thank you so much for having me. It's a pleasure to be here, Wouter Klijn 02:21 No problem. So can you tell us about what actually the National Reconstruction Fund Corporation is? Because I understand it's created to help diversify and transform Australia's industry and economy, but it also has a return objective. You've been asked to take a commercial mindset to the organisation. Is it as a sovereign wealth fund, a government corporation, a subsidisation vehicle? What is it? Mary Manning 02:47 Great, great place to start. So the National Reconstruction Fund, or the NRF, as we call it, is a sovereign fund. It was set up by the government about 18 months to two years ago, and the purpose is to device diversify and transform the Australian economy. But maybe we can dig a little into what, what that means and and why the NRF was was set up. So the impetus for the National Reconstruction Fund and similar funds around the world, there are a number, that have have been established, was perhaps in the wake of some geopolitical events, and then certainly in the wake of COVID that governments realise that countries need to have some sovereign capabilities. So globalisation meant that, you know, there was a lot of changes in the world, but it also meant that a lot of countries lost sovereign capabilities in in certain areas. And one area where Australia's sovereign capability had been on the decline for some time was manufacturing. And so the Australian economy as as you're well aware, and your listeners will be well aware, you know, lots of very impressive sectors in terms of mining and commodities and digging stuff up, and, you know, putting it on on ships and sending it elsewhere, but not a lot of processing or value add or the manufacturing of those types of minerals, and similarly, a very vibrant services economy, But manufacturing in terms of actually making things in Australia had been on the decline, and, you know, an economy that's structured this way carries certain risks. So covid is probably the best example in terms of, if there's a shock to the global economy and supply chains get disrupted, it's a very uncomfortable and vulnerable place for a country to be to not be able to make certain things. So I guess medical sciences is a great example. During the pandemic, Australia could manufacture hand sanitizers or certain vaccines or, you know, let alone semiconductors and aspects like this. So part of the reason the NRF was was set up, was to make sure that we have these sovereign capabilities. And those are some of the companies that that we're investing in. The next part that I'll add is those are some of the push factors about why the NRF was set up. But in terms of pull factors, as you may know, Australia has amazing research and innovation inside our our universities and world class startups and scale ups, but a lot of these, I. Sort of companies or ideas that are in universities are not making the jump to commercialization, and then a lot of startups and scale ups are actually going offshore because they can't find the financing in Australia. And so another aspect of the NRF is to make sure that these domestic companies or Australian born companies or Australian born ideas stay in Australia and benefit Australia and Australians going forward. So that's a brief intro to the NRF, and I'm sure we'll get into some more of the specific factors in the rest of the podcast. Wouter Klijn 05:31 Now it's interesting that you mentioned that, that it sort of came out, that COVID realisation, that a lot of manufacturing had disappeared overseas, and we've seen a lot of discussions around reshoring, friend-shoring, but it seems to be more about supporting industry from the ground up. Mary Manning 05:49 Yes, that's exactly true, supporting industry from the ground up and also helping to create new industries. So you know, one of the areas which is a focus for the National reconstruction fund is quantum and you may be aware, but Australia is a global leader in quantum computing and in the supply chain that goes around quantum computing, it's a Centre for Excellence in terms of people who work in the quantum industry. And so this is not sort of a industry that used to be great and then got offshore. This is an emerging industry which is really exciting for Australia, and so that's part of our job also, is to make sure that those new industries emerge and become as important and as powerful as they can be. Wouter Klijn 06:30 Yeah, so we delve straight into some of the thematics in your portfolio there, quantum computing. How did you identify that? Is that something that the team came up with as a thematic or is that part of sort of a policy push into this sector? How does the opportunity get identified? Mary Manning 06:50 Maybe I will take a step back and just outline, sort of the the investable universe of the national reconstruction fund, and then I can go on to where quantum fits inside that. So the NRF has seven priority sectors across the economy in which we can invest. And seven is a lot. So we made up an acronym to to remember the the seven, and it spells red tram. So if you can't remember what the remember red tram. So the R, the first R is renewables and low emissions technologies. The E is enabling. Capabilities. So this is kind of a broad brush term for a lot of aspects of technology. It's AI, machine learning, robotics, space, biotechnology, etc. The D is defence, the T is transport, the second R is resources. The a is agriculture, fisheries and forest trees, and the M is medical science. So if you add up all those seven red tram sectors, it is a huge part of the economy. And one of the things that I did when I started was back to your very first question about sort of sovereign capability and why the NRF was was set up. If you look at those red tram sectors, some of them are sectors or industries where Australia already has a very strong competitive advantage globally. So resources, AG, renewables would would definitely be in that category. And the idea is just to value add more improve those industries and integrate them more into a manufacturing supply chain. The other ones, defence is probably the best example, and medical science is also. These are our areas where you have to have sovereign capability, regardless of whether you have a competitive advantage or not, because it's it's a vulnerability and a sovereign capability aspect. And then, you know, transport is probably somewhere in between. So those are seven priority sectors. It's very broad, and it covers the whole scope of of the sovereign capabilities that Australia has and also needs. And then one of the things that I wanted to do when I first started was identify different sub sectors within those red tram because, you know, they're they're very broad. So what are the sub sectors which within each of those so we actually identified over 50, which means that investable universe is enormous and within enabling capabilities, which is the tech part quantum, was specifically listed in our act, the act that set up the NRF and called out of an area of focus. So of course, we looked at it. That's what we're mandated to do. But certainly, once the investment team started digging into the opportunities in quantum it became obvious that this is a really exciting time for Australia, and it's an ability to, like, build an ecosystem around an emerging technology in an area where Australia is already considered a global leader. So putting those kind of two things together, it's an area where we spent a lot of time analysing and looking for good investments. Wouter Klijn 09:42 Yeah, yeah. So it's a broad uniform you also have a very sort of broad mandate, in the sense that you need to improve the Australian economy. No pressure there. So how do you narrow that down to investment opportunities? And maybe you can put it a little in the context of you have a very clear investment objective, you have a target, what does that mean for sort of the risk profile that you target in the fund and the type of companies you can invest in? Mary Manning 10:13 Yes, we do have a commercial return. You mentioned this at the beginning, and it's really important to go back and highlight this. We have a benchmark. It's the Aussie government five year plus two to 3% and you know, the investments that we make need to generate a commercial return. There's another very important part of our our target return, and the benchmark, which is that we must target this benchmark over the medium to long term. And one of the areas that we're finding already where the NRF can play a very important role, is that a lot of the private funds, and you know, certainly the Superfund industry, they by definition, may be required to have shorter timeframes. So if you're a private fund, and you've raised the fund, and you need to deploy it by x date, you need to have generated returns by x data, you're not going to be able to raise fund two and that, that, you know makes sense, and certainly with your future, your super you know, the super funds have have, like performance hurdles, which are, are quite regular. And that is, is, you know, it can influence the way that you invest. And as you may know from my previous role, I spent a lot of my career doing equity investment, and your time horizon is super short. You have to give your investors like a monthly report, and you have annual performance, and you have your Bloomberg. And you know, you wake up in the middle of the night and check your your alpha every day. And so one of the great things about the NRS mandate is we can take a longer term view. And you know, that really opens up the universe in terms of of some of the the companies and the industries in which we can invest, because it's not a daily or a monthly or even a yearly target that we're aiming to. It's more that medium to long term. So in terms of identifying different opportunities, there's a couple of ways to look at it. I should mention that we can invest across debt and equity. So this is a really important aspect of of what the NRF can do. Similar to my comment before, in terms of, there's the seven priority sectors, and there's, you know, around 50 sub sectors. Underneath that, within debt and equity, there's 15 different sub asset classes that we can invest in. So on the debt side, that goes for everything from senior secured to mezzanine to to venture debt. And then on the equity side, everything from listed equities to private equity to Series A, B, and then there's, you know, if you add all of those up, it's about 15 different sub sectors. So the combination of of the sub sectors and the sub asset classes means that we have an absolutely huge mandate. So one of the first things I do you know, you you know that that show on Netflix, everything everywhere all at once. One of the risks of of having a very broad mandate is that you try to do everything everywhere all at once, and you end up doing nothing particularly well. So I wanted to make sure that, you know, we use this very broad mandate, but also we're focused on the right things, so that we can actually get some things done, certainly in the early years of the NRF. So we do