Conversations with Institutional Investors

Investment Innovation Institute [i3]
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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/

  1. 131: From the Archives – Greg Cooper

    MAR 15

    131: From the Archives – Greg Cooper

    Greg Cooper is Chair of financial services giants Perpetual and Colonial First State, but is perhaps best known for his role as the Chief Executive Officer for Schroder Investment Management in Australia. In this interview from late 2019, only weeks before COVID-19 broke out, we spoke with Greg about whether public markets are broken, the state of active management and his interest in the venture capital space, topics that are still very much alive today. Enjoy the show!  __________ Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights  __________ Greg Cooper podcast overview: 1:00 Starting out in actuarial studies 3:00 Focussing on Japanese equities 4:00 Compared to 1986, Japanese equities are still at the same level 5:00 What were some of the highlights of your career at Schroders? 6:50 We've moved on from strategic asset allocation 7:55 As a CEO, don't be afraid of what others think and try to draw out ideas 9:35 Are public markets broken? 11:00 Not having a well-developed VC industry means that a lot of good ideas get starved of capital and eventually go offshore 11:30 Will that change when the effect of QE goes away? 15:00 No investor is entirely passive. 16:30 Passive rose, because active had too large a share, but you can't have a 100 per cent passive investment market 17:30 Will value-style investing come back? 21:30 You have an interest in fintech and hold a board position at OpenInvest? 25:00 Joining the TCorp board and chairing the investment committee Full Transcription of Episode 131: Wouter Klijn  01:12 I'm here today with Greg Cooper. Greg, welcome to the podcast.  Greg Cooper Thanks, Wouter. Wouter Klijn So can you tell me a little bit about how you started in the asset management industry. We had some former guests on there that started with, you know, creating banks at eight. What were you doing at eight?  Greg Cooper   01:26 I certainly wasn't creating banks. Probably more surfing and and that kind of stuff up on the beaches and the Central Coast than anything. I mean, my career in investment really started in the latter stages of high school. I was at one stage looking at becoming an accountant. And then my maths teacher at the time had said, Have you thought about actuarial studies? I didn't even know what one was at that point in time, and, you know, and so I looked it up, and things kind of sort of went from there so that, I suppose that was the real genesis of things year 11 and 12 at high school.  Wouter Klijn  01:59 So how do you transition from an actuary training to an investment career?  Greg Cooper  02:04 So I mean, I started out in the more traditional actuarial fields. I was working for Taos Perrin the time as a defined benefit actuary, and it was at the point in time, I was in the early 90s when the SG was just coming into play defined benefit plans, some were being wound down, but there was a lot of work to do in the DB space, but as SG kind of kicked in. Then there was a whole pile of, you know, actuarial work to do around, you know, justifying minimum contribution levels and so forth. And then, you know, one day, one of the investment guys had come over to in the investment asset consulting area, come over and asked me if I was interested in doing some research. And it was on Managed futures at the time. And, and I kind of said, I said yes. And and started doing and I really enjoyed it. And that was kind of the first foray into investment consulting. And so sort of from starting out in the actuarial field, I was lucky enough to get off at a roll up in Hong Kong with with towers. And I sort of took the view that the traditional actuarial work was, was, was a good mainstay, but was not likely to be a growth engine. And moving into the investment space was, was a lot more interesting, and it also worked from a commercial perspective.Wouter Klijn  03:15 Yeah, did you ended up doing anything with those managed futures research? Greg Cooper  03:19 Well, apart from it was kind of the early stages of hedge funds, I guess. And it was at the point where saying, you know, alternatives kind of had a place in a portfolio that was, that was the primary emphasis of the research. So, you know, it's interesting. And obviously, you know, alternatives nowadays have become a much bigger, much bigger part. But back then, it was really just looking at that small hedge fund, like type diversifying characteristics and see whether they fit it in a portfolio. Wouter Klijn  03:44 Yeah. And then from there, you went to Schroeder's and started doing Japanese equities. Why Japanese equities? Greg Cooper  03:51 Yeah, good question. It was really partly as a function of the role that was there at the time and Schroeder's. I come out of asset consulting, I