1 00:00:03,930 --> 00:00:06,750 Sean Aylmer: Welcome to the Fear & Greed business interview. I'm Sean Aylmer. 2 00:00:06,900 --> 00:00:09,719 Sean Aylmer: With interest rates back at more normal levels, the investing 3 00:00:09,719 --> 00:00:12,630 Sean Aylmer: landscape is returning to a state we haven't really seen 4 00:00:12,630 --> 00:00:16,199 Sean Aylmer: since before the global financial crisis. Today, I want to 5 00:00:16,199 --> 00:00:19,350 Sean Aylmer: look at what this means for asset allocation and who 6 00:00:19,350 --> 00:00:21,930 Sean Aylmer: better to talk to than one of Australia's biggest super 7 00:00:21,930 --> 00:00:28,290 Sean Aylmer: funds? In 2022, SunSuper and QSuper merged to create Australian Retirement Trust, 8 00:00:28,500 --> 00:00:32,098 Sean Aylmer: managing more than 260 billion in retirement savings on behalf 9 00:00:32,098 --> 00:00:36,090 Sean Aylmer: of 2. 3 million members. Additional smaller funds have since 10 00:00:36,090 --> 00:00:39,930 Sean Aylmer: merged with ART, including the Australia Post Super Scheme, Commonwealth 11 00:00:39,930 --> 00:00:42,659 Sean Aylmer: Bank Group Super, Alcoa Super, and a deal to manage 12 00:00:42,659 --> 00:00:46,139 Sean Aylmer: funds at Woolies. So this is a pretty big fund. In fact, 13 00:00:46,139 --> 00:00:48,000 Sean Aylmer: I'd almost call it a mega fund that not just 14 00:00:48,000 --> 00:00:52,109 Sean Aylmer: combining the different investment strategies of SunSuper and QSuper, but doing it 15 00:00:52,109 --> 00:00:55,170 Sean Aylmer: in an environment that we probably haven't seen for about 16 00:00:55,170 --> 00:00:57,540 Sean Aylmer: 15 years or so. Andrew Fisher is the head of 17 00:00:57,540 --> 00:01:02,010 Sean Aylmer: investment strategy at Australian Retirement Trust. Andrew, welcome to Fear & Greed. 18 00:01:02,730 --> 00:01:04,349 Andrew Fisher: Thank you Sean, and thank you very much for having 19 00:01:04,349 --> 00:01:05,339 Andrew Fisher: me. It's very exciting. 20 00:01:05,849 --> 00:01:08,939 Sean Aylmer: I want to talk to you about asset allocation and 21 00:01:08,940 --> 00:01:11,458 Sean Aylmer: strategies, things like that, but first, how do you take 22 00:01:11,819 --> 00:01:14,399 Sean Aylmer: a bunch of really big super... Well, I mean two 23 00:01:14,430 --> 00:01:18,449 Sean Aylmer: mega super companies and put them together and then you 24 00:01:18,750 --> 00:01:21,809 Sean Aylmer: throw in a few of the corporate super funds? That's 25 00:01:21,809 --> 00:01:25,079 Sean Aylmer: quite a big deal to get everyone on the same page. 26 00:01:25,889 --> 00:01:29,040 Andrew Fisher: Yeah, it is quite a big deal indeed, and I 27 00:01:29,040 --> 00:01:32,220 Andrew Fisher: think it's reassuring for us, and it's good for us 28 00:01:32,220 --> 00:01:34,770 Andrew Fisher: to have done this once or twice before. There's a 29 00:01:34,770 --> 00:01:37,140 Andrew Fisher: level of match fitness, I think, in bringing together large 30 00:01:37,140 --> 00:01:40,650 Andrew Fisher: portfolios of assets. And so it is a big deal. It's 31 00:01:40,650 --> 00:01:43,920 Andrew Fisher: a huge thing to be working through. It's exciting for 32 00:01:43,920 --> 00:01:45,899 Andrew Fisher: us, I think as a team to work through something 33 00:01:45,900 --> 00:01:47,369 Andrew Fisher: like this. It's probably one of the biggest things that's 34 00:01:47,369 --> 00:01:50,310 Andrew Fisher: happened in our market, if you think about $ 200 billion 35 00:01:50,550 --> 00:01:52,680 