have a strategic asset allocation that allocates between debt equity, and we can also do partnerships. So this is investing via managed funds, which in turn invest on our behalf, and then there are also certain allocations in terms of the different priority sectors. And within that, those 50 sub sectors, we've identified two or three within the red tram of where we want to focus and where we're seeing the most opportunities. So that's what we're focused on right now, and anticipate that over time, those things may change, but it's important to have a map about where you're going and start in that direction, and then if you you need to, you know, alter course as you go then, then you know that. That's certainly understandable, but I felt very strongly when I started at the NF about a year ago that we needed a map, and then we're following that map now. Wouter Klijn 13:58 Yeah, absolutely. So can you tell us a little bit about what that SAA look like? Is it more akin to, say, a Balanced Fund, of a super fund, and I also believe that there is a capital commitment of about $15 billion for the fund. Does that sort of influence as well the way you look at the investments you make? Mary Manning 14:18 So it's kind of a triangulation. I'm not going to give you the exact numbers in the in the SAA. That's That's confidential, but there are a few aspects of the NRF mandate that were taken into account when this was developed. The first is that we need to have a diversified portfolio and invest across debt and equity, invest across those seven priority sectors, and then also invest across Australia. So we can't just put everything in New South Wales, or, you know, everything in like Perth based companies. So those three aspects of diversification were taken into account in terms of what the allocations are. Secondly, we do have a medium to long term time horizon, which I mentioned before, and so that. Means, particularly in more of the early-stage equity, you have the luxury of being able to invest in, say, Series A, B or C, D, where you might not get that return for a few years. The other aspect of the NRF is that we do need to be a self-sustaining organisation. So there needs to be some sort of interest income or dividend income or coupons from certain investments, so that we are a self-sustaining organisation. It's not like a private fund, which, you know, I was more familiar with before, where you have a management fee, and then you have a performance fee, and your management fee is what's paying your working capital in the immediate term. Then ref obviously doesn't have a management fee, so we need to have some of those returns from from the dead investments early on, so that that's sort of how I circled it. And then we, I mean, the other thing is, $15 billion is a lot of money, and I take that very, very seriously as a responsibility. And from a stewardship perspective, it is, it is taxpayer money. And so sort of allocating out to the the different sub asset classes and then checking to make sure what that meant in terms of, like our market share, and whether that was reasonable in the context of the Australian economy. So I guess an extreme example would be if the SAA said, let’s put $14 billion in series AB, that would be like a multiple of the current market share. So obviously that's not going to work. So when I'm saying like triangulating, these were all the factors that went in and then coming out with a with an allocation that made sense across all those different characteristics. Wouter Klijn 16:29 If I look at the mandate, where the fund is at a high level, intended to stimulate local manufacturing and support the economy, there seems to be a little bit of a bend towards potentially more startup companies, smaller companies, but I think you can invest across the entire spectrum of startups to more mature businesses. How do you see that interaction between sort of those high-level objectives and managing the risk profile of the fund. Does that limit the amount of like startups you can invest in? Mary Manning 17:04 This is a good question. So maybe I can just give you some flavour of what our, our current portfolio looks like, and then certainly what our what our pipeline looks like. So in our current portfolio, we've made 10 investments to date, and I'm really proud of these investments. I've been at the NRF for about a year, and our first investment was November. So in less than a year, we have deployed almost 600 million of capital across 10 investments. So I'm pleased with that momentum, but within that 10 the smallest is a $13 million early-stage investment in a in a quantum company, and the largest is a $200 million convertible note in era fewer rare earths, which is a listed rare earths company. So even in those like a small portfolio of 10 investments, you see a really big range in terms of the size and the maturity of the company in which we can, we can invest. So for right now, you know there, there's certain investment deployment targets, which, which we are aiming for. And it's...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/37987995
info_outline
117: Geopolitics with Alan Dupont – Tech wars, Geoeconomics and the Mag 7
08/18/2025
117: Geopolitics with Alan Dupont – Tech wars, Geoeconomics and the Mag 7
In this episode, I'm speaking with Dr Alan Dupont, who is the founder and CEO of Cognoscenti Group. Alan is a highly respected geopolitical strategist and has advised a wide range of governmental and commercial organisations, including the Northern Territory Government, Asia Society, the Australian Strategic Policy Institute and Outcomes Australia. He has advised several Australian ministers of defence and foreign affairs, and in 2013 established and led the Abbott government's defence white paper team. Alan started his career in government, including as an Army officer, intelligence analyst and diplomat. In this episode, we take a look at the geopolitical turmoil around the world and its impact on economies and investment markets. We discuss the disintegration of Pax Americana, where the US had the balance of power since the Second World War. And we look at the redistribution of power around the world, including the potential of non-state actors to play a role. We examine US President Trump's use of tariffs and the dollar as financial weapons, and ask the question whether the performance of The Magnificent Seven is related to the tech war between the US, China and Russia. __________ Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at __________ Overview of Podcast with Dr. Alan Dupont 04:00 Early interest in geopolitics and working with Michael Hinze at CQS 06:00 We are slap bang in the middle of moving from Pax Americana to another system, which is yet to emerge. 08:30 Kondratiev Cycles and why they are important 10:00 Are we moving into the national security era, where security takes primacy over trade and commerce? 13:00 I don’t think we are on the eve of a new world war. Putin is constrained in what he can do. 17:00 The scope of a fruitful relationship with China is limited by the very nature of its system 20:00 If Australia has to choose between the US or China, then we will get a polarised, deglobalised world and we will have to forfeit a lot of economic benefits from globalisation, which are considerable 21:30 There is a technological and financial war going on 23:00 Trump decided to weaponise the dollar for geopolitical reasons 24:30 Geoeconomics: the use of economic and financial power for geopolitical objectives 28:00 Alan, you called the Iran tensions a few days before the rocket launches happened. What gave you this insight? 32:30 China has its nose in most of the key technologies of the future world. But they are not ahead in the most important one: AI 39:30 Is the technology war part of the reason why the Magnificent Seven have performed so strongly in recent years? Full Transcription of Episode 117 Wouter Klijn 00:00 Hello and welcome to the i3 podcast: ‘Conversations with Institutional Investors’. My name is Wouter Klijn, and I’m the Editorial Director for the Investment Innovation Institute. For more information about our educational forums for institutional investors, please visit our website at www.i3-invest.com. That’s the letter i and the number three at invest.com. There, you can also subscribe to our complimentary newsletter. I3 insights in which we discuss investment strategy and asset allocation questions with asset owners from around the world. Now, as you all know, we love our disclaimers in this industry, so here’s ours. This recording is for educational purposes only. It does not constitute financial advice and is intended for institutional and wholesale investors only. Please enjoy the show In this episode, I'm speaking with Dr Alan Dupont, who is the founder and CEO of Cognoscenti Group. Alan is a highly respected geopolitical strategist and has advised a wide range of governmental and commercial organisations, including the Northern Territory Government, Asia Society, the Australian Strategic Policy Institute and Outcomes Australia. He has advised several Australian ministers of defence and foreign affairs, and in 2013 established and led the Abbott government's defence white paper team. Alan started his career in government, including as an Army officer, intelligence analyst and diplomat. In this episode, we take a look at the geopolitical turmoil around the world and its impact on economies and investment markets. We discuss the disintegration of Pax Americana, where the US had the balance of power since the Second World War. And we look at the redistribution of power around the world, including the potential of non state actors to play a role. We examine US President Trump's use of tariffs and the dollar as financial weapons, and ask the question whether the performance of The Magnificent Seven is related to the tech war between the US, China and Russia. Let's get started. Alan, welcome to the show. Alan Dupont 02:36 Thanks very much. Wouter, pleasure to be here. Wouter Klijn 02:40 So I had a little bit of a look at your background, and you have quite a varied background, including starting as an Army officer and intelligence analyst. Is that sort of where your focus on geopolitics today come from? Or is it more related to sort of your study? I think you studied international relations. How does one become a geopolitical strategist? Alan Dupont 03:06 Well, good question, and actually started probably earlier than you think. I always was interested in global affairs when I was even a student at secondary school, and that flowed through into my time as an intelligence analyst, which really whetted my appetite for international affairs, because I was the Vietnam desk officer, and, you know, I was briefing ministers and involved in high level geopolitics from a very early age. And so I re credentialed myself after I got out of the army, I went back to university and decided this is what I wanted to do for the rest of my life. Then the question was, well, how would I be able to do that and earn a sufficient money to keep in the lifestyle that I wanted? Right? So anyway, it all worked out okay, eventually, with