was much more interested in working in the asset management side of things, the role, while it was in Japanese equities, it was much more about the product side of things. So it was more like being in charge of the business, of running an asset management sort of sub strategy, if you like, rather than specifically worrying about, you know, Japanese equities or European equities. But it was very interesting, because at that point in time, Schroeder's was the biggest manager of Japanese equities. You know, you were just coming out of the 90s, which had been a bit of a lost decade, but, but in the latter part of the 90s, you know, Japan had taken off with the likes of SoftBank and so forth. So, you know, there was this real kind of boom happening, and it was just a really interesting time to be involved in, in in the markets, but particularly Wouter Klijn  04:48 in Japan. Yeah, any views on Japanese equities today? Greg Cooper  04:51 Well, it hasn't been a terribly good investment since that time. I remember one day sitting with one of the team, and he said, he said, Oh, you know, he said. I started in Japanese equities in 1986 and the markets pretty much at the same level it is was then. And I think we're always say the same now, so, but it's, you know, it's a very interesting case study in what happens in a deflationary environment. And, you know, when assets get overvalued, you know, you can have everyone thinks that equities kind of go and, you know, 10 years in equities, you'll make your money, but you'll make money. Wouter Klijn  05:21 I was just about to say, Did I just hear you say that equities don't go up always. That's right, Greg Cooper  05:25 so, you know, and it's a fantastic case study, but also one, I mean, sort of investment aside, it's a good one to think about, that, you know, despite, you know, the economic criteria not looking that good. You know, the social cohesion in Japan, everything else is held together very well. And so, you know, life isn't all about just economics. There's more to it than that. Sorry, all the economists. Wouter Klijn  05:49 So you spent almost 20 years at Reuters, climbed up to be the CEO of the Australian business, and also had a global distribution role. What are some of the highlights you look back on your career. And also, do you have any tips for aspiring CEOs, Greg Cooper  06:06 I suppose, in terms of highlights, you know, it was just, it was fantastic, and still is fantastic being involved in, in in sort of the dynamism that is the whole investment marketplace. I mean, in particular, just look at, I mean, not just Australia, look globally, but certainly in Australia, you know, the rate of change that's taken place with funds. And, you know, back in the late 90s, early 2000s you know, there was obviously a much larger number of very, very small funds. And you look at where we've come to now, I'm having conversations about internalising and, you know, financing specific assets, and you know, the size of the asset pools and so forth. So I would say, you know, over that whole span, it's just been a very exciting time, and I think that will continue. It's no less exciting looking forward than it has been in the past. But just the sheer growth of the industry has been fantastic terms of some particular highlights. I mean, I always quite enjoyed standing back and looking at sort of the way the industry was was developing, and coming up with suggestions for maybe how things could be done better, or where, you know, the industry had adopted certain practices that I didn't think were the right sorts of practices, and it was much more fun kind of standing back and trying to point those out and offer suggestions for better ways forward, rather than just joining the chorus of sales people out there. Wouter Klijn  07:21 Can you give an example of that? Greg Cooper  07:23 I mean, the key one that you know, and I write a lot of research papers around this, is the i concept of around, sort of objective Based Investing, and the idea that benchmarks and the whole strategic asset allocation process, which we've grown up with in the 80s, didn't always work. And you had in Japan is a great case in point, you know, a fixed, strategic asset allocation with a large exposure to equities through the 90s in Japan killed you. And so you know that that, to me is, you know, it's resonated very well in the industry, and I think it's a key part of sort of thinking about how to do things differently. And so, you know, sort of, it's not to say that strategic asset allocation is that that style of investing is bad. It's just to say that I think we've moved on from there, and there and there are better ways to think about this, and there's some consequences that come from that, and that's worth bearing Wouter Klijn  08:07 in mind, the consequences. Yeah, so in your answer, it sort of shows that you, you've always been quite keen on fostering a culture where it's open for discussion, and there's pretty much no topic of debate. Why is