Andrew Fisher: pools of assets coming together. And so there's a lot 36 00:01:52,680 --> 00:01:56,250 Andrew Fisher: of challenges to overcome, but they're also exciting challenges. You 37 00:01:56,250 --> 00:01:59,670 Andrew Fisher: don't get opportunities like this very often. So we take 38 00:01:59,670 --> 00:02:03,540 Andrew Fisher: a thoughtful and constructive approach to how we make the 39 00:02:03,540 --> 00:02:07,230 Andrew Fisher: best decisions, but you have two really thoughtful and high 40 00:02:07,230 --> 00:02:10,620 Andrew Fisher: performing investment capabilities coming together, bringing the best of each 41 00:02:10,620 --> 00:02:13,020 Andrew Fisher: of them and finding that, extracting it, and putting it 42 00:02:13,020 --> 00:02:15,690 Andrew Fisher: together. We can make something quite amazing, I think. 43 00:02:16,380 --> 00:02:20,130 Sean Aylmer: Okay. When you're investing that much money though, even that 44 00:02:20,130 --> 00:02:22,260 Sean Aylmer: in itself is difficult. And if you think of the 45 00:02:22,260 --> 00:02:25,680 Sean Aylmer: ASX and you've had super companies taking Sydney Airport for 46 00:02:25,680 --> 00:02:29,460 Sean Aylmer: example and stuff like that off the board, just finding 47 00:02:29,460 --> 00:02:30,989 Sean Aylmer: the opportunities is a challenge? 48 00:02:31,740 --> 00:02:34,469 Andrew Fisher: Yeah, it's certainly something we think quite a bit about 49 00:02:34,469 --> 00:02:37,889 Andrew Fisher: is anything we're doing today. So as long as I've 50 00:02:37,889 --> 00:02:41,880 Andrew Fisher: been working SunSuper prior to the merger at ART, we've 51 00:02:42,150 --> 00:02:44,310 Andrew Fisher: been on a trajectory of doubling in size every five 52 00:02:44,310 --> 00:02:47,040 Andrew Fisher: years. And so the investment you make today, which seems 53 00:02:47,040 --> 00:02:49,830 Andrew Fisher: appropriately sized for your fund in five years is going 54 00:02:49,830 --> 00:02:52,619 Andrew Fisher: to be half what you want it to be in the context 55 00:02:52,620 --> 00:02:55,349 Andrew Fisher: of the fund. And so getting that thought process and 56 00:02:55,349 --> 00:02:59,279 Andrew Fisher: getting that mix of being forward- thinking enough to plan 57 00:02:59,279 --> 00:03:02,700 Andrew Fisher: for your growth, but at the same time, not overstretching 58 00:03:02,700 --> 00:03:05,280 Andrew Fisher: and not getting enough diversification in your portfolio, it's a 59 00:03:05,280 --> 00:03:09,150 Andrew Fisher: delicate balance that we're constantly challenged with and we also 60 00:03:09,150 --> 00:03:12,389 Andrew Fisher: have to evolve over time. And so private markets is 61 00:03:12,389 --> 00:03:15,389 Andrew Fisher: a really good example of that. You're right, Sydney Airport 62 00:03:15,389 --> 00:03:18,449 Andrew Fisher: is something we've participated in as ART in terms of 63 00:03:18,449 --> 00:03:21,870 Andrew Fisher: that privatization. That's not something we were doing five years 64 00:03:21,870 --> 00:03:24,959 Andrew Fisher: ago in terms of taking private directly off the ASX. 65 00:03:25,740 --> 00:03:27,629 Sean Aylmer: Okay, so that's a pretty good segue into the sorts 66 00:03:27,630 --> 00:03:31,169 Sean Aylmer: of assets that you look at. And in a sense, 67 00:03:31,169 --> 00:03:34,710 Sean Aylmer: this is a more general discussion rather than ART specifically, 68 00:03:35,190 --> 00:03:38,640 Sean Aylmer: it is the role in this new interest rate environment, 69 00:03:38,670 --> 00:03:41,760 Sean Aylmer: new, at least post 2007, where rates are more like 70 00:03:41,760 --> 00:03:44,520 Sean Aylmer: they used to be, albeit touch higher but not a 71 00:03:44,520 --> 00:03:50,369 Sean Aylmer: lot higher. The role that bonds play, credit plays, equity 72 00:03:50,370 --> 00:03:54,119 Sean Aylmer: plays, alternative assets, which 15 years ago, some of the 73 00:03:54,150 --> 00:03:56,820 Sean Aylmer: alternative assets that we're thinking about today just weren't even 74 00:03:56,940 --> 00:04:02,400 Sean Aylmer: available 15 years ago. So how should investors think about 75 00:04:02,400 --> 00:04:05,730 Sean Aylmer: that big picture in terms of the roles that these 76 00:04:05,730 --> 00:04:06,809 Sean Aylmer: asset classes play? 77 00:04:07,950 --> 00:04:11,070 Andrew Fisher: Yeah, I think there's an element of, back to the 78 00:04:12,000 --> 00:04:14,130 Andrew Fisher: past a little bit with this. For those of us 79 00:04:14,340 --> 00:04:16,320 Andrew Fisher: with a few gray hairs on our head, when we 80 00:04:16,529 --> 00:04:19,529 Andrew Fisher: went through university, we were taught about an investment environment 81 00:04:19,529 --> 00:04:22,380 Andrew Fisher: that looks something like this. Your standard assumption for interest 82 00:04:22,380 --> 00:04:24,629 Andrew Fisher: rates when you were building a portfolio with something around 83 00:04:24,630 --> 00:04:28,590 Andrew Fisher: 5% and bond yields around 5%. The past 20 years, 84 00:04:28,949 --> 00:04:32,219 Andrew Fisher: we've become accustomed to lower and falling interest rates, and 85 00:04:32,220 --> 00:04:35,040 Andrew Fisher: that's influenced the way we think about all assets and 86 00:04:35,040 --> 00:04:39,449 Andrew Fisher: how we include them in portfolios. I think, while it 87 00:04:39,450 --> 00:04:41,820 Andrew Fisher: might seem challenging, it's actually quite exciting to be an 88 00:04:41,820 --> 00:04:44,339 Andrew Fisher: environment where diversification is a lot easier than it has 89 00:04:44,339 --> 00:04:47,369 Andrew Fisher: been for a long time. You probably use the expression, 90 00:04:47,369 --> 00:04:51,120 Andrew Fisher: TINA, in this podcast, which is there is no alternative. 91 00:04:51,180 --> 00:04:53,609 Andrew Fisher: And essentially that was equities because interest rates were so 92 00:04:53,610 --> 00:04:55,890 Andrew Fisher: low, there was nothing else to do. With interest rates 93 00:04:55,890 --> 00:04:57,630 Andrew Fisher: going back up, there's a range of things we can 94 00:04:57,630 --> 00:05:00,000 Andrew Fisher: put in a portfolio in a diversified way. So we're 95 00:05:00,000 --> 00:05:02,969 Andrew Fisher: not just so heavily relying on equity risks to deliver long- 96 00:05:02,969 --> 00:05:05,758 Andrew Fisher: term returns. And that's what we're focused on at the moment. 97 00:05:06,539 --> 00:05:08,370 Sean Aylmer: Stay with me, Andrew, we'll be back in a minute. 98 00:05:14,580 --> 00:05:17,370 Sean Aylmer: My guest this morning is Andrew Fisher, head of investment 99 00:05:17,370 --> 00:05:22,229 Sean Aylmer: strategy at Australian Retirement Trust. Okay, so let's talk about 100 00:05:22,230 --> 00:05:26,820 Sean Aylmer: fixed income. Suddenly, bonds, government bonds are interesting again because 101 00:05:26,820 --> 00:05:28,349 Sean Aylmer: you're getting a better return, but then if you go 102 00:05:28,350 --> 00:05:32,849 Sean Aylmer: out into credit portfolios and investment grade and then beyond, 103 00:05:33,510 --> 00:05:37,320 Sean Aylmer: how do investors who haven't actually done a lot with 104 00:05:37,320 --> 00:05:40,618 Sean Aylmer: bonds for a long time because maybe they're defensive, but 105 00:05:40,619 --> 00:05:43,170 Sean Aylmer: a couple of years ago they actually weren't defensive. So 106 00:05:43,440 --> 00:05:46,169 Sean Aylmer: how should they think about it going forward in terms 107 00:05:46,170 --> 00:05:47,250 Sean Aylmer: of moving out the curve? 