a few detours on the way. Yeah, fair enough. So you have a wide range of advisory roles, also to government. But one thing that stood out for me as well is that you are involved with a hedge fund. Michael Heng says, CQ, s, so there's a bit of an investment angle there. What's What's your role with the hedge fund? Yes, well, the the context is that later in life, I was appointed to the chair at Sydney University, and the chair was funded by Michael hinsey. And when I first met him, I said, Michael, do you understand that this is this is actually national security, not financial security? And he smiled as Yes, as I fully understand that. So that began a sort of a long association with Michael, and then one thing led to another, and he invited me to come on to his advisory group to give a geopolitical dimension to his investment decisions, which was quite path breaking at the time. So I agreed to do that, and I served on that advisory group for nearly 10 years. Learned a lot about investment head. Funds, what they do, and I hopefully they learn something about geopolitics. So that was how it all happened. Wouter Klijn 05:07 I think CQ s is global macro, isn't it? So it's more of a more in common with geopolitics than than, say, other types of in strategies. Alan Dupont 05:15 Well, well, Michael would tell you there, there's sort of, it's sort of a multi asset investment platform where geopolitics has taken into the decision making in a way that most other hedge funds don't. But, you know, really, I really think it's on the edges, because it's very hard to find a geopolitical trade, per se. You have to be aware of what's going on the world, but what's the trade? You know, it's quite difficult, so it took us a while to work that one out. But no, no, he's been quite sort of bit of a thought leader in the sense that he has brought the two dimensions together to the benefit of both. You know, so, and I think more and more investment companies platforms are starting to factor in geopolitics now for pretty obvious reasons. Wouter Klijn 06:03 Yeah, we've seen a lot of developments in that space. And you and I have spoken a little bit over the year about this concept of the end of Pax Americana, the great American Peace, and that there will be a redistribution of powers and potentially multiple power centres coming up, even maybe non state actors. Where are we in that shift away from Pax Americana? Alan Dupont 06:30 So where? Where we are at the moment is right, slap bang middle in the most disruptive part of this process of moving from one system to another one, which is clearly yet to emerge. So if you look at this historically, there are these great wave cycles that macro cycles that shape history. And every 80 to 100 years or so, the existing system starts to break down, and you get a lot of turbulence and unpredictability, just as we're experiencing now. And the bad news is it often lasts for 10 and 20 years before the new system emerges. So Max taxi, Americana, the American Peace is a system that was set up by the victors of World War Two in 1945 all our institutions and our norms were shaped by essentially United States and the West, and now that's under threat from authoritarian challenges and and even under threat from the US president himself, Donald Trump. I mean, in a way, he's trashing the legacy of his predecessors all the way back to 1945 and he's the guy who's really shaking up taxi Americana and saying, we're not going to be global cop anymore. We're not going to carry the burden for everyone else. We're going to look after ourselves, America first, and the rest of the world has to stand up and do what we've been doing. And you can understand why he's doing that, but that's that's another reason why Pax Americana is fragmenting. But will we see a Pax Sinica that is a, you know, a Chinese led world order? Possibly, a lot of people think so. I've got my doubts about that, but that's where we're at the moment. Wouter Klijn 08:14 So these big cycles in history, I think, that are called comrades cycles. Can you explain a little bit about how they work and why they're important? Alan Dupont 08:23 Sure. So there are two theories about the way the world works. One was articulated by a Russian economist named condratia, and the other by his geopolitical equivalent, who said, Well, the same thing is going on the geopolitical space. And when you marry up the two waves, if you like the the ups and the downs, they do tend to coincide. And I think the singular insight by both of them into the way in which the world works is that, like everything in life, things rise and fall. And it's no surprise that governments, empires, principalities, kingdoms, also rise and fall, as we know now in the distant past, empires like Rome rose slowly and they declined slowly over hundreds of years, whereas in the you know, the sort of Uber accelerated world in which we live, things happen much more quickly. So the theory is that every 60 to 80 to 100 years, the old system exhausts itself. And economically speaking, what happens is, you see, if you think, after the Second World War, the economy, global economy, boomed, tremendous advances economically, then it sort of platted out and lost a bit of steam, and globalisation, which was its handmaiden, started to come under under stress. And now people are saying, well, globalisation is dead or certainly not as prominent as it was before. And now we're into the national security era, where national security starting. To take primacy over a trade and commerce, and we can see that playing out everywhere, including with Prime Minister Albanese visit to China this week, where he's caught between a rock and a hard place. On the one hand, he wants more trade with China, but on the other hand, China is hardly classified as a friend, because he's been doing some rather nasty things against Australia and within the region. So how do you reconcile those two? And it's, it's really very difficult to do. Wouter Klijn 10:27 Yead, and with this shift to national security, I think one of the big impacts, as well as on Europe, where obviously Trump has said, You guys are going to have to spend more on on defence, I think there's the Ukraine war that sort of made him realise that maybe we should prop up our defences a little bit more. What do you think that is going to mean for the European industry there? We will see sort of a renaissance of the military complex there, or the industry. Is that going to drive growth? Or how do you look at that? Alan Dupont 10:59 Yes. Look, it's hard to really fully understand how fundamentally Europe's security environment has changed over the last few years, primarily because of Putin's invasion of of of Ukraine, but, but it's a way, it's been a wake up call for Europe, about the fact that they've been clearly freeloading off the United States for 75 years, and that has to come to an end. And slowly, grudgingly, they've come to that conclusion. And now, all of a sudden, with a bang, they've finally woken up, and the light bulb has gone off, and they realise that they've hollowed out their whole defence industry sector to the point where they can't even make as much ammunition as a North Korea. Okay, this is a bit of a problem, so that's been a big wake up cause. So I think this is a fundamental shift that defence the defence industry is going to become. It was already becoming a priority for most of Europe, not all of Europe. The Spanish, for example, said, Hey, we're not going we're just not going there because our social welfare state's too important. But to me, that's a false premise. It's not an either or proposition between the caring economy, the welfare state, and defence. You have to do both. It's a question the balance between them and Europe didn't have the balance right, and now it's shifting to rebalance. And that means defence industries, anything to do with defence, broadly defined, is going to get a massive stimulus. And we've already seen that, particularly in Germany. I mean, it's just amazing how much the Germans are now putting into the defence sector, very late in the day. But it is definitely a trend that's going to consolidate and accelerate, I think, over the next five to 10 years. Wouter Klijn 12:56 And I read this morning that Trump was apparently has said to Zielinski, when he was on the phone with him that where he basically asked the question, if we provide you the weapons, would you strike Moscow or St Petersburg? And it made me think, could this conflict grow into a broader conflict, potentially a New World War? Alan Dupont 13:19 Look, a lot of people think that it could. I'm not one of them. I'll tell you why. Putin's calculation is that he could get away with the invasion of Ukraine, because the West would never stand up to him, because he had nuclear weapons, so he rattled the nuclear weapons case for the last four years. But the reality is, if Putin was foolish enough to use nuclear weapons, it would be a suicide note for Russia, because he's not the only one with nuclear weapons, right? Yeah, so that would actually destroy his dream of making Russia great again. What's the point of blowing everyone else up, if you blow yourself up, right? Yes, I think they're always been constraints on what Putin will do in Europe, and the fact that the Europeans and and even the US were reluctant to take him on only encouraged him to keep pushing the envelope. But if the Europeans are standing up and Trump is starting to reverse his position. Now suddenly the task of, you know, making Russia great again becomes much more difficult and counter productive for Putin's own rule. So my argument is contrary to the view that we should concede to Putin the most effective way of stopping him from doing what he's doing in Ukraine and in beyond is to be stronger, to deter him and make him realise that he can't win. And I think Europe and the US combined are capable of doing that. It's not their economies combined. Economies are 10 times the size of Russia's Russia's economy. Is only slightly bigger than Australia's, so it would be completely foolhard here for him to study. Then go right now, I'm going to invade Europe, you know. So, so that's why I don't think it will escalate. My concern is we'll go into this. No, you know, sort of no man's land. Of nobody's winning, but nobody's losing sufficiently to bring about a peaceful settlement, which is what everybody wants. Yeah, it has a rings as well of the old Vietnam War to it, where it was a much longer drawn out conflict than people expected, correct? Yeah, yeah, interesting. So what's, what's the role of China in all of this? Because we have seen some support from China for for Putin. There's also, of course, concerns around the Taiwan situation, whether that would escalate and how that would draw other parties into the conflict. What are your thoughts around that? So my view is that China is a greater problem for democracies than Putin for the simple reason that China is the only near competitor to the United States. It's an emerging superpower, and it It dwarfs the capacity of Russia in any field, economic, financial, militarily, and why I see China