    30 min
  2. 130: RQI Investors' David Walsh – Is A Quant Winter Coming?

    MAR 1

    130: RQI Investors' David Walsh – Is A Quant Winter Coming?

    In this episode, I'm speaking with David Walsh, who is the Head of Investments of RQI Investors, a First Sentier fund manager. And we delve into the concept of a Quant Winter.  Some market participants argue a new Quant Winter is in the making, since growth and momentum factors are compounding with limited breadth, driven partly by the promise of AI. This can lead to distortions in the market and the collapse of quantitative models. David has tackled this topic in a recent paper, called 'Lessons from the Quant Winter' and we discussed what it is, how likely it is another one is coming, the impact of monetary policy and innovations in quantitative strategies through machine learing and AI. For the full paper, please see here: https://www.firstsentierinvestors.com.au/au/en/adviser/insights/latest-insights/lessons-from-the-quant-winter.html __________ Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights  __________ Overview of Podcast with David Walsh, RQI Investors 04:00 From engineering to investing 09:00 What is a Quant Winter? 11:00 Is a Quant Winter a form of mean reversion? 15:00 Do I see another Quant Winter emerging? Probably not. What we are seeing is an anti-value period 18:30 On average value should beat growth, because the market is behaviourally tilted towards growth and overpays for it 20:00 In a high volatility environment, a rotation towards quality is sensible 23:00 A good quant portfolio is not just about established factors, it should be much more about finding idiosyncratic sources of alpha 25:00 You don't want a 100 signals in your portfolio; you want them to be able to breath 26:00 Machine learning let's you build models in ways you couldn't in the past 28:30 How to deal with cost in implementing non-linear signals 31:00 Higher dimensional portfolio optimisation through quantum computing 33:00 Quant Winter versus a recovery 38:00 Is AI in a bubble? "My guess is that the air will come out of the balloon, rather than it popping" 41:30 The extent to which passive or passive-enhanced money has affected the market structure is definitely an issue that has been arising in the past five or 10 years. You can broadly read that the market is becoming less efficient Full Transcript of Episode 130 Wouter Klijn  00:00I Welcome to the [i3] Podcast. I'm here today with David Walsh, who is the Head of Investments for RQI Investors. David, welcome to the show.   David Walsh Thank you very much. Great to be here.   Wouter Klijn  So I understand you studied electronic engineering before you got into the investment industry and specialised in reducing circuits and chips, is that correct? And optical communications? So how do you end up in the investment industry after that?   David Walsh  00:28 Yeah, well, that was the topic du jour when I was studying my electronic engineering, way back a long time ago, the idea of what was called, at the time, very large scale integration, which was the idea of taking a circuit board or a chip design, and shrinking it down as small as possible had a lot to do with the way in which the mapping of the transistors on the chip worked, the material science underneath which materials you're going to use. That was very interesting. Also worked and looked at optical communications quite an early part of that industry. A lot of the talk about the fibre technology and loss rates and speed rates and bandwidth and so on, are quite interesting topics that were quite topical at the time. Emerging industries, the material science and the optical technology side, were very interesting, and clearly emerging technologies that have gone a long way since then. I took that and worked in power and mining engineering for a few years after I graduated, not directly in those topics, but used a lot of the ideas and instrumentation design and the like when I when I was in the industry, it doesn't naturally segue into finance, but it's important to think that a lot of the problem solving techniques that you get from being an engineer or training as engineer, the way you approach problems, the technical issues you use, the things you realise you're missing, apply themselves pretty well to a finance study as well. So when I, some sense, moved careers from engineering to finance, a lot of the skills came with me.   Wouter Klijn  01:49 So when you talk about shrinking circuits and chips, is that related to like Moore's law, where, you know, trying to get more and more things on the chip and making them smaller, and then that would increase the computer power. Or is that totally off?   David Walsh  02:05 Yep, no. Same field, pretty much. The idea there is you can only shrink them down to a certain size, beyond a certain size. It's impossible to to get the chip widths, the better the actual tracks you use for transmitting electrons around the circuit. You can't get them any smaller than a certain size. So there's that sort of limit, physical limit. There's been a lot of work since then. That's a long time ago. A lot of work since then, that's evolved that technology. But the idea was, how far could you get it down before we started to impinge on on issues regarding impurities in the material, in terms of the track sizes, in terms of the transition times, in terms of getting things out of sequence. So the design was really important in that sense, that was kind of the the intuition behind it.   Wouter Klijn  02:44 Do you sort of with that background look at today's, you know, development around machine learning and AI and like this need for chips and the dominance of AMSL, with that background, does that surprise you? Sort of where that has gotten to?   David Walsh  03:02 Not at all. No, I think it was a natural evolution. We would see of the of the the technology was growing back in the day when I was again while studying it a long time ago, the evolution of the technology was, was clearly progressing towards faster chips, greater memory, better software and the like. It's pretty early days, but you can see the trajectory it was moving on. A lot of discussions at the discussions at the time not about where the hardware or software would go, but how the usability of those technologies would move. And really, even then, artificial intelligence was a concept. At some point the industry expected to get to the point where it could replicate some kind of human behaviour, not to the scale we see it today. But certainly there was trajectory. I don't think it's been much deviation from that. The only real direction I think has been interesting, and I don't really understand this properly yet, is the idea of quantum computing, which gets away from the original idea of logic gates being zeros and ones to an issue where to a logic gate or a bit can have both zero and one at the same time based on some probabilistic distribution, which I can I've studied Quantum Physics A long time ago. I kind of understand basically the principles. I still don't get quantum computing the way I'd like to.   Wouter Klijn  04:04 Yeah, no, it's a fascinating topic, but very complex indeed. So that engineering background you now work as a quantitative investor. So you know that engineering background was that sort of a natural progression to become a quant, rather than, say, a fundamental approach?   David Walsh  04:21 Yes. So I transitioned across to finance academia first. So I was doing a higher degree in Finance as part of my studies, further studies. And I liked it, and transitioned across at an academic level, mainly because I liked the idea of research and pushing the ideas of knowledge and challenging myself. And I liked teaching. I like communication side. Did those skills necessarily move them across to quantitative investing? The answer is yes, I think fundamental investing has changed quite a bit since I've been in the industry. There are a lot more quantitative skills being used, but it's still not disciplined in a way that a quantitative investment process is. So having those tools and techniques that I'd learned as an engineer were not. Really directly applicable, but the discipline around problem solving, the idea of numerical optimization, the idea of constructing a problem in a certain way, those things lend themselves very naturally to quantitative investing,   Wouter Klijn  05:11 Yeah, but you're not getting to a stage where you built your own computers and systems for backing up the quant strategies?   David Walsh  05:18 No, no. There are many more, many people in the industry, including people that work with us, who are much better at that than me, my skills, are more around I think thinking about how the evolution of information works in markets, what things get priced in, what don't, what drives volatility, what events are happening that will perhaps override those that sort of quantitative discipline applied to the investment market. So it leads us on, naturally to where I've sort of come from in my come from in my industry, rather than going back to the technological side.   Wouter Klijn  05:46 Yeah. So part of the reason to do this podcast is because you wrote a paper that was talking about the quant winter lessons from the quant winter, which is perhaps not the topic you expect from a quant, because, you know, always works, doesn't it? What is a quant winter?   David Walsh  06:02 So quant winter was a term that was coined by a couple of industry people back in about 2020 also 2021 to reflect a certain period when a lot of quant factors didn't work as expected, both not in terms of factors not working, but in terms of the complementary factors that usually work not working either. So I went to almost a drought. So you could call almost a winter or a drought would be sort of either terminology. I don'