108 00:05:48,120 --> 00:05:49,980 Andrew Fisher: Yes. I think the first thing you really want to 109 00:05:49,980 --> 00:05:54,178 Andrew Fisher: think about is recalibrating your principles and your thoughts around 110 00:05:54,178 --> 00:05:56,279 Andrew Fisher: what a risk- free rate is. When you're in an 111 00:05:56,279 --> 00:05:59,339 Andrew Fisher: environment where interest rates are 1% and bond yields are 1% 112 00:05:59,339 --> 00:06:02,670 Andrew Fisher: to 2%, your expectations from equities can be quite a 113 00:06:02,670 --> 00:06:05,760 Andrew Fisher: lot lower than they otherwise are. And so when interest 114 00:06:05,760 --> 00:06:07,470 Andrew Fisher: rates are 5%, you've got to remember that you need 115 00:06:07,470 --> 00:06:10,170 Andrew Fisher: to be expecting something like 9% out of equities for 116 00:06:10,170 --> 00:06:12,690 Andrew Fisher: them to be offering you an appropriate reward for the 117 00:06:12,690 --> 00:06:14,940 Andrew Fisher: additional risk that you are taking. And now for an 118 00:06:14,940 --> 00:06:17,820 Andrew Fisher: investor like us, we invest globally as well. So this 119 00:06:17,820 --> 00:06:21,900 Andrew Fisher: becomes another interesting perspective is well, what's the interest rate 120 00:06:21,930 --> 00:06:24,870 Andrew Fisher: in the country in which you're investing in? So if 121 00:06:24,870 --> 00:06:27,299 Andrew Fisher: another country has really low interest rates or another country 122 00:06:27,300 --> 00:06:30,058 Andrew Fisher: has really high interest rates, they're generally high for a 123 00:06:30,059 --> 00:06:31,709 Andrew Fisher: reason. And so you've got to make sure you're being 124 00:06:31,710 --> 00:06:35,549 Andrew Fisher: rewarded for risk. And so starting with a baseline of, 125 00:06:35,550 --> 00:06:38,520 Andrew Fisher: well, some bonds in a portfolio at 5% return, or 126 00:06:38,790 --> 00:06:41,250 Andrew Fisher: sorry, 4% return today, but cash is 5% in the U. 127 00:06:41,250 --> 00:06:43,740 Andrew Fisher: S. So if you can get 4% to 5% return 128 00:06:43,740 --> 00:06:47,939 Andrew Fisher: from some relatively safe assets in your portfolio. And then if 129 00:06:47,940 --> 00:06:49,500 Andrew Fisher: you think about equities, if you want to be at 130 00:06:49,770 --> 00:06:53,879 Andrew Fisher: 9% return for equities relative to that 5%, credit should 131 00:06:53,879 --> 00:06:56,909 Andrew Fisher: be somewhere in between. And so making sure we think 132 00:06:56,910 --> 00:07:00,990 Andrew Fisher: about it in reward for risk space, so bonds at 133 00:07:00,990 --> 00:07:05,339 Andrew Fisher: 4% to 5%, equities at 8% to 9%, then credit's 134 00:07:05,339 --> 00:07:08,790 Andrew Fisher: probably somewhere halfway or maybe a third of the way 135 00:07:08,790 --> 00:07:13,050 Andrew Fisher: in between as an expected return. So if we're confident 136 00:07:13,050 --> 00:07:15,391 Andrew Fisher: with that return, that's how we can diversify the portfolio. 