as a problem is that fundamentally, its values and interests are completely opposed to those of Australia's and the US and most democracies. Now that's not a reason for not trading with them or having a stable relationship with them, but there are clear constraints about how far Democrats can go in having constructive relations with China. If China continues to be as assertive and aggressive as it is globally, trade coercion against Australia, what it's doing in the South China Sea. I mean, I could give you a whole list that. So it's not that I'm anti China or anti anti Xi Jinping, but I just see, think that the scope for a fertile relationship with China is limited by China's China's the the nature of China, China's system and its actions. But now the second point is this, China plays on a global chessboard, and all these conflicts are connected. What happening in Ukraine is clearly connected to to the Indo Pacific. China is supporting Russia. It's pretty clear. It's been careful not to go too far, but it's providing all sorts of material to Russia in the war against Ukraine. It's flooding Europe with cheap goods, subsidised goods, okay? It manipulates the market. Critical minerals is a classic example. One of the reasons why our critical minerals miners is having struggling with prices, because China has artificial depressed them to keep them to keep them out of the market. So all those sorts of things are going on in the economic sphere, and then in the financial domain, China would like to see the US dollar dethroned and replaced by preferably by the yuometer knows that that won't be possible, but certainly by a bricks currency, or some other alternative that doesn't favour the United States. So is that in Australia's interest? I wouldn't have thought so. But anyway, that's debatable one, I suppose. So my bottom line is that China wants to be number one. It wants to be the preeminent state in the system. It's entitled to have that aspiration. But the problem for the rest of us is, what does that mean for the rest of us? If China's going to be number one, well, then we're presumably going to be number 234, and five, right? And is that, if you're happy about living in the China world, that's probably great, but I personally would not be. Wouter Klijn 18:54 So how do these tensions interact with sort of, the broader trend of de globalisation? And I think you...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/37698310
info_outline
116: Igneo Infrastructure Partners' Danny Latham – Infrastructure 2.0, Waste to Energy and Transition Assets
08/04/2025
116: Igneo Infrastructure Partners' Danny Latham – Infrastructure 2.0, Waste to Energy and Transition Assets
In this episode of the [i3] podcast, Conversations with Institutional Investors, we speak with Danny Latham, Partner and Head of Australia and New Zealand for Igneo Infrastructure Partners. We discuss the evolution of infrastructure assets, termed "Infrastructure 2.0," which includes renewable energy, digitalisation, and waste management. Danny highlights the shift from traditional infrastructure to more dynamic, B2B-focused assets, emphasising the importance of cash flow predictability and regulatory risks. He also touches on the role of gas as a transition fuel, the potential of hydrogen, and the integration of water management in infrastructure projects. Finally, Danny explains his investment strategy, which involves active management, matching up hard assets with good people, and leveraging mid-market opportunities for value creation. Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at Overview of podcast with Danny Latham, 02:00 The Four C’s of Lending: capacity, capital, collateral and character 04:00 Funding versus financing; there is plenty of capital in the world, but are people prepared to pay for services and products? 05:30 My first venture into infrastructure was actually a prison in rural Victoria 09:00 Changes in the infrastructure over the last 30 years 13:30 There used to be a perception that these assets looked after themselves 17:00 Infrastructure 1.0 versus 2.0 18:30 Theoretically, infrastructure 1.0 should be a little less risky, but you are trading demand risk for regulatory risk 24:00 Are people taking more risk because of the odd YFYS benchmark? Yes, we are seeing that 26:00 Atmos Renewables, a key example of how Igneo invests 27:00 We’ve moved away from large caps, because we see more opportunities, better bolt-ons and better bilateral deals in the mid-market space 30:00 Today, our focus is on taking ownership stakes of 50 - 100 per cent, so we are driving the bus 35:00 Large, hyperscale data centres today are probably more frothy than other parts of the market 36:30 Australia’s power consumption will double between now and 2050. Where is that power going to come from? The potential conflict between energy transition, decarbonisation, and the reliability and affordability to support growth is a huge thematic across the globe. 38:00 Natural gas does have a long term role as a transition fuel 41:30 In the UK, the last coal-fired power plant has been shut down. In fact, one of the last assets we’ve acquired in the UK was a waste-to-energy asset that is located on an old coal-fired power plant site. 44:00 In a waste-to-energy model, you get paid for your fuel. So it is quite a different model. 46:30 In Australia, we are actually not that good at recycling water. One of our businesses takes wastewater and uses that to water the McLaren Vale wine region. 50:00 Adjacency benefits: Amazon has just bought the plot of land next to our waste-to-energy plant in the UK 54:00 AI and infrastructure; is it all about data centres? Full Transcript of Episode 116 Wouter Klijn 00:00 Hello and welcome to the i3 podcast: ‘Conversations with Institutional Investors’. My name is Wouter Klijn, and I'm the Editorial Director for the investment Innovation Institute. For more information about our educational forums for institutional investors, please visit our website at www.i3-invest.com. That's the letter i and the number three at invest.com. There, you can also subscribe to our complimentary newsletter. I3 insights in which we discuss investment strategy and asset allocation questions with asset owners from around the world. Now, as you all know, we love our disclaimers in this industry, so here's ours. This recording is for educational purposes only. It does not constitute financial advice and is intended for institutional and wholesale investors only. Please enjoy the show This episode of The i3 podcast was sponsored by Igneo Infrastructure Partners. As such, the sponsor may make suggestions for topics, but final control over the podcast remains with the investment Innovation Institute. Welcome to Episode 116, of the [i3] Podcast, Conversations with Institutional investors. In this episode, I'm speaking with Danny Latham, who is a partner and head of Australia and New Zealand for Igneo Infrastructure Partners, a manager that's owned by First Sentier Group. Danny and I are discussing the new wave of infrastructure assets, also referred to as Infrastructure 2.0. What is this and how does it fit in with an existing portfolio of assets? Are they riskier than traditional core assets, and what's their return profile? We take a look at assets such as waste to energy in the UK, where Amazon has just bought a plot next to Igneo's plant, we will discuss gas as a longer term transition asset and the national security aspects of it. Finally, we talked about capturing and repurposing wastewater and of course, AI, please enjoy the show. Danny, welcome to the show. Danny Latham 02:26 Thank you very much. Wouter Klijn 02:27 So tell me a little bit about your background before we get into all the details of the deals and the pipes and everything. Why investing and why particular infrastructure? Danny Latham 02:37 Sure. Yeah. So thank you. Thank you for the opportunity to be here. So in some respects, sort of my, my journey to infrastructure really started with, I guess my first exposure to the investment industry was more in mortgage securitization, okay, so back in the sort of the early 90s. So yeah, been around a little while, and so as part of that sort of evolution. So been involved in sort of a lot of the, I guess, a lot of the foundations around, sort of credit analysis and the like and, and I guess, sort of some of those learnings for being sort of good stead for, I guess, sort of the subsequent career in infrastructure. And I guess, sort of some of those principles around, if you like the four C’s of lending, Wouter Klijn The four C's? Danny Latham The four C's, yeah, so capacity, capital, collateral and character. Wouter Klijn Okay, so last one is a bit different than the first three? Danny Latham Absolutely. And I think this is sort of a, I think it's probably an hour, an area that's sort of less focused on. But when it comes to investment, investing, whether it be in the public markets or the private markets, a lot runs, we are still fundamentally a people business. And so as part of that people business, character becomes important, right? So who are you dealing with? Who are you backing? What are their values? What are their ideals, in terms of, sort of managing money as part of that fiduciary responsibility, in terms of whether it be in the infrastructure world, about or even in my previous life, in the mortgage securitization world, is, if you lend someone money, are they going to pay it back? Wouter Klijn 04:20 Yeah, yeah. It's kind of important. What about the other three C's? Danny Latham 04:29 Yeah. Well, I think that is actually a very direct correlation across to sort of investing in all its guises. So it's understanding where the cash flows are coming from the variability of those cash flows, the capacity of the business to to pay. And this is sort of, I touch on, sort of in other aspects, but it's also about this sort of financing versus funding sort of ability. So I think, as a general rule, there's plenty of money out there to. Finance things. But in a cost of living pressured world, are people prepared to pay for the for the services and the products, and whether it be infrastructure, whether it be anything, so that's sort of that, I think that that funding capacity is often sort of under, under appreciated and and so it doesn't matter what you put into a model you need to under underpin that was sort of saying, what is the partly comes back to the character, what is the ability and propensity of people to pay? Wouter Klijn 05:32 Yeah, yeah. So we'll go a bit deeper into the investment process later on as well. But do you still remember your first infrastructure deal? Danny Latham 05:42 I do actually, and and essentially. So if I sort of segue from my journey from sort of mortgage securitization, yeah, into infrastructure. Mortgage securitization was great, and was lending, it was getting people into houses and so forth. But fundamentally it was, it was sort of just financing, yeah, and so for me, I guess intuitively, it was about sort of what's what's more real, and infrastructure became something that is more real. And so I grew up on a farm. My dad was a builder, so a lot of my sort