    46 min
  3. 129: From The Archives – Fiona Trafford-Walker

    FEB 17

    129: From The Archives – Fiona Trafford-Walker

    In this episode, we go into our archive to October 2019, when we interviewed Fiona Trafford-Walker. Fiona was one of the key consultants behind the success of Frontier Advisors and spent 25 years with the asset consultant, advising many of the largest funds in Australia. She has been named several times among the most influential consultants in the world and was a driving force behind the fight for equitable fees in the industry. In this interview, we delved into the changing role of asset consultants, questioned whether too much time is spent on manager selection and examined the struggles of value-style strategies. Fiona has since retired, but is still active in the industry through various director roles, including for Victorian Funds Management Corporation, Perpetual and as a member of the IFM Real Estate investment committee. __________ Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights __________ Overview of Episode Overview Fiona Trafford-Walker podcast: 2:30 I'm an accidental asset consultant 4:30 You're named as one of the most influential asset consultants in the industry. What makes a good asset consultant? 5:35 You have to be willing to collaborate 7:00 Technical skills are very important, but equally important is time in the markets 7:30 The changing role of asset consultants over the years 9:30 As asset consultants have increased their senior staff, have conversations become more focused on strategy? 10:30 There is still the need to have a blend of specialist and generalist skills 11:50 Are we already heading to having a panel of asset consultants? 13:00 Is there a good balance between the time spend on manager research and that on asset allocation? 14:30 What type of data should inform changes in asset allocation? 16:00 There is not much you can do about geopolitical risk; predicting what politicians are going to do next is pretty hard. 16:30 But trade wars are a real thing that have an effect on markets 18:00 Are the struggles of active managers, particularly value managers, structural or cyclical? 19:00 There seems to be a need to tweak the value process to allow for the new capital-light business models. But at what stage do you get style drift? 21:30 Frontier Advisors took the decision to build a platform with all their research on it, quite a brave step in an era where softcopies get distributed easily. 26:00 You spent some time arguing for lower fees in the industry. Are we at the right level? 27:30 The real change has been the internalisation of asset management by some funds. 29:00 Can internalisation refocus asset management on the long term? 30:00 Bottom draw mandates 31:00 To what extent should asset owners engage with the companies they invest in? You are on a number of boards and see both sides? 33:00 Governance certainly has changed as asset owners realise they are the beneficial owners 35:00 To what degree can you divest from companies as a fiduciary? 38:00 The challenge of developing retirement products 41:00 At the moment, the willingness to do things together [as funds] isn't there. 42:00 What is next in store for you? 44:00 What issues come up in mentoring new asset consultants? Full Transcript of Episode Wouter Klijn  01:12 I'm here today with Fiona Trafford-Walker, who is a director with Frontier Advisors. Fiona, welcome to the podcast. Fiona Trafford-Walker  Thank you. Walter, happy to be here. Wouter Klijn So 25 years of Frontier advices, has it gone quickly, or do you think it's a long time ago since you started out? Fiona Trafford-Walker  01:28 I think the answer today is both, when I think back that it's been 25 years, I feel like, wow, that's such a long time. It's about half my life. And if I think about it like that, it feels like it's a very long time. But also, I think it's gone very, very quickly when I think of what it was like to start the organisation with Ray King, obviously he was very integral to starting the asset consulting business inside industry fund services, which became frontier. And I remember very clearly the first day walking to the office in Carleton. There were two of us in this room working out of there. And then I think of how, you know, we grew over the years. Some terrific people came on board, and then all of a sudden, it's 25 years later. So in some ways, it feels like it's a long time. Otherwise, it feels like it's gone very, very fast. Wouter Klijn  02:13 Yeah, if I can take you back a little bit to the start of your career, I read this funny quote one time that you did an interview with The Sydney Morning Herald, where they asked you how you became an asset consultant, and you sort of made this comment where you said, yeah, it's not really something that you aspire to in university. It sort of happened. Can you tell us a bit about that? Fiona Trafford-Walker  02:33 Yes, that's definitely true. I'm a great accidental asset consultant, I think, for a few reasons. One, it's not something back, you know, 25 years ago that people really knew that much about it was a relatively new career. Back then, the asset owners were much smaller. The system was very different. And I was interested in financial markets research, and I grew up in North Queensland, where the career prospects for that sort of thing are obviously relatively narrow. So I knew I had to move, and I knew it would have to be Sydney or Melbourne, and so just applied for a number of different jobs. I remember going for my interview again with Ray King, because he has employed me twice now, and sitting in the office at Towers Perrin in Sydney. And you know, Ray was asking me all these questions, and I couldn't answer most of them, and I thought I'd completely mucked up the interview. And next thing you know, they're offering me a role. It was a research role, and it was in the investment consulting business in towers parent, but sitting alongside that function, and my job was to do specific research that might help the consultants provide advice to their clients. And there were two of us in what we called the Global Research Unit, which I used to think was kind of ironic, given there were two people in Melbourne in a global unit. And after six months, the person I reported to Ron Bird, decided that he would move into funds management. And so I think they looked at me and said, Oh, well, we'll just move you into the asset consulting business. So I moved in, and I was there at Towers Perrin for a couple of years, and I just really, really enjoyed that work. I think what resonated with me was the chance to do research and practical research that could then be used to influence client portfolios and then outcomes for members. And I think I just not made that connection well enough before in those first six months. So I moved into the asset consulting division, and then in the middle of 1994 when Ray left to start industry fund services, I moved over with him, and the rest, as they say, is history. Wouter Klijn  04:32 So you've been called one of the most influential asset consultants in business. What makes a good asset consultant? Fiona Trafford-Walker  04:40 I get asked that question a lot now, and I think, I think what happens as you get older, people ask you all these questions, and so I've had to actually think quite a lot about it, because it was not something I ever thought about a lot beforehand. For me, I just did what I thought was the right thing, and it sort of happened to work out. But as I look back, I think. There's a few key characteristics. One, I think, is you have to be able to listen to people, and not only listen, but you have to hear. So listen to what they say. Sometimes their words aren't exactly what they mean. So you have to be able to read the room and understand what a question really means, and then you have to answer it and be clear in your answer, depending on the audience, use the right kind of terminology. So for example, in a trustee meeting, where you might have a lot of people who don't have an investment background, speak in very plain English so that people can understand what you're recommending that they do equally. If you're speaking to a much more technical audience, for example, internal team, then you tailor the way you speak to answer the questions and have the discussions. So listening and hearing and communicating, fundamentally, I think, is really, really important. The next thing I think you need to be really good at is collaboration, because as an investment consultant, asset consultant, you're giving advice, and a client may or may not take that advice, so you have to be willing to work with them to get a good solution that works for them. And sometimes you might go in with the best of intentions, the best advice you can possibly develop, but a client might say that doesn't work for me for these reasons, and so you have to always collaborate and move and shift and evolve your advice to make sure that you can continue to influence the clients. I think also, there are some fundamental skills around you know, the technical skills you really need to have, and they have changed over the years. So, for example, when I first started, I think we still use lotus, 123, but I'm not actually sure, because we didn't use it very much. And then we graduated to excel, and when we were interviewing people, when, for example, about 15 or so years ago, we'd interview people, and we used to do these tests in Excel, and they would have to do a VLOOKUP and those sorts of things. Whereas the technical skills nowadays, not only in the use of various pieces of software, but also the financial technical skills, are much, much stronger, and we see the young people coming through. They've clearly exceptionally skilled. And for people like me who don't necessarily have all of thos

    48 min
  4. 128: MLC Asset Management's Dan Farmer – Active Management, Private Equity, AI and the Early Days at Telstra Super

    FEB 2

    128: MLC Asset Management's Dan Farmer – Active Management, Private Equity, AI and the Early Days at Telstra Super