137 00:07:15,391 --> 00:07:19,290 Sean Aylmer: Yeah, okay. So broadly, without holding you to those numbers, 138 00:07:19,350 --> 00:07:20,430 Sean Aylmer: that's par? 139 00:07:21,450 --> 00:07:21,451 Andrew Fisher: Yeah, pretty much. 140 00:07:21,451 --> 00:07:24,150 Sean Aylmer: That's what investors should be thinking. If I'm doing better than that, great. 141 00:07:24,300 --> 00:07:26,820 Sean Aylmer: If I'm doing a lot below it, not so good. 142 00:07:26,820 --> 00:07:29,129 Sean Aylmer: This is over a time period because we're talking about a 143 00:07:29,129 --> 00:07:29,969 Sean Aylmer: longer period here. 144 00:07:30,059 --> 00:07:33,570 Andrew Fisher: Yeah. And you'll always find structured things that someone will 145 00:07:33,570 --> 00:07:36,330 Andrew Fisher: try and repackage things in a slightly different way to 146 00:07:36,330 --> 00:07:40,020 Andrew Fisher: extract return. Generally speaking, the person that's structured whatever that 147 00:07:40,020 --> 00:07:42,389 Andrew Fisher: thing is together, it does it for their benefit, not 148 00:07:42,389 --> 00:07:45,270 Andrew Fisher: necessarily yours as an investor. And so that's something we're 149 00:07:45,270 --> 00:07:47,219 Andrew Fisher: always cautious of. If something looks too good to be 150 00:07:47,219 --> 00:07:49,139 Andrew Fisher: true, it probably is. 151 00:07:49,590 --> 00:07:54,210 Sean Aylmer: Okay. So what about real assets, so infrastructure and REITs, 152 00:07:54,270 --> 00:07:57,300 Sean Aylmer: real estate investment trusts, how do they fit into this 153 00:07:57,360 --> 00:08:00,270 Sean Aylmer: new world? And then I'm going to ask you about 154 00:08:00,809 --> 00:08:03,179 Sean Aylmer: alternatives, private equity and things like that. But let's start 155 00:08:03,179 --> 00:08:04,110 Sean Aylmer: with the real assets. 156 00:08:04,830 --> 00:08:08,550 Andrew Fisher: So real assets. So we think of it, and this is one 157 00:08:08,550 --> 00:08:11,550 Andrew Fisher: of the benefits I think of being large and at 158 00:08:11,550 --> 00:08:14,370 Andrew Fisher: our scale where we can control how we use debt 159 00:08:15,000 --> 00:08:18,900 Andrew Fisher: in those assets. And so if you think about an office building, for 160 00:08:18,900 --> 00:08:21,960 Andrew Fisher: example, without any leverage, without any borrowing against the building, 161 00:08:21,960 --> 00:08:24,660 Andrew Fisher: it's a pretty stable stream of rents and it looks 162 00:08:24,660 --> 00:08:26,280 Andrew Fisher: a lot more like a bond than it does an 163 00:08:26,280 --> 00:08:29,760 Andrew Fisher: equity. Now what you can do of course, is you 164 00:08:29,760 --> 00:08:32,249 Andrew Fisher: can borrow, and anyone would know this with their own 165 00:08:32,250 --> 00:08:35,190 Andrew Fisher: house, if you borrow money against your house, the return 166 00:08:35,190 --> 00:08:36,960 Andrew Fisher: on the small sliver of equity that you have in 167 00:08:36,960 --> 00:08:40,258 Andrew Fisher: your house is magnified dramatically. That's how you make a 168 00:08:40,260 --> 00:08:42,780 Andrew Fisher: much riskier version of that. And so when we think 169 00:08:42,780 --> 00:08:46,140 Andrew Fisher: about real estate or infrastructure as a real asset in 170 00:08:46,140 --> 00:08:49,710 Andrew Fisher: our portfolio, it's really how much debt is involved in 171 00:08:49,710 --> 00:08:51,929 Andrew Fisher: that. So is it more like equity or is it 172 00:08:51,929 --> 00:08:54,419 Andrew Fisher: more like fixed income? So we call them mid- risk 173 00:08:54,420 --> 00:08:58,259 Andrew Fisher: assets internally, and it's something we can actually control at 174 00:08:58,260 --> 00:09:00,299 Andrew Fisher: our size and scale at least, particularly where we own 175 00:09:00,299 --> 00:09:03,030 Andrew Fisher: direct, we can actually control that. So that suits our portfolio. 