of upbringing was about real stuff. Yeah, yeah, tangible stuff. So that sort of segued into, sort of my, my jumping from sort of financing, which was a little bit less real, into something much more real and tangible. And my first opportunity, as I sort of looked at the as I jumped into that sort of infrastructure space, was actually a social infrastructure asset in in rural Victoria, basically the sale of a prison. So, so a very atypical journey into, sort of jumping into that sort of infrastructure space. But then sort of that was sort of a more of a lending type deal, the real big sort of infrastructure. First asset was the Melbourne City Link deal, where it was, it sort of quite interesting this sort of, we were the, we were the underbidder to what became Transurban, yeah, sort of way back there in the in the 90s. So, so that was sort of the, if you like, that, sort of that start of definitely something real in the context of of a new build toll road, in a fundamental piece of infrastructure in Victoria. Yeah. Wouter Klijn 07:32 So how do you go from mortgages to a prison, which is a form of housing, to a toll road? Danny Latham 07:39 Yeah, good question, because if you unpick it all, it all goes back to those sort of the four C’s I talked about. And this is really sort of as a if you like an infrastructure investor, and really an infrastructure investor on behalf of clients and that sort of fiduciary responsibility. It was really about sort of understanding the cash flows, delivering expected investment outcomes, to for the risk, to to those underlying clients. And so it's back to those sort of four C's. So, so as I mentioned, those sort of foundations in the securitization world did translate across to and they equally apply to all investing. So fundamentally, investing comes down to cash flows. Where are they coming from? What's the variability, what's the risk of those cash flows turning up? And how do those cash flows end up in the hands of investors? Wouter Klijn 08:37 Yeah, with toll roads, it's quite interesting, especially new toll roads, because much relies on, sort of the estimation of traffic flow and usage of the road itself, which, you know, can sometimes be a little bit of an esoteric art. Danny Latham 08:50 Oh, absolutely. And I think you touched on a great point in terms of the evolution of this space over the last sort of 30 odd years. And if we look at sort of the, I guess, my experiences over those last 30 years, and it tends to be the ability to forecast and predict human behaviour has become the most challenging aspect of that sort of infrastructure journey. So particularly for as you, as you touch on, for if you like new build toll roads, where you actually then sort of say, what's the likelihood that someone is prepared to pay a toll to save some time, versus sort of that they stay on the congested road? So that sort of predicting of human behaviour, I think, frankly, has been probably one of the biggest challenges and been one of the biggest one of the biggest issues of infrastructure over the last over the last 30 years. So as a general rule, particularly for by definition, humans tend to be lethargic and apathetic in terms of. Their behaviours, they tend to be creatures of habit. So they tend to, sort of for them to change is often misunderstood from, from an economist perspective, the economist will say your time saving is x, so therefore you should be your value of time is y, so therefore you should be prepared to pay a toll. Yeah, yeah. It doesn't sort of get into the behavioural aspects around around people. Wouter Klijn 10:26 Yeah, there's a bit of behavioural finance in there, counting on people not to change their stripes. Absolutely, absolutely. I was going to leave the question question for last. But since you mentioned it, what are some of the biggest changes you've seen over the 30 years that you've been involved in this space, I can imagine that the type of assets have changed, but also the structures of the transaction themselves. Danny Latham 10:49 So if you think from it, from an industry perspective, if we go back to sort of the mid 90s, particularly here in Australia, obviously the real estate and the property space have been around for forever. It's really around that sort of mid 90s that the private equity and private infrastructure funds management really started to sort of take off. And there was a whole congruence of factors that sort of sort of all came together at that point in time, one of which was obviously mandated superannuation, so that the pool of capital was increasing. There was a whole lot of micro economic reform in Australia at the time, really striving for productivity improvements. And as part of that, there was also, in some states, like Victoria, there was sort of financial stress. So there was whole lot of factors sort of manifested at the point in time in terms of supply of opportunities, and then also demand for those opportunities. And that sort of really started in that sort of space. So that's the origin of it. And then over the last 30 years, what we've seen is the as the growth and the development of the infrastructure space globally, and not dissimilar to the evolution of the infra of the property sector, it has grown and developed. So if I look at it, I'm trying to think where, what the analogy now is, is I think where I think the infrastructure sector is probably beyond the the pimply adolescent, yeah, we're probably now into the to the young, young adult phase, and at the point of, sort of getting married, having children, and the sector has grown. It's segmented by by sector, by geography, by by by risk, and so so back in the sort of the mid 90s, it was a bit more of a homogenous sort of product. It's now grown and developed. And so from an investor perspective, there's there's much greater choice in terms of the number of players, the number of managers, the number of strategies. And so therefore there's a greater opportunity for the end investor to then say, well, okay, what? What works for me in terms of my own objectives, in terms of risk and return? So I think that's probably the main it's that evolution in terms of diversity of options. Now, as part of that, the definition has certainly evolved. So if we go back to the start of my infra journey, it was reasonably traditional. It was very much sort of the infra 1.0 it's now evolved, and it's now to the 2.0 which we can dig further into. But it's even then beyond that, sort of, almost, sort of a very, very diverse extension of the of the definition and and, like beauty, it's very much in the eye of the beholder as to what people's definition of infrastructure. Wouter Klijn 13:56 Did you see sort of an increasing specialisation as well? Because I think there's sort of, you mentioned the private equity industry that's involved in many infrastructure projects, and you've seen sort of an evolution there, where initially they had similar models, like, you know, reduce costs or change management, but now they've evolved to target very specific parts of different business models. Some of them use AI. It's much more specialised. Is that similar in the infrastructure space? Danny Latham 14:24 Yeah. I mean, I think the the thematics that play out on a from a PE perspective, are no different. So I think there's, there was a perception incorrectly, that these assets looked after themselves. Fundamentally, these are large, complex businesses, and in some cases, much more oversight visibility from a community perspective, so many more stakeholders in terms of of those sort. Of having a view around these businesses. So in terms of the they certainly don't look after themselves. So I think that's one of the I think one of the main aspects in terms of that sort of evolution is these need to be, if like actively managed, no different to PE the the end game might be different. So depending upon the nature of the asset, depending upon the structure in which it's held, it may be that they they're held in an open ended fund, and they're sort of very much sort of built out over a long period of time. So it's less focused on an exit in five to 10 years time. It's but nonetheless, you are actively managing these businesses you are, you're appointing the boards, you're appointing the management teams, and then you're down in the trenches. Wouter Klijn 15:46 So you mentioned there that we've moved on to infrastructure 2.0, how is it different from the first iteration? Do they still include include core assets? I mean, can you tell us a little bit about is there a different risk profile, are they more like greenfield projects? Danny Latham 16:04 Sure, I mean, that's sort of that evolution of the sector, and it's not, it's not just an infrastructure thematic. So what we've seen is a fundamental shift in terms of, and I guess you can put it in the context of, sort of the third industrial revolution, or the fourth industrial revolution, and then sort of what flows off the back of that from a from a broader community perspective, but also from an infrastructure perspective. And so if you think about, sort of the the traditional infrastructure, arguably, is probably more of a second industrial revolution type, types of scenario around those sort of traditional assets, of of utilities, water, gas, electric, telco, and then more on the sort of GDP correlated assets, more around sort of your ports, airports, road, rail. So if you think about they are very much a early 1900s sort of thematic as we move forward into, I guess, that sort of third and fourth industrial revolutions. It's more about electrification, Internet of Things, AI and and that's sort of how that sort of set up. I put sort of the the traditional infrastructure in that 1.0 and now we're moving to the 2.0 and the 2.0 is really driven by a lot of those sort of macro thematics that we see that are not just infrastructure related. So energy, energy transition, or decarbonization, digitalization, de globalisation, as we've moved from a sort of a global world to a much more sort of look after ourselves in a post pandemic world, and then a lot feeding off the back of that also is a lot more about circular economy. So how do we, how do we do more locally with what we do? How do we, how do we recycle our waste. How do we be very focused on our water use, etc, etc. So that's, I think that's the part of that evolution, and they can co exist. But as a general rule, I think what we see is that the the infrastructure, 1.0 tends to be a bit more traditional, a bit more of a of an interface with government. So these sort of regulated monopoly assets that are sort of focused around sort of economic regulation, because they're monopolies, and the influence of regulators in that, if you go to the 2.0 it's a bit of a sort of move from a B to C world to a B to B world. So if you...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/37630090
info_outline
115: Gain Line Analytics' Ben Darwin – Performance Analytics, Team Cohesion and The Wallabies
07/14/2025
115: Gain Line Analytics' Ben Darwin – Performance Analytics, Team Cohesion and The Wallabies