    In this episode, I'm speaking with Dan farmer, who is the Chief Investment Officer of MLC Asset Management. We talk about Dan's early days managing an internal Australian equity portfolio and getting involved with derivatives at Telstra Super, almost straight out of university. We talk about some of his mentors, including Steve Merlicek, and the influence they've had on Dan's investment philosophy. We also touch on the merger between IOOF and MLC and the new capabilities this has brought to his team. __________ Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights  __________ Overview of Podcast with Dan Farmer, CIO of MLC Asset Management 02:00 Getting a job at Telstra Super, while still at university. "Imagine a graduate helping out dealing in a small Aussie equity portfolio, probably one of the first internally managed [portfolios] going around" 06:30 How did those first company meetings go, when you were still a 20-something year old? "I thought I was being taken seriously at the time, but in retrospect I probably wasn't" 08:00 The investment philosophy I build up over the years is being active in all areas, whether it is active in asset allocation, using active managers or being active in currencies 12:00 Dealing with market concentration in the US and the Magnificent Seven, while being cognisant of the Your Future, Your Super regulations 17:00 Looking at Private Equity, you really need to take a longer term perspective. Under YFYS, private equity is benchmarked against listed global equities, that has been a particularly hard benchmark to beat over the last few years 25:00 Steve Merlicek told me that if you have high conviction in a position, make sure you follow through on it 29:00 It is pretty hard for a CIO today to be purely an investor; you have to manage your team and there is also the regulatory aspects to it 33:00 Too stringent an implementation of TPA can create its own problems 36:00 We are doing some work around looking whether AI changes active management, where active becomes data scraping with some AI tools applied to it. We haven't reached a conclusion yet 43:00 MLC is the fund with the highest number of retirees. What special insight does this give you? Full Transcript of Episode 128 Wouter Klijn Dan, welcome to the show. Dan Farmer 01:51 Thanks for having me. Pleased to be here. Wouter Klijn 01:53 So tell me a little bit about how you got started in investing. I had a look, of course, at your CV, and you spent 17 years with Telstra before going over to IOOF. Tell me a little bit about how you got started and what some of your key moments were at your time with Telstra. Dan Farmer 02:12 Yeah, look how I got started. So I was doing my masters of finance at Melbourne Uni, so I was in my fifth year of study, and thought I better grow up and get a job and actually start earning some money. So I started looking around, and I got a tip off from one of my college supervisors about a role going at Telstra super, which, at the time the CIO was a guy called John Simkiss. So went over there, got a job at Telstra super, and it was fantastic, great, great time to enter the industry. The Super industry in Australia was really in its infancy. Imagine a graduate out of uni, and I was straight helping out, dealing on a small Aussie equity portfolio that the group was running, probably one of the first internal managements going around in the Aussie super industry. So great learning curve. You know, really cut my teeth on that, that Aussie equity portfolio. So it taught me a fair bit of humility. It's not easy running a direct Aussie share portfolio, so I think that set me in a good stead about how the industry actually operates. Wouter Klijn 03:12 So you said it taught you some humility. What do you mean? What are , Dan Farmer 03:17 It is tough to outperform the market. If you're sitting on the outside, it's very easy to throw rocks and say, well, you should be outperforming in this market and be quite critical of managers. But I think it gave me an insight on the nuances of running a portfolio. It gave me a good insight into risk and look, I think I was very lucky starting off with that role. Also part of that portfolio was using option strategies around individual stocks to provide some protection. So that also gave me probably my first taste of asymmetric risk and using options to control risk. Wouter Klijn 03:54 So thrown straight away into the deep with options and derivatives and Dan Farmer 03:58 Yeah, it wouldn't happen today. Wouldn't happen today. This is back in the early 90s, but had a really good, really good boss in John Simkiss, who used to be Head of Research at UBS Australia. So it was great start. And look milestones at Telstra Super, as I said, the industry was in its infancy, so I think when I got there, the portfolio was two balanced managers. That was it. You know, might have been BT and Schroders. So really went through the whole evolution of moving from balanced managers to specialist Australian equity managers, specialist global managers, specialist fixed interest managers. So, you know, that whole exercise, you know, working with consultants, it was a great time to be entering the industry. And then Telstra Super also went from purely a defined benefit fund to an accumulation scheme. You know, as Telstra was reshaping its workforce, you could just see members leaving the DB fund, and we set up an accumulation Fund, which was a little bit novel at the time for a corporate super fund, but was very successful. And that's obviously, you know, huge part of the Telstra super fund as it is today. Wouter Klijn 05:02 And I think your main role was looking after equities. Why equities? Why did you start there? Dan Farmer 05:07 To be perfectly frank, that was the job offer. That was my toe into the door. And look, I did love the space. And it was Australian equities, which was very relatable. I think it's a great spot for new people to enter the industry, because you can relate to the businesses. It's tangible. The management of those companies are very proximate. So, you know, I was a young, early 20s guy meeting CEOs of, you know, big Australian businesses. It was a fantastic learning curve. And I think I learned a lot more in the direct Aussie shares to start with, and then really put me in good stead with the managers. And it was a terrific spot. I mean, active management was certainly dominant back then. And there was some great, you know, Great Aussie equity managers going around. I think one of the first appointments I made was Perpetual when it was just coming out of the trusteeship. So did that search with JANA and, you know, really had good access to those managers?. Wouter Klijn 06:06 Yeah, so how did those first company meetings go? I mean, did you, did you feel that you were taken seriously, or did you have to build up? You know, some slick... Dan Farmer 06:15 I felt like I was being taken seriously at the time, but in retrospect, I probably wasn't. That's, that's all right. So no, look, those, those meetings were great. And really, I think the industry back then was, it was probably a bit smaller. There was a bit of an acceptance of new people coming into the industry. So I'm sure I asked a lot of pretty naive questions at the time. But, you know, good, good, good respect. But it was, it was interesting because we also, when we're running direct portfolios, going into a lot of smaller companies as well, and they're very hungry for capital. So it was a really good dialogue with a lot of those, a lot of those CEOs and management teams. Wouter Klijn 06:56 Yeah. So do you feel that gives you a different perspective on you know, now, as a CIO of a large company to had that experience of like boots on the ground and and talking to management themselves. Dan Farmer 07:07 I think it does like at the end of the day when we're investing. Obviously, as you climb the ranks of an investment team, you probably become less and less proximate to the actual investments. So a reminder, at the end of the day, when we're investing in an index, you know, whatever global equity index that is, ultimately, that's a series of underlying management teams under a series of underlying business strategies. And hence, one of the , I guess, philosophical beliefs that I've built over the year and we run in the team, is a belief in active investment management in all its forms. Be it being active with asset allocation, using active managers where it makes sense in that particular asset class, you know, being active with currency, active with style selection. So I think that grounding in direct shares, and the fact that it is a very differentiated asset base, and there's a lot of idiosyncratic risk in there, really filtered up, you know, throughout my career, and just how we think about managing money today. Wouter Klijn 08:08 Yeah, do you see a change in the role of active management today as back when you started? Because we obviously seen a lot of changes in markets, in the Super system, new regulations coming in with Your Future, Your Super What is your current view on active management? Dan Farmer 08:27 Yeah, look, still see a role, very much a role for active I mean, the industry has changed, and it's, it's a big topic, particularly at the moment where there's obviously, at the moment, high concentration in in equity markets, and the concentration is correlating with some high valuations, so it is putting some challenges on on active managers at the moment. Now, I've been around long enough to see a few cycles of different forms of this, and I remember the 2000s, where, you know, we had a similar concentration wasn't quite as high, but, you know, very similar in the sense of valuations high. Think a little bit differen

