In this From the Archives episode, we revisit a conversation with Tanya Branwhite, former Head of Portfolio Construction at TCorp, which was originally released in March 2023. Tanya takes us through her unconventional path into investing, from her early days as a credit analyst in the "whiz-bang" late 1980s, through more than a decade at Macquarie, to her move into asset owner organisations at the Future Fund and, eventually, TCorp. In early 2023, TCorp was already wrestling with questions around how to best shape the total portfolio approach for the organisation, as well as how to deal with higher inflation, rising rates and the true cost of implementation, topics that have only grown in relevance today. We did a deep dive into TPA at TCorp and why it thinks about risk rather than asset classes. We spoke about how equity, duration, credit and FX risk together explain the vast majority of portfolio behaviour, and how a "prepare but don't predict" mindset shapes decisions on liquidity, implementation and diversification. Overview of Podcast with Tanya Branwhite, TCorp: 01:00 Starting out as a credit analyst with Elders Finance Group: "It was a fairly interesting baptism of fire…" 03:00 The Macquarie years. The 'loose/tight' culture of rules and entrepreneurship 05:30 During the GFC, I wrote research highlighting that a number of Macquarie vehicles had significant financial risk. That wasn't well accepted within the organisation at the time. But I learned to stand by the rigour of my analysis. 07:30 Ultimately, it made my career at Macquarie, because I became sought after for client work 09:00 Leaving Macquarie for the Future Fund 11:30 The Future Fund didn't feel like it was a restrictive environment from a government-owned perspective. It is a company that is owned by the government, not a department of the government 13:30 How has a Total Portfolio Approach changed the investment portfolio? 17:00 Risk is at the heart of what we do, because we can only control risks and outcomes are the result of that risk. 18:00 Equity risk is at the centre of this model. 21:00 Diversification away from equity risk in an environment where equity and bond correlations are positive 23:00 Not just unlisted assets, but illiquid assets can help diversification. For example, we own a number of hydroelectric dams in Canada. 26:00 Challenge in fixed income is even higher than before, because real returns are a challenge 26:00 Bonds almost had their own global financial crisis last year; it was a three standard deviation event 28:30 We prepare, but we can't predict 34:00 On valuation frequency of unlisted assets: we do try to de-smooth valuations of unlisted assets. And sometimes these assets need additional capital from investors during periods of crisis; that is not often thought about 36:00 Managing liquidity 39:00 We are looking at natural capital and opportunistic liquidity 40:00 Reducing the number of managers, has this work finished? 42:00 On implementation and efficiency Full Transcript of Episode 143 Wouter Klijn 00:11 Tanya, welcome to the podcast. Tanya Branwhite 01:21 Good morning, and I'm really pleased to be here, Wouter. Thanks for the invitation. Wouter Klijn 01:25 Thank you. We always ask a little bit about people's background and how they got into investing. So what made you decide to pursue a career in investing? I think you started out initially as an analyst at Deutsche Bank. Tanya Branwhite 01:38 Well, actually, if we really want to go back, I wouldn't say that I pursued a career in investing. It sort of happened, so I won't say there was any great design in where I've ended up. I actually started off as a credit analyst, and I did that in the whiz-bang years of the late 1980s and early 1990s. Being a credit analyst at that time, for Elders Finance Group, was a fairly interesting baptism of fire. We went from one extreme, operating in an environment where there was a lot of money available, to the other, and I ended my career with Elders Finance working out a range of corporate finance lending that had gone sour, with not many other people left in the organisation to work it out. So that's really how I started off. I then moved to Citigroup, and as part of what was still almost a graduate training programme at that stage, ended up in their investment arm, and that's how my investing career started. So it wasn't by any great design, but much more a journey of serendipity and opportunities presenting themselves. Wouter Klijn Fair enough. Now, you also spent a significant time at Macquarie, I think more than 10 years. Tanya Branwhite Yes. Wouter Klijn Can you tell us some of the highlights from that period? Tanya Branwhite Look, my career at Macquarie was an extremely fulfilling, challenging, and enjoyable part of my career. At the time I joined Macquarie, I'd certainly been on the asset management side, the asset manager's side, in listed equities, but