176 00:09:03,510 --> 00:09:08,040 Sean Aylmer: Okay. And then you mentioned infrastructure there. What about some 177 00:09:08,040 --> 00:09:10,620 Sean Aylmer: of those assets? You talked about Sydney airport before. Is 178 00:09:10,620 --> 00:09:12,090 Sean Aylmer: it the same deal because you are so big? 179 00:09:13,139 --> 00:09:17,639 Andrew Fisher: It is the same deal. Typically, I think what's specific 180 00:09:17,639 --> 00:09:20,458 Andrew Fisher: about the infrastructure space, we'll tend to use leverage a 181 00:09:20,460 --> 00:09:24,179 Andrew Fisher: little more because oftentimes, you have some form of guarantee 182 00:09:24,179 --> 00:09:26,580 Andrew Fisher: on the top line cash flows. And so if you 183 00:09:26,580 --> 00:09:28,920 Andrew Fisher: know your rent is guaranteed, it's a regulated asset. 184 00:09:29,070 --> 00:09:30,240 Sean Aylmer: Like a tollway or something? 185 00:09:30,420 --> 00:09:34,260 Andrew Fisher: Exactly. Your tollway is to an extent, but even utilities 186 00:09:34,260 --> 00:09:38,130 Andrew Fisher: probably more so. Tollways is still a little bit sensitive to 187 00:09:38,520 --> 00:09:40,770 Andrew Fisher: the economic environment. In a recession, you might have less 188 00:09:40,770 --> 00:09:45,750 Andrew Fisher: cars using a tollway, whereas electricity demand is generally fairly consistent. 189 00:09:46,920 --> 00:09:49,530 Sean Aylmer: So if you're talking about bonds being parred at about 5%, 190 00:09:49,860 --> 00:09:53,129 Sean Aylmer: equities being par at 9%, the credit curve somewhere in 191 00:09:53,129 --> 00:09:57,780 Sean Aylmer: between that, where do things like real alternative assets, private 192 00:09:57,780 --> 00:10:01,740 Sean Aylmer: equity, and some of those asset classes fit into it? 193 00:10:02,849 --> 00:10:07,110 Andrew Fisher: So I think I outline a relatively simplified framework for 194 00:10:07,110 --> 00:10:11,159 Andrew Fisher: thinking of it because I think the simplified frameworks... There's 195 00:10:11,160 --> 00:10:13,858 Andrew Fisher: always extremes, but the simplified framework, it's a mid- risk 196 00:10:13,860 --> 00:10:16,679 Andrew Fisher: asset and we think it's somewhere between equities and bonds. 197 00:10:16,679 --> 00:10:21,000 Andrew Fisher: Then if it was a liquid daily tradable asset, then 198 00:10:21,000 --> 00:10:23,130 Andrew Fisher: we'd probably put it at a 7% return. If it's 199 00:10:23,130 --> 00:10:25,769 Andrew Fisher: halfway in between, now, then you need to ask yourself, 200 00:10:25,770 --> 00:10:28,259 Andrew Fisher: is it a liquid daily tradable asset? And if it's 201 00:10:28,260 --> 00:10:30,840 Andrew Fisher: not, am I being adequately rewarded for the fact that 202 00:10:30,840 --> 00:10:33,179 Andrew Fisher: it isn't? And that's when we think about what we 203 00:10:33,179 --> 00:10:36,330 Andrew Fisher: call an illiquidity risk premium. Is there a premium over 204 00:10:36,330 --> 00:10:40,590 Andrew Fisher: that liquid return that justifies us tying money up for 205 00:10:40,590 --> 00:10:42,780 Andrew Fisher: an extended period of time? You can think of that 206 00:10:42,780 --> 00:10:45,179 Andrew Fisher: like a term deposit for a year versus a month. 