    47 min
  5. 127: Frontier Advisors' Kim Bowater – Consultants in a Changing Industry, AI and Gender Diversity

    JAN 19

    127: Frontier Advisors' Kim Bowater – Consultants in a Changing Industry, AI and Gender Diversity

    In this podcast, I'm speaking with Kim Bowater, who is the Director of Consulting at Frontier Advisors. Kim has spent 23 years at the firm and saw the asset consultant grow from a small advisory firm with just 13 people when she started in 2002 to the leading asset consultant it is today. She is one of the driving forces behind a number of key initiatives that have supported Frontier's growth, including the establishment of a technology platform that allows clients to access research online and the initial set up of the retirement business. In this episode, we discuss how the continuously changing industry affects the role asset consultants play, the impact of AI and gender diversity within the investment industry. Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights  Overview of Podcast with Kim Bowater, Frontier Advisors 03:00 I come from a science family; I'm the only one that went into finance 06:00 When I joined Frontier there were 13 people 07:00 Frontier's new independent CIO service 10:00 You led the first phase of Frontier's technological overhaul that saw the implementation of a digital platform for clients. How did that come about? "I put my hand up." 14:00 We are a reasonably open book in terms of our research and ratings 16:00 Does this platform allow you to address knowledge management of the organisation 15:30 We've developed an AI agent, called Frank, that allows us to access all of our data in a streamlined manner 20:30 Ashby Monk said asset consultants might be in trouble with the rise of AI. Do you agree? "No!" 23:00 You've started Frontier's retirement business. What are your thoughts towards product development and investments? 25:00 Retirement is a meaty problem 26:30 Annuities haven't been helped by the low-yield environment that we've had for so long, but in principle, we do think they have a role to play 32:00 The industry has changed quite a bit, how do you look at the future growth of Frontier? Where is it going to come from? 38:00 How do you look at the gender balance in the investment industry today?   Full Transcript of Episode 127   Wouter Klijn  00:00 Kim, welcome to the show. Thanks. How are you pretty good, pretty good. Thank you very much. Thanks for having me. So why asset consulting? I think you started originally out as a actuarial consultant. How did you become involved with the asset consultancy side?   Kim Bowater  00:18 Yes, well, I am, yes, I did maths at university and took up an actuarial consulting role, which was coming from a scientific kind of family, a bit of a leap into the unknown. It worked with defined benefit funds, so in the superannuation space. But after a few years, I felt like I was more attracted to the asset side rather than the the liability side. So started the CFA course, and then kind of naturally moved into to asset consulting. It was, it was relatively kind of organic, one step at a time, then then in an intentional path. But here, but here I am still.   Wouter Klijn  00:59 So what sort of science is your family into?   Kim Bowater  01:02 My father was a a senior lecturer of Applied Chemistry, and my mother was a Pharmacist, and she had a science degree as well. Yes. So there was no one in finance in my family. I thought, let's give something we've got. We don't know what it is, but we'll give it a go.   Wouter Klijn  01:20 Is that your form of rebellion?   Kim Bowater  01:22  Yes, they were intrigued too,   Wouter Klijn  01:25 Fair enough. And now you've been with Frontier for 23 years, so you don't see that too much anymore in the finance industry, where everybody has like to be your gigs. So 23 years, that's, that's quite a long time. And you've, you've, now, you know, climbed all the way up to part of the leadership team, part of the Investment Committee, but when you sort of look back on that period, was there anything that stood out for you? Is like, these are some of my standout moments?   Kim Bowater  01:55 Yeah, I mean, it's, it's been a good journey. I think Frontier also changed a lot, and our clients, particularly in the Super space, have changed a lot over 23 years. So it feels like a role that's had a lot of change in it, rather than kind of just one firm. I think when I when I started, we were under the leadership of Fiona Trafford-Walker, who, you know, many people will still remember as a leader in the industry and frontier, had a had a really nice culture. I thought client focus, kind of team oriented, but forward looking, kind of challenging ourselves and and I think kind of one, it's not necessarily a serious tan at moment, but I'm quite proud of of the fact that we've managed to have a culture that's endured with those characteristics. That's something I'm quite proud of. Frontier has always been a good place to be part of, and we still hear that today.   