Ben Darwin is the Co-founder and General Manager of Corporate at Gain Line Analytics and in this episode we're going to take a look at what makes teams successful and stay successful. Ben is a former Wallaby player, having played 28 test matches for Australia. He's a former coach and a performance analyst, having worked with a number of rugby teams, including a Japanese team, the NTT Shining Arcs and Suntory Sungoliath, he started Gain Line in 2013 out of a desire to introduce a greater degree of empirical analysis into professional sports. But his research goes broader than just sports, it also goes into the dynamics of professional teams across industries and the cultures they foster. In this podcast, we're looking at how this has implications for investment teams and also for super fund organisations. Overview of Podcast with Ben Darwin, Gain Line Analytics 03:00 I was always interested in Australian sports punching above its weight 05:00 I realised that my efforts as a coach did not necessarily have any influence on the outcomes 08:30 We would find that teams that didn’t buy new talent and held on to the players they didn’t want did better 11:50 Attribution bias, we overly attribute performance to the individual 13:00 With cohesion, I’m trying to measure the attributes that drive people’s understanding of each other 14:00 We all misattribute what change does 18:30 When people try to make things better, they usually make things less cohesive 20:30 The dangers of growing organisations (super funds) too quickly 23:30 Growth is really hard 27:00 Cohesion is not the same as culture 37:30 Is it possible to build cohesion in a team with a high level of turnover? 44:00 The tumble down effect: one change causes more changes, which causes even more changes 48:30 Cohesion can drop 50% in a week, but it can’t grow 50% in a week. It grows maybe five per cent a year 52:00 My experience is that economies of scale are vastly overrated 1:05:00 Often we are dealing with a competent person who works in a structure that makes them look like they are incompetent 1:06:00 Building interpersonal trust is great, developing clarity is better Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at Full Transcription of Episode 115 Wouter Klijn 00:00 Hello and welcome to the [i3] podcast, conversations with institutional investors. My name is Wouter Klijn, and I'm the director of content for the investment Innovation Institute. For more information about our educational forums for institutional investors, please visit our website at www.i3-invest.com There, you can also subscribe to our complimentary newsletter, [i3] Insights, in which we discuss investment strategy and asset allocation questions with asset owners from around the world. Now, as you all know, we love our disclaimers in this industry, so here's ours. This recording is for educational purposes only. It does not constitute financial advice and is intended for institutional and wholesale investors only. Please enjoy the show. Welcome to the [i3] podcast, conversations with institutional investors. I'm here today with Ben Darwin, who is the co founder and general manager of corporate at Gain Line Analytics. And today's topic is a little bit different from our normal investment focus podcast, because we're going to take a look at what makes teams successful and stay successful. So Ben is a former Wallaby having played 28 Test matches for Australia. He's a former coach and a performance analyst, having worked with a number of rugby teams, including a Japanese team, the NTT shining arcs and Centauri Sun Goliath, he started gain line in 2013 out of a desire to introduce a greater degree of empirical analysis into professional sports. But as research goes broader than just sports, it also goes into the dynamics of professional teams across industries and the cultures they foster. So in this podcast, we're going to have a look at how this has implications for investment teams and also for super fund organisations. So Ben, welcome to the show. Ben Darwin 02:21 Thank you so much. Wouter Klijn 02:22 So tell me a little bit about the origin story behind gameline. I just mentioned why you started it, but can you tell us a little bit about the history of it? Ben Darwin 02:31 I suppose I have to begin in a way, and I apologise to go back, but with my own history in that not being Australian and coming from the UK, I always sort of had a bit of a always felt like a bit of an outsider in my view of the world and becoming sort of, then part of Australian Rugby. I was always confused by this idea of, like, people say to me, you know, I go to the UK. Oh, geez. They breed them big in Australia. Actually, I was born in crew in the Midlands, like, I'm not even from Australia. And they would say, you know, you Australians, you're so good at sport and things, and I'd be like, I don't, I don't quite understand why. And so I was always interested by this idea about Australian sport punching above its weight, and why rugby particularly punched above its weight, and also why countries like England or France for that matter, or just generally, larger countries would would have all the resources in the world and not necessarily be as successful. And I remember a particular phrase by Peter Fitzsimons talking about England coming out to play, and thinking, is this the best they can put together? Because with, you know, they've they have a million rugby players. For example, in England, Ruffin, I think we have 60,000 so it's like, how's it, how's this taking place? So as a player coming into that environment, I was a little bit confused by it. And then you become, you know, one of the problems with sport is we all see things. So magically, we all see and we, you know, we see individuals as heroes, and not sort of think of them as everyday people. So you then sort of become part of that environment, and you meet the coaches, and you meet people as part of the system, and think, well, like, how is this successful? It doesn't, doesn't make sense. And not that people aren't talented, but the people you're up against being just as talented, if not more, talented, and not understanding why. So then I became a then I became a coach, because I had a spinal injury 2003 so I got very young into coaching, and the first club I was ever a part of, I don't think I won a game as a coach, so I'm like, Okay, I'm a terrible coach. And then I went to another club, which was the Western Force, which was a startup team, and we didn't win anything. And then I went to Japan and didn't lose for two years. Then I come back and coach somewhere else and win there. And then I coached again in Japan and didn't lose. And thinking, okay, maybe it's just me in Japan, but then I'd have other teams in Australia to do well or poorly. So I began to understand that that my influence on a team was sometimes good, sometimes bad, but that didn't necessarily lead to outcomes, and I've got so probably my worst coaching I ever did was in a team that did not lose the whole year. So my son. I was trying to derail them, and almost did derail them, to be honest, but they won despite me. And once you bounce around enough organisations, you start to kind of see some causality around performance. And sometimes teams win with good coaches. Sometimes they win despite good coaches. Sometimes they lose with good coaches. You talk to enough people with enough experience, they'll tend to tell you the same thing. So the last team I was part of, from a coaching perspective, I also became a data analyst, and that was the Melbourne rebels, and that one of the questions they asked me was after two years, because we spent a lot more than the market. We basically spent double what the market had in terms of talent, but we didn't win a lot of games. And so the question came up for me as an analyst, how long is it gonna take for us to win? So that question led me down this path, and I did one more stint, sorry, approaching at Suntory, like I said, and I came back to Australia and basically started the business because I didn't want to work in sport anymore, because I could not control the outcomes at all. Yeah, the team that last job I had as a coach, I was literally fired after we went undefeated. So I'm like, okay, bugger this. I could this is not working. So gameline is basically a consultancy company because then, because you see a lot of people in sport, when they lose their jobs, or in business, they become a consultant to kind of fill the time. This is basically that option. It's just gotten out of hand, but it's a stock gap that's gotten out of hand now for 13 years. Wouter Klijn 06:28 Yeah, it's got out of hand in a good way. Ben Darwin 06:30 Yeah, in a good way. So that's kind of how I arrived that point. But the original idea for the business was actually not cohesion analytics, as we call it. It was actually something entirely different, which was a model whereby clubs would come to us, and we would tell them who was, who was off contract. And the way I arrange the data is I always arrange the data visually so I could just easily find a player, and I arranged them by team, but I would couple all the all the players in that team together, and then I would notice contractual changes year to year between teams. And there was one particular team that that basically came to us and said, We want to gut the whole team. Can you help us find new players? And we tried to help them do that. And then they came back and said, We're really sorry. The owners got financial problems. We have to keep the players we don't want. So we knew what they wanted and didn't want, and it wasn't what they had they didn't want. And the next year, they went from, I believe, second last in the year they came to us, and the next year, they made the finals for the first time. And I don't think they've had the final since. So this one year where they stabilised because of an external force, which was the financials, made them keep the place they didn't want, they dramatically improved. And I'm like, okay, that does not make sense. And then there was another example. At the same time in 2013 of a team called the highlanders in Super Rugby, who had a recent period of under performance. And they were gifted through New Zealand Rugby, a large amount of players have been highly successful at the 2011 World Cup and and the the market responded by saying, Okay, look how much talent they have. So they went, I believe, from 40 to one, so with 2% chance of winning the competition, to six to one, which put the favourites second favourites. And they won three games, including losing to the rebels, which generally gets you five as a coach, right. But, yeah, but that that team two years later, without most of those guys, then won the cop. So I was really confused now because, and it was almost running against my own self interest, because we were trying to help players go into the marketplace. And what it was saying was, don't buy talent. Yeah, hold on to the talent you don't want. And so the more that people that imported, the less they could do. So sorry, the more, yeah, more people imported, the worse they got. And the less they imported, the better they got. So I started to run analysis on this, and