207 00:10:45,389 --> 00:10:47,939 Andrew Fisher: Are you being adequately rewarded for tying your money up? 208 00:10:48,299 --> 00:10:50,340 Andrew Fisher: And then when we think about it, we look for 209 00:10:50,340 --> 00:10:54,208 Andrew Fisher: something like about a 2% excess return over and above 210 00:10:54,900 --> 00:10:57,929 Andrew Fisher: the underlying risk. So what that means is something like 211 00:10:57,929 --> 00:11:00,958 Andrew Fisher: an infrastructure asset probably has the same return hurdle for 212 00:11:00,960 --> 00:11:03,360 Andrew Fisher: us as equities to make it into the portfolio. 213 00:11:04,139 --> 00:11:06,750 Sean Aylmer: Okay. The moral to this story though is work out 214 00:11:06,750 --> 00:11:08,939 Sean Aylmer: where your base case is and with higher interest rates, 215 00:11:08,940 --> 00:11:12,929 Sean Aylmer: bonds being your base cases, that's 5% or 4% now, 216 00:11:12,929 --> 00:11:16,199 Sean Aylmer: not 1%, and then you work the other assets off 217 00:11:16,200 --> 00:11:18,900 Sean Aylmer: that. That's the story we're telling here today. Is that 218 00:11:18,900 --> 00:11:19,380 Sean Aylmer: right, Andrew? 219 00:11:19,710 --> 00:11:23,489 Andrew Fisher: Yeah, absolutely. And then also think about risk and are you 220 00:11:23,490 --> 00:11:27,150 Andrew Fisher: being rewarded is what we always think about. And if 221 00:11:27,150 --> 00:11:28,679 Andrew Fisher: something looks too good to be true, there's probably a 222 00:11:28,679 --> 00:11:31,320 Andrew Fisher: reason. There's probably some illiquidity wrapped up in there that 223 00:11:31,320 --> 00:11:33,630 Andrew Fisher: you don't quite realize you're exposed to or there'll be 224 00:11:33,630 --> 00:11:36,450 Andrew Fisher: some other risk inherent in something that's been packaged in 225 00:11:36,450 --> 00:11:38,759 Andrew Fisher: there that explains why that return looks better than it 226 00:11:38,759 --> 00:11:43,199 Andrew Fisher: might otherwise look like for a traditional bond or equity listed investment. 227 00:11:43,710 --> 00:11:45,150 Sean Aylmer: Now, we're way over time, but I'm still going to 228 00:11:45,150 --> 00:11:49,800 Sean Aylmer: ask you one more. Things like trends. So digital infrastructure, 229 00:11:49,800 --> 00:11:54,059 Sean Aylmer: everyone wants a data center at the moment or ESG, 230 00:11:54,059 --> 00:11:59,369 Sean Aylmer: energy transition, those sorts of things. As an investor, I'm 231 00:11:59,369 --> 00:12:00,990 Sean Aylmer: not asking you where to put my money, I'm just 232 00:12:00,990 --> 00:12:04,949 Sean Aylmer: saying how should I approach these mega trends, which seem 233 00:12:04,950 --> 00:12:08,099 Sean Aylmer: to be... Am I going to buy Nvidia? Probably not 234 00:12:08,099 --> 00:12:10,260 Sean Aylmer: because it's too expensive for me now anyway, how do 235 00:12:10,260 --> 00:12:11,310 Sean Aylmer: I think about these things? 236 00:12:12,030 --> 00:12:14,608 Andrew Fisher: The first thing I always think about with this is am 237 00:12:14,610 --> 00:12:16,108 Andrew Fisher: I at the back end of the trend or the 238 00:12:16,109 --> 00:12:18,119 Andrew Fisher: front end of the trend? Because if you're at the 239 00:12:18,119 --> 00:12:19,950 Andrew Fisher: back end of the trend, you're probably helping someone who 240 00:12:19,950 --> 00:12:21,390 Andrew Fisher: got in at the front end get out at a 241 00:12:21,390 --> 00:12:24,088 Andrew Fisher: nice, tidy profit. And so the first thing we think 242 00:12:24,090 --> 00:12:26,639 Andrew Fisher: about is how much legs there are to run in 243 00:12:26,639 --> 00:12:29,608 Andrew Fisher: the trend. How is the thematic playing out? COVID's a 244 00:12:29,610 --> 00:12:32,580 Andrew Fisher: really good example of this. We had all these accelerated 245 00:12:32,580 --> 00:12:34,949 Andrew Fisher: trends come through markets and things that were supposed to 246 00:12:34,949 --> 00:12:38,189 Andrew Fisher: take seven years happened overnight. I think the AI trend 247 00:12:38,340 --> 00:12:40,559 Andrew Fisher: has a little bit more length to it at this 248 00:12:40,559 --> 00:12:43,710 Andrew Fisher: point, but you're right, these things all look incredibly expensive. 249 00:12:43,710 --> 00:12:47,610 Andrew Fisher: And so they will invariably find their way into prices 250 00:12:47,610 --> 00:12:50,159 Andrew Fisher: very quickly. One of the things we try and do 251 00:12:50,190 --> 00:12:52,529 Andrew Fisher: is if we are getting towards the back end of 252 00:12:52,529 --> 00:12:54,780 Andrew Fisher: a trend is try and think about who are the 253 00:12:54,780 --> 00:12:58,140 Andrew Fisher: second order winners then? So a good example of this, which 254 00:12:58,140 --> 00:13:00,030 Andrew Fisher: is something we were invested in, is if you think 255 00:13:00,030 --> 00:13:03,929 Andrew Fisher: about the move from retail to online shopping. First stage 256 00:13:03,929 --> 00:13:06,210 Andrew Fisher: of that is warehouses. The second stage of that though, 257 00:13:06,210 --> 00:13:10,259 Andrew Fisher: which we had an investment in, is robot infrastructure to 258 00:13:10,260 --> 00:13:12,000 Andrew Fisher: sit in the top of a warehouse and pick things 259 00:13:12,000 --> 00:13:14,220 Andrew Fisher: up and move them around in a private equity investment. 260 00:13:14,550 --> 00:13:17,460 Andrew Fisher: And so having the foresight if you want to invest 261 00:13:17,460 --> 00:13:20,429 Andrew Fisher: in a trend is not the vanilla, but what is 262 00:13:20,429 --> 00:13:23,338 Andrew Fisher: all the periphery around that trend? Even if you're not 263 00:13:23,340 --> 00:13:25,200 Andrew Fisher: able to get in the early adoption, you might be 264 00:13:25,200 --> 00:13:27,090 Andrew Fisher: able to find some opportunities around the edges. 265 00:13:27,450 --> 00:13:29,010 Sean Aylmer: Yeah, I was talking to an investor the other day, 266 00:13:29,010 --> 00:13:31,620 Sean Aylmer: he'd gone heavy into air conditioners for data centers. 267 00:13:31,830 --> 00:13:32,730 Andrew Fisher: Yeah, yeah, exactly. 268 00:13:33,000 --> 00:13:35,069 Sean Aylmer: Andrew, thank you very much for talking to Fear & Greed. 269 00:13:35,670 --> 00:13:37,380 Andrew Fisher: No worries. Thank you very much for having me, Sean. 270 00:13:37,890 --> 00:13:40,920 Sean Aylmer: That was Andrew Fisher, head of investment strategy at Australian 271 00:13:40,950 --> 00:13:44,370 Sean Aylmer: Retirement Trust. This is the Fear & Greed business interview. Remember, 272 00:13:44,370 --> 00:13:46,859 Sean Aylmer: this is general information only and you should always seek 273 00:13:46,859 --> 00:13:50,429 Sean Aylmer: professional advice before making investment decisions. Join us every morning 274 00:13:50,429 --> 00:13:53,160 Sean Aylmer: for the full episode of Fear & Greed, Australia's Best Business 275 00:13:53,160 --> 00:13:55,800 Sean Aylmer: podcast. I'm Sean Aylmer, have a great day.