I'd also worked on the broking side at Deutsche Bank, writing research. So having had the opportunity to see both sides, the client side and being a client, I think that really gave me a very good perspective. Macquarie is, as we're all well aware these days in Australia, a very unique organisation, very successful, and there's no doubt culture is at the heart of that success. They have a very clear way of encouraging you, though I'm not sure to what degree people are aware of how their culture has been described internally. When I began, it was called "loose-tight," which meant there was a set of rules you had to obey, but once you understood those rules, they encouraged you to be as entrepreneurial as possible, to see it as your own business, take ownership, and be empowered. I'm a few years out of Macquarie now, so I'm not sure how they describe their culture internally these days, but it later became known as "freedom within boundaries," which is probably a clearer way to articulate it. Boundaries and risk are at the heart of the organisation, but within that set of boundaries, people are fully encouraged and empowered to bring their best ideas, find opportunities to do new things, and challenge others. Wouter Klijn What were the highlights at Macquarie? Tanya Branwhite Well, I was at Macquarie through a really turbulent period in investment markets. I started in 2004, Wouter Klijn 05:06 right, Tanya Branwhite 05:07 and I didn't leave until 2015. So in 2004, we rode the whole wave leading to the GFC. Macquarie, like many other investment banks, had to stand back and reassess itself and its business model, but one of the things Macquarie is extremely good at is pivoting, and it pivoted very quickly. Some of the research I wrote, particularly around the GFC, under the understanding that we were completely independent in the securities division writing institutional research, highlighted a number of Macquarie vehicles as having significant financial risk. That wasn't well received internally within the organisation at the time, and it caused me quite a lot of angst in terms of what it feels like when the organisation's pressure bears down on you, challenges you, and really tests your resolve as to whether you stand by that research. When I wrote the research, the full GFC had not really occurred, and this wasn't crystal-ball gazing, it was straight financial analysis. We were analysing the cash flows of companies right across the listed spectrum. A number of Macquarie vehicles were highlighted through that analysis, and I simply shared those companies, as well as a number of others, that were in a business model which, from a cash flow perspective, would come under pressure if the environment we were operating in at the time continued. And that proved prescient. But I learnt to trust not my instincts but my analysis, trust the rigour of that analysis, and be prepared to stand by it if I truly believed that what I was writing and the work I was doing were the right insights to share with our institutional clients at that time. Wouter Klijn 07:10 Because you stayed on for quite a while after that, it obviously didn't cause any sort of permanent disruption for you? Tanya Branwhite 07:17 No, it didn't. In fact, in some respects it made a little bit of my Macquarie career, because in having stood my ground, and the organisation, people talk, particularly at senior levels, so my name became known through that period. I was then sought after internally, over the ensuing six, seven, or eight years, to help other divisions, the investment banking division, see investment banking clients, and give advice on some of the transactions they were looking at. So it actually opened up a much broader engagement internally and with a broader client base ultimately. So for a short period of very deep pain, there was some very nice payoff, ultimately, for my career at Macquarie. Wouter Klijn 08:06 Yeah. So that almost harks back to what you mentioned about freedom within the rules. You did have enough freedom to have a bit of a critical voice out there. Tanya Branwhite 08:15 Yes. I think that's absolutely correct, and real credit goes to the person who was my divisional director at the time, Roy Laidlaw. He asked me directly, amid all the angst going on, "Do you stand by the research? Do you think there are any errors in it? Are you confident about what you've written?" And I said, "Yes, I am." And he said, "Fine, that's all I need to know." So he was very much the one who stood behind me and beside me against some of the other people within the organisation who were, to put it mildly, very angry with me. Wouter Klijn 08:51 Yeah, so a true merit-based system. Tanya Branwhite 08:53 Correct. A true merit-based system. Wouter Klijn 08:55 So, from Macquarie you joined the Future Fund, which is a government organisation. I imagine that would be quite a different environmen