Wouter Klijn  02:58 Yeah, I think Fiona was one of the first people that I interviewed, I think, for this podcast series A while ago. But yes, it's still one of my favourites.   Kim Bowater  03:08 I think also, you know, just thinking about the evolution of advice, the different environments we've been through, you know, COVID, GFC, all the evolution in the superannuation space that's impacted on investment processes and governance and portfolios is something that, you know, we've really focused on working with clients to help them succeed. And I think, you know, I feel that's been a really rewarding journey, I think, for funds themselves, as well as for ourselves, who are, who are also here to kind of create good outcomes for members. We've we've done very well, you know, in our in the external survey of asset consultants, which has been the Peter Lee survey for a long period of time, and that's always been a kind of standout moment for me and the team, you know, to receive really positive feedback from our clients that we're actually, you know, adding value, because you're always a step remote. Step removed as an advisor, in a way, I think, as well from, from looking at Frontier as it's grown, you know, when I joined, there was maybe 13 people. Oh, wow. It was a pretty small, you know, we all did something, you know, we did a range of things. It was mostly super now, you know, two thirds of our clients are outside of super across a whole range of areas. We're working with clients in New Zealand and Japan the Pacific. We have an office in Japan and now recently announced a new independent CIO service. You know, all of those are really significant kind of standouts.   Wouter Klijn  04:38 That was quite an exciting announcement. Because, I think to a degree, it does change the business of Frontier a little bit. Because I think so far, Frontier has been able to provide advice, but not necessarily implemented advice. And now with this team up, where you bring in the investment team of state Super 14 people come. Coming over, you actually will be able to implement that as well. It's quite a bit of an evolutionary step for the business. But what do you see, sort of the future? How, how do you think that this might add to growth?   Kim Bowater  05:12 Yeah, I mean, it's exciting. We've always, you know, we've been an independent, kind of institutional advisor, so not not having implemented product business, and we're going to continue to be an independent advice led consulting business. And this really, you know, in our mind, extends the reach of that it's not implemented product solution, but we have found that there are asset owners. It's less, less kind of common in superannuations that have grown and have internal teams, but outside of super and some at the smaller end, perhaps, you know, want external advice, want an institutional advisor, but don't really have all of the tools to implement it or execute a bit reporting or custody or execution. So this just provides some extra service levers that we can work with organisations that need those components. It's still, it's still advice LED. It's recommending portfolios that really align to their needs and objectives. And previously, the only other solution they've had is to go into an implemented, like a Balanced Fund, kind of wholesale, kind of group product. And this is, this was providing, I think, a really, potentially, really attractive solution. So from a from a growth standpoint, I think it extends the reach of our our institutional advice, to the border, to broader markets where they need some additional service capability as well.   Wouter Klijn  06:38 Yeah, yeah. And from what I understand, this mainly is targeted, sort of the smaller end of the spectrum, like the charities, maybe some family offices. Is that right? Yes, yeah. And does that also allow you to then tap more into sort of the private wealth space?   Kim Bowater  06:53 Yeah, potentially, we've been working in the private wealth space for a while now. That's obviously a growing area, and they're also, you know, a group's interested in in working with an organisation like us as they've got bigger so and they they also can have other additional needs, like reporting and various things that that this can assist with. So it just provides a greater flexibility of us to to help our clients with all of the different aspects that they need.   Wouter Klijn  07:25 Yeah, and it's very aligned structure as well, because State Super has now become a co-owner of Frontier, yes, and it's been a long-term client as well.   Kim Bowater  07:35 So it's yes, it's exciting and and to have you know a team with Charles and 14 people join us is really exciting, too.   Wouter Klijn  07:44 Yeah, yeah, for sure. So if I may take you back a little bit about your journey at Frontier and changing essence consultant environment

    43 min
  6. 126: Professor Scott Donald – Should Trustees Use AI?

    JAN 5

    126: Professor Scott Donald – Should Trustees Use AI?