just built some very simple algorithms, one called Twi, which the acronym I'll regret forever, particularly in financial services that we've that's what we've got and and we just started to find some commonality. And then we found weaknesses in that system. And then there was a it's been a continuous iteration ever since, on this kind of formula for success or failure. And then team started talking to us, but the core of that research was not out of sport. It was it was out of Grossberg work on portability talent. It was around military data on shared experience. It was around hospital research on contractual stability. It was on other military research around structure and size of teams, and we just then applied it to sport, and then it came back again, where we've taken it back to corporate again. But this the we just found it to be particularly long term, really strongly predictable on performance, but also we felt was getting to the heart of causality, because a lot of data in financial services and in sports. Sports industry is fundamentally measuring outcomes, measuring performance, but what we're trying to get to the heart of is what's causing that performance. Yeah, so we're not really interested. In, in the scenario of like a company is selling this much more, what, which is, why are they selling this much more? Or why are they having performance? So we're trying to remove ourselves from form. And the turn of phrase I'll use to that is, the closer we've what we're finding is the closer you would get to correlation, the further you would move from causation. Yeah, two things were so tired, I'll give a very simple example. This in sport, in rugby, the team that makes the most line breaks or gets the most run metres will generally win the game. Okay, well, that's pretty close to try scored, because you can't really make one score tries without making line breaks. So why don't we just say the team with the highest score wins the game? Okay, but that's really not getting to the heart of causation at all. Let's go right further back. Why are they catching the ball? Why are they able to pass the ball? Let's keep, keep coming back to the core about why the skills of the players develop so well. And so what we're we're really trying to is to move entirely away from form, because form has no hard end causation. Wouter Klijn 10:59 Yeah, yeah, you touch upon something there that I thought was interesting as well. You, you did a presentation for us at our strategy forum in May, and you were talking about this concept of spending a lot of money on talent is actually not necessarily helping the team perform better. And I sort of made a comparison there with investment teams, where you often have a star investor or a star fund manager, but if you take them out and put them in a different team, in a different company, they don't always perform as well or are as successful either. And you talked a lot about cohesion within a team. Can you tell us a little bit about what do you mean by cohesion, and how do you develop it? Ben Darwin 11:41 So that turn of phrase, and all of these pretty much terms have been used, you know, brought up by other people, but the turn of phrase attribution bias, I really like, which is we overly attribute performance to the individual, either successful or unsuccessful, to the individual, rather than the collective of the situation that person's performing in. So what we're trying to do is to understand what are the drivers of that individual performance. And so we know that a player is is much more likely to perform well when, for example, in rugby, you have a 910 combination, a passer and a catcher, if that passer has been passing to that person 9000 times before they're going to know where to put the ball. Okay, in financial services, for example, you might have a researcher. Relationship between a researcher and a fund manager, and that researcher knows how to deliver the information effectively. And you can use all of the terms and phrases that we like you know, and can get to a shorthand, or can look for the keys that this person's really interested in? Well, that's just a relationship that can work much faster and cover off more detail. And we also like how the things are handed to us. So whatever form this takes, whether it be sport or corporate, I don't really see too much of a difference. So what I'm trying to do in cohesion is I'm trying to measure the attributes which directly drive understanding between people. And there's different forms of understanding. So that understanding could either be interpersonal understanding, it could be system understanding, it could be role understanding, and then things like size of the team, which we can touch on later on, then structure, which is extremely important how different parts interact. In fact, there's a group I did some some work with in Sydney. Was a was a asset management company, and they had different divisions in the business, and realised the different divisions were not talking to each other, and another one would make a change, and the other one would say, Why didn't you tell us this was going to take place? This is going to take place, this is going to completely stuff our systems up. And they were like, we didn't even think of talking to you. And I mean, I've done work with an almond manufacturing company that had the same problem, right? It doesn't systems are systems are systems. And of course, there's different nuances to each scenario, but, but under we all miss attribute what change does in its many forms, and so cohesion is fundamentally trying to measure change as well as the level of understanding between the component parts of the team. So if I look at a if I look at a team, and we've done work with Platinum, for example, the Platinum team has a level of measurable understanding that we can map at any one point, and it's shifting all the time, up, down and and when a team doesn't change, it's shifting. So if you and I do something, if we do this podcast, there'll be misunderstandings. We do it again, and you'll go, Ben yesterday, I heard about this, but I want to talk more about this. Or you might say, I I know when Ben's talking too long, or, you know, I know with my wife, for example, you know when the when the left eyebrow goes up, that's a dishwasher related issue, right? We have this shorthand that we all misunderstand, right? If I could give you a really easy example of this, and I. Didn't present this at the thing, but I was, I was in the supermarket one day, and I normally shop at Woolworths in Blackburn, and I was up at Doncaster, which is a little bit further from our house, with our daughter, and my wife said, Can you do the weekly grocery shop? Okay, now, sometimes I sit my car on my phone after I've done a grocery shop, and my wife sells me say, Why are you taking so long? And on this particular occasion, I couldn't find anything in the Woolworths in Doncaster, right? And my wife messaged me, why you taking so long? It's like because bread's not where bread is. It's in my mind's eye. I had a picture because I know I actually do this sometimes at conferences. I say, right? Tell me who does the shop right, and which, which one do you go to? And they say, Woolworths here. I say, Where's the bread? They'll go, oh, seven. Where's the chocolate? All four, right? You have in your your head of mine's eye. So not every Woolworths is mapped out the same. And so there is a map in your head of what that looks like. Or, you know, you get in the car and the indicator goes off because the windscreen wipers on the other side now, right? Yeah. And so we we use the human brain, uses shortcuts all the time to help us, and it's discombobulating when it becomes ambiguous as to where things are, and all of a sudden we keep going to the wrong places, yeah. That's cohesion. That's a form of cohesion. I have a level of cohesion with that supermarket. Now, if I keep going to Doncaster, I'll build up a different cohesion. The problem is the learning and the unlearning, right? That's also a form of cohesion, and because if you've done something a lot before, now it becomes the problem, right? If I have a if I have a CRM that I'm using in my financial services business, and I changed to a new one, because it's better. The problem now becomes the old system, and my knowledge of...
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/37232405
info_outline
114: Bellmont Securities' Michael Block – The Michael Block Roadmap to Investing
06/30/2025
114: Bellmont Securities' Michael Block – The Michael Block Roadmap to Investing
Michael Block is Chief Investment Officer of Bellmont Securities and Adjunct Industry Professor at the University of Technology Sydney (UTS), where he helped establish the UTS Anchor Fund. The UTS Anchor Fund is a live investment portfolio managed by students to give them hands on experience with managing portfolios. In this episode, we take a look at Michael's extensive career in investing, spanning roles with Future Plus, Nambawan Super, Australian Catholic Superannuation & Retirement Fund and now Bellmont Securities, and discuss the lessons learned during this time and how you can condense this experience in a course for students. We talk investment theory & philosophy, impact of regulations, meeting your investment heroes and the Michael Block Roadmap to investing. Enjoy the Show! Overview of podcast with Michael Block 02:00 I’m just a nerd with a PC, interested in investments 05:30 I once was an analyst working for the government looking at money laundering, where I saw the bust of a bikie gang and they confiscated a live alligator 08:00 The greatest accolade I can have is that the people I’ve [mentored] are now achieving in the outside world 09:00 Getting involved with the UTS Anchor fund 11:00 The UTS Anchor fund helps students ‘from go to woah!’ 13:00 The Graveyard of Good Ideas – There are many good ideas that super funds can’t do 16:00 A super fund of the future will look massive and passive 17:00 Changes in the wealth space can be glacially slow 20:00 There will never be another super fund that fails the [YFYS] performance test again, because they will never take enough risk for that to occur 26:00 The Michael Block roadmap: 1 Set an age appropriate SAA 27:00 Funds that don’t believe in lifecycle just want to put everybody into a balanced fund. That is lazy 28:30 The Michael Block roadmap: 2 Only move away from the SAA under extreme circumstances 30:00 The Michael Block roadmap: 3 Decide when to be active and when to be passive 35:00 Your time horizon is what matters; LTCM became insolvent but was ultimately proven right 40:00 Super funds are faced with an activity bias 42:00 I rather be vaguely right, then precisely wrong 44:00 I’m a purist so I believe there are only two asset classes: equities and bonds 48:00 Mean/variance optimisation is like driving in a car looking only in the rearview mirror 55:00 On Jeremy Grantham and other heroes __________ Follow the Investment Innovation Institute [i3] on Explore our library of insights from leading institutional investors at The [i3] podcast is available on , , , , or your favourite podcast platform.
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36995680
info_outline
113: FCLT's Eduard van Gelderen – Long Term Investing, Concentrated Portfolios and Decarbonisation
06/04/2025
113: FCLT's Eduard van Gelderen – Long Term Investing, Concentrated Portfolios and Decarbonisation
Eduard van Gelderen is Head of Research for Focusing Capital on the Long Term (FCLT), an organisation that was established in the wake of the Global Financial Crisis, or Great Recession as it is known in the US, to move away from a so-called “quarterly capitalism”, which arguably contributed to the crisis, and towards a true long-term mind-set.
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963330
info_outline
112: Fulcrum's Suhail Shaikh – Absolute Return Investing, Market Timing and The Role of Luck
04/29/2025
112: Fulcrum's Suhail Shaikh – Absolute Return Investing, Market Timing and The Role of Luck
Suhail Shaikh is Chief Investment Officer of Fulcrum Asset Management and is the portfolio manager of Fulcrum’s Discretionary Macro and Diversified Absolute Return strategies. In today’s incredibly volatile environment of tariff wars and deglobalisation, investors tend to be more sensitive about the level of their absolute returns, than their performance against the benchmark. In this episode, we delve into the philosophy of absolute return investing, we talk about the role of skill versus luck, the use
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963335
info_outline
111: ART's Michael Weaver – The Role of Real Assets in a Pension Portfolio
04/02/2025
111: ART's Michael Weaver – The Role of Real Assets in a Pension Portfolio
In episode 111 of the [i3] Podcast, we speak with Michael Weaver, who is the Head of Global Real Assets with the Australian Retirement Trust. We discussed the role of real assets in the context of a multi-asset, pension portfolio, the ever-lurking threat of inflation, the return of office property and more. Please enjoy the show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963340
info_outline
110: Allspring Global Investment's Jamie Newton – Is Now The Time to Add Duration?
03/04/2025
110: Allspring Global Investment's Jamie Newton – Is Now The Time to Add Duration?
In episode 110 of the [i3] Podcast, we speak with Jamie Newton, Head of Global Fixed Income Research and Deputy Head of Sustainability at Allspring Global Investments. We discuss why now is a good time to add duration to fixed income portfolios, concerns over the lack of experience with high default rates in private credit and opportunities in data centres and other digital assets. Enjoy the Show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963355
info_outline
109: Is DeepSeek What It Promised To Be? – Will Liang Explains New AI Model
02/12/2025
109: Is DeepSeek What It Promised To Be? – Will Liang Explains New AI Model
In episode 109, we are back with Will Liang, Executive Director at MA Financial, to discuss the introduction of DeepSeek and the impact on the future development of artificial intelligence and the global economy. Are tech firms going to scale back their investments due to this low cost model, or is it all a bit of a hype? Enjoy the Show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963360
info_outline
108: Victory Park Capital's Brendan Carroll – Private Credit, Asset-backed Lending, ChatGPT
01/02/2025
108: Victory Park Capital's Brendan Carroll – Private Credit, Asset-backed Lending, ChatGPT
Private credit has evolved significantly since the global financial crisis, and Brendan Carroll, Senior Partner at Victory Park Capital, has been at the forefront of that transformation. In this episode, we explore how private credit investments are adapting to meet the needs of insurers, the growing role of asset-backed lending, and why insurance companies are becoming the fastest-growing investor base in the space.
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963350
info_outline
107: Scott Donald on Governance and Member Meetings
12/19/2024
107: Scott Donald on Governance and Member Meetings
In episode 107 of the [i3] Institutional Investment Podcast, we speak with Scott Donald, Associate Professor at the School of Private and Commercial Law of the University of New South Wales, about his research into governance and the now mandatory annual member meetings of superannuation funds.
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963365
info_outline
106: Tuckwell Family Office's Craig Dandurand
11/18/2024
106: Tuckwell Family Office's Craig Dandurand
In episode 106 of the [i3] Institutional Investment Podcast, I speak with Craig Dandurand, Chief Investment Officer of the Tuckwell Family Office. Craig has an impressive career in the investment industry that spans time with US pension fund CalPERS and Australia's the Future Fund. We talked about his background in credit investing, setting up a hedge fund program and the world of private wealth. Enjoy the show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963370
info_outline
105: T. Rowe Price's Jessica Sclafani
10/25/2024
105: T. Rowe Price's Jessica Sclafani
In episode 105 of the [i3] Institutional Investment Podcast, we speak with Jessica Sclafani, a Global Retirement Strategist with US fund manager T. Rowe Price, which manages $1.6 trillion in total assets on behalf of clients. Retirement is a more complex phase than wealth accumulation and it needs a more sophisticated approach to deliver good outcomes. Sclafani discusses a 5 dimensional approach to retirement and the tradeoffs that come with choosing a suitable approach
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963375
info_outline
104: State Super's John Livanas
10/08/2024
104: State Super's John Livanas
John Livanas is the Chief Executive Officer of State Super, the $37 billion superannuation fund for public service and public sector workers in NSW. In this episode, we talk about the use of defensive overlays, dealing with the COVID drawdown and machine learning in investments. Enjoy the show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963380
info_outline
103: Janus Henderson's Matt Culley
09/03/2024
103: Janus Henderson's Matt Culley
Matthew Culley is a Portfolio Manager on the Emerging Market Equity Team at Janus Henderson Investors. In this podcast, we talk about the best performing markets, tensions around China, the impact of the US elections and fighter jets. Enjoy the Show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963385
info_outline
102: Qantas Super's Andrew Spence
07/30/2024
102: Qantas Super's Andrew Spence
In episode 102 of the [i3] Podcast, we speak with Andrew Spence, Chief Investment Officer of the $9 billion corporate super fund Qantas Super. Qantas Super recently announced to merge with ART and we took the opportunity to look back at the investment strategy that Spence put in place as the fund's first CIO, the innovations along the way and lessons learned.
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963390
info_outline
101: ECP's Damon Callaghan and Sam Byrnes
07/02/2024
101: ECP's Damon Callaghan and Sam Byrnes
In episode 101 of the [i3] Podcast, we speak with Damon Callaghan and Sam Byrnes of asset management firm ECP. ECP was established by Dr. Manny Pohl of Hyperion Asset Management fame and in this episode we talk about the opportunities and challenges of artificial intelligence when investing in Australian equities. Enjoy the show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963395
info_outline
100: Private Equity Co-investments with Neuberger Berman
06/04/2024
100: Private Equity Co-investments with Neuberger Berman
It is our 100th episode of the [i3] Podcast and we are celebrating this with an in-depth discussion on innovation in private equity, especially mid-life transactions, with David Morse, Managing Director and Global Co-Head of Private Equity Co-Investments at Neuberger Berman. Enjoy the show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963400
info_outline
99: Global Equities with Janus Henderson
04/30/2024
99: Global Equities with Janus Henderson
In episode 99 of the [i3] Podcast, we speak with Julian McManus, who is a Portfolio Manager on the Global Alpha Equity Team at Janus Henderson Investors. We spoke about global equities, the role of the Magnificent 7, Japanese equities and hybrid cars. Enjoy the show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963405
info_outline
98: Artificial Intelligence in Wealth Management
04/17/2024
98: Artificial Intelligence in Wealth Management
In episode 98 of the [i3] Podcast, we are speaking with Will Liang, who is an executive director at MA Financial Group, but is also well-known for his time with Macquarie Group, where he worked for more than a decade, including as Head of Technology for Macquarie Capital Australia and New Zealand. We discuss the application of AI in financial services and wealth management, ChatGPT and how to deal with AI hallucinations.
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963410
info_outline
97: Talking Leadership with Felicity Walsh
04/02/2024
97: Talking Leadership with Felicity Walsh
In this episode of the [i3] Podcast, we speak with Felicity Walsh, Managing Director and Head of Australia & New Zealand for Franklin Templeton about leadership, fostering a great work culture, mentorship and lab coats. Enjoy the show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963415
info_outline
96: T Rowe Price's Maria Elena Drew – Towards Net Zero Portfolios
03/05/2024
96: T Rowe Price's Maria Elena Drew – Towards Net Zero Portfolios
In episode 96 of the [i3] Podcast, we speak with Maria Elena Drew, Director of Research – Responsible Investing, at T. Rowe Price about the challenges and opportunities of transforming investments into net zero portfolios. How does it affect your objectives and engagement with companies? Enjoy the show!
/episode/index/show/5bcc2d8e-2740-4ba1-86ed-831c46b535f3/id/36963420