    In episode 126, Scott Donald, Professor at the Faculty of Law and Justice of the University of New South Wales, breaks down how artificial intelligence is reshaping the work of superannuation trustees. Efficiency is the big draw, but legal and ethical risks mean trustees are moving carefully. AI is already embedded in parts of the finance sector, from document summarisation to risk management, yet its tendency to hallucinate and behave inconsistently remain serious hurdles. Scott explores where AI can genuinely add value and discusses its application to investment strategy, compliance and even private-market valuations, while stressing the need for strong human oversight. Enjoy the show! Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights Overview of Podcast with Scott Donald, Professor at UNSW 02:00 Using AI as a trustee is a little bit different because you are managing money of somebody else 04:00 AI can be applied where a trustee knows what information to look for, but just asking it to go and look for something can be quite dangerous. 07:30 Trustees have an obligation under the SIS Act to form an investment strategy. I think it would be very dangerous to use AI here. 10:00 Risk is where you don't think to look; AI can help with that 12:30 AI models don't really hallucinate. They don't seem things that are not really there, because they don't care about the truth. 14:30 In contrast to a fund manager, a trustee often has to answer to the Australian Financial Complaints Authority (AFCA) and they will ask you to justify your decision. 'The machine said it', is not an answer that is going to work. 18:00 How human interaction with an AI model occurs is actually quite crucial and we haven't really grappled that to the ground yet 24:00 Should trustees use AI at all? "I think they should consider it, because it can drive down costs" 30:00 Most of the AI systems out there are trained on datasets that are massive, compared the data in a super fund 37:00 As investment and legal professionals, we have to be aware that some of the skills that got us to where we are now are no longer worth the cost to us to acquire Research paper: Donald S, 2025, 'Artificial Intelligence and Super Fund Trusteeship', Company and Securities Law Journal, 41, pp. 137 - 157 Full Transcription of Episode 126 Wouter Klijn  00:00 Welcome to the [i3] Podcast. I'm here today with a return guest, Scott Donald, who is a Professor at the Faculty of Law and Justice at the University of New South Wales. How did you come to research this topic?  Scott Donald  00:24 Look, it's very difficult to avoid the issue of AI. It comes up everywhere in the news, talking to trustees about what they're doing, the plans they have for next year, and so on. So for a lot of Trustees, it's a really important issue. Trustees typically don't have enormous resources to spend on things, and they've got an enormous list of things they've got to get through. Yeah, so it's, it's a natural place for them to look for efficiencies and ways to get things done quicker, more rigorously, perhaps cheaper. So just hearing it on the on the grapevine, that they were really interested in this, but, but also a little bit nervous. Yeah, you know, what were the risks? How, what, what, from a legal perspective, might be some of the issues. And so that was really how I started to get engaged in this is to think, Well, we know trusteeship is a little different. Yeah, it's not just about managing your own money. You're managing money for someone else, and that that does change things a bit. So that's how it came about. Wouter Klijn  01:22 So did you find that they were already dabbling in AI, or were they more curious?   Scott Donald  01:27 I think most of the big financial institutions are well down the track of thinking about how they can employ AI in different areas. And so the trustees that are part of those big institutions were hearing things or being told that they should consider different ways of organising their operations. But just generally, even at conferences, you'd see people talking in groups, or maybe the presentations from people who are spruiking the advantages of AI. So they were coming across it in lots of different ways, and there'd be very few boards, super fund, boards, managed investment scheme, boards that aren't think, haven't thought about, haven't discussed, how might we use this? Could we do that? Could we do this? Or could we do that? But it's hard to get independent advice on it, because the expertise in the area is so much in the hands of those who are selling the various products that you know you're sitting there as a trustee with lots of other concerns to do with the administration of the trust, to invest and so on. And now you've got, well, hang on, what do I do with AI? It's, it's, it's not an easy area to get into, yeah.  Wouter Klijn  02:32 So what are some of the obvious applications of AI for a trustee? I could imagine that, you know, they get large amounts of documents to read. A core of AI, at least with large language models, is sort of the summarisation capabilities. Can they just chuck it in AI and tell them what they should know?  Scott Donald  02:52 Well, sometimes that's always very tempting, and sometimes it's a better idea, and sometimes not so much. I mean, AI is very good at collating information. You can send out to search things, find things. It's helpful if you know kind of what the lay of the land is beforehand, because it's not quite so good at disclosing that it hasn't actually found something, or it hasn't known. And we'll maybe talk a little bit later about sort of hallucination and the way it can create apparently information. So I think certain types of summaries, it's very useful for, I think some of the trustees that we've been speaking to who are using it to in very controlled environments, so places where or circumstances where they know what type of information is likely to be relevant, they know what type of information they need to bring to bear on a decision, then I think it's much safer. I think just asking it to go and look for something could be kind of dangerous. I don't know if you've ever tried to plan a trip somewhere using it, or tried to find the date for something, it quite happily will come back and tell you the wrong answer, and not really. You've got no way of second-guessing whether that's right or not. Yeah. So, so I think that that kind of summarisation is useful, but you need to be really sensitive and thoughtful about is this an area where we know what sort of information we're likely to find. So, you know, the insurance companies have used AI very effectively to understand better the nature of the risks and the sorts of information they need to work out what the underwriting risks are around around their book, but they're looking for specific things. They're interested to find patterns that they might not have seen otherwise. That I think works quite well. I think if you were just trying to do it in an area where you know, perhaps you didn't know what sorts of answers you wanted to find. You might be a little bit more. Might be a bit riskier for you. Wouter Klijn  04:49 Yeah, so I think in your paper you list a few areas where it could potentially be applied, and I picked out a few that I thought were interesting for. Sort of the investment environment, and one of them is investment strategy, mandate, compliance and private market valuations. Now those sound kind of complex topics. Is that sort of an obvious area to apply? Scott Donald  05:16 Ai, let's start with the investment area. I think, for instance, if you're a superannuation trustee, you actually have a responsibility under the under the SIS Act to formulate an investment strategy. That particular act is one. I think AI, you'd be very nervous about using AI for, because the actors said you as trustee, and therefore, you know your directors have a response, a legislative responsibility to do something, which means that if it's ever comes into question as to how that was done, you need to be able to demonstrate how you might have gone about it. So the highest level investment strategy story that that, I think you need to be careful about how you might use it. But beneath that, you could fund funds and investment managers, investment managers and investment firms have been using AI for some time to go looking for trading strategies, to go looking for risks, to go looking for other sorts of things that maybe wouldn't be apparent using normal kinds of analytical techniques. And I think it can be tremendously powerful there, because at that point that's really kind of a flow down from the overall strategy. And I think you can, you can certainly use it there. And hedge funds and investment managers and others have been using it there quite productively for some time. Yeah, and that makes perfect sense.  Wouter Klijn  06:33 I think the area of private market valuations, there's this a lot of focus on that by the regulator. They want to see more of it, potentially more look through. How can AI be applied there? Scott Donald  06:47 Look, one of the nice things about listed markets is you've got lots of people looking at the data from lots of different angles, asking lots of questions. And so any finance theorist will tell you that an efficient market hypothesis, you know that all that information is going to come to bear in private markets, you don't have that quite so much. And if you're trying to work out what the value of a property is, and all your all the leases and all the rest of it, and drawing all that information together can be incredibly time-consuming. People make mistakes, not just machines, and so, you know, it's error-prone as well. So I think some of that data colle

    40 min
  7. 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  Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights __________ 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 do

    1h 6m
  8. 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  Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights 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 www.fidelity.com.au. 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 sc

    40 min
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