1 00:00:10,920 --> 00:00:13,960 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:14,040 --> 00:00:18,000 Speaker 1: James Kirby. Welcome aboard, everybody. I was entertained by the 3 00:00:18,760 --> 00:00:23,119 Speaker 1: lead headline in a daily financial newspaper which shall remain nameless, 4 00:00:23,640 --> 00:00:29,240 Speaker 1: but it's said this week investors bamboozled by peace talks. Now, 5 00:00:29,280 --> 00:00:31,440 Speaker 1: it's not a great headline, but you know it's true. 6 00:00:31,680 --> 00:00:34,639 Speaker 1: No one knows what's going on as far as we 7 00:00:34,720 --> 00:00:36,879 Speaker 1: know as investors. All we know for sure really in 8 00:00:36,920 --> 00:00:40,239 Speaker 1: relation to the Iran crisis is that there's been an 9 00:00:40,280 --> 00:00:44,239 Speaker 1: oord shock and a consequent inflation shock. So we've got 10 00:00:44,280 --> 00:00:46,760 Speaker 1: to talk about how are you dealing with And my 11 00:00:46,880 --> 00:00:50,240 Speaker 1: guest today is a top advisor. He's one of the 12 00:00:50,280 --> 00:00:52,080 Speaker 1: few advisors that's been at the upper end of the 13 00:00:52,120 --> 00:00:55,680 Speaker 1: Baron's Top one fifty days since it was started. And 14 00:00:55,720 --> 00:00:58,200 Speaker 1: it says, I'm just looking at he's entering the magazine 15 00:00:58,360 --> 00:01:00,560 Speaker 1: you need five million actually to deal with and that's 16 00:01:00,560 --> 00:01:03,120 Speaker 1: not uncommon by the way, at the upper reaches of 17 00:01:03,280 --> 00:01:05,640 Speaker 1: the list. I mentioned this because it goes to the 18 00:01:05,640 --> 00:01:07,520 Speaker 1: heart of what I want to talk to him about, 19 00:01:08,360 --> 00:01:12,200 Speaker 1: which is how wealthy investors are dealing with this crisis. 20 00:01:12,240 --> 00:01:15,000 Speaker 1: So far In what way is it different since COVID, 21 00:01:15,040 --> 00:01:19,160 Speaker 1: for instance, It's Ben James is the managing director and 22 00:01:19,360 --> 00:01:22,560 Speaker 1: partner and advisor at a Scala A partner. How are you, Ben, 23 00:01:23,160 --> 00:01:24,039 Speaker 1: I'm very well. 24 00:01:24,040 --> 00:01:26,360 Speaker 2: Thank you, James, thank you for having me on the 25 00:01:26,400 --> 00:01:27,959 Speaker 2: pod today. It's a pleasure to be here. 26 00:01:28,280 --> 00:01:30,640 Speaker 1: It's very nice to have you on. And as I mentioned, 27 00:01:30,680 --> 00:01:32,679 Speaker 1: we've tack tacked over the years. I think you're I 28 00:01:32,680 --> 00:01:35,400 Speaker 1: think you're one of a handful I must count based facically, 29 00:01:35,480 --> 00:01:37,760 Speaker 1: but there's only a handful of that one fifty that 30 00:01:37,800 --> 00:01:40,560 Speaker 1: have been on the list since it's launched once upon 31 00:01:40,600 --> 00:01:45,400 Speaker 1: a time around to sixteen thereabouts. Okay, now here's the thing. 32 00:01:45,520 --> 00:01:47,880 Speaker 1: As I say, oh, we really know, I mean, anyone 33 00:01:47,880 --> 00:01:50,120 Speaker 1: else is kidding themselves if they say they know any 34 00:01:50,160 --> 00:01:52,080 Speaker 1: more than what we've got in front of us, which 35 00:01:52,120 --> 00:01:56,120 Speaker 1: is an inflation shock, an energy shock, specifically a supply 36 00:01:56,240 --> 00:01:58,880 Speaker 1: shock on energy. One of the things we were talking 37 00:01:58,880 --> 00:02:01,840 Speaker 1: about before the show was how it's different you feel, 38 00:02:01,880 --> 00:02:06,680 Speaker 1: at least in your experience with your cohort of investors, 39 00:02:06,680 --> 00:02:08,639 Speaker 1: your clients, but not just your clients, how much in 40 00:02:08,680 --> 00:02:13,119 Speaker 1: your entire circular it's different. Right, So people are reacting differently, 41 00:02:13,680 --> 00:02:17,079 Speaker 1: and maybe in the show we'd explore how our listeners 42 00:02:17,760 --> 00:02:20,799 Speaker 1: could move differently from here, But in what we are 43 00:02:20,919 --> 00:02:23,600 Speaker 1: people reacting differently to this crisis. 44 00:02:24,000 --> 00:02:26,880 Speaker 2: It's a really good question, James, because I think investors 45 00:02:26,919 --> 00:02:30,120 Speaker 2: have been you know, you rightly say so, challenged with 46 00:02:30,200 --> 00:02:33,600 Speaker 2: so many different things over the last fifteen or twenty years. 47 00:02:33,639 --> 00:02:36,160 Speaker 2: And you know, if I pull back a bit to 48 00:02:36,200 --> 00:02:39,760 Speaker 2: the different types of crisises we've had in recent years, 49 00:02:40,400 --> 00:02:43,639 Speaker 2: you know, we break them down to probably three major 50 00:02:43,720 --> 00:02:47,919 Speaker 2: crisises being geopolitical and arguably we're in that now. We've 51 00:02:47,960 --> 00:02:52,840 Speaker 2: also had financial crisis, economic crisis, and what our data 52 00:02:52,880 --> 00:02:56,960 Speaker 2: shows is that crises that are deeper, you know, more 53 00:02:57,080 --> 00:03:00,960 Speaker 2: damaging to financial markets of the financial crime. And if 54 00:03:00,960 --> 00:03:03,840 Speaker 2: you look back to the GFC, I think even a 55 00:03:03,880 --> 00:03:08,640 Speaker 2: balanced portfolio during that time probably fell twenty twenty five percent. 56 00:03:09,400 --> 00:03:11,760 Speaker 2: If you look at an economic crisis, you know, we 57 00:03:11,840 --> 00:03:14,080 Speaker 2: look backwards to things that have happened in the past. 58 00:03:14,600 --> 00:03:17,640 Speaker 2: I think we could all agree COVID was an economic crisis, 59 00:03:17,680 --> 00:03:21,919 Speaker 2: and a balanced portfolio then probably fell about twenty odd 60 00:03:21,960 --> 00:03:26,200 Speaker 2: percent as well. If we drilled down the geopolitical in crisises, 61 00:03:26,440 --> 00:03:28,960 Speaker 2: and you know, we're certainly in one of them. Now 62 00:03:29,840 --> 00:03:33,080 Speaker 2: take ourselves probably back to Ukraine and Russia in feb 63 00:03:33,160 --> 00:03:37,360 Speaker 2: Of twenty twenty two. You know, balanced portfolios only fell 64 00:03:37,600 --> 00:03:40,840 Speaker 2: about two or three percent during that time. If you 65 00:03:40,880 --> 00:03:43,920 Speaker 2: go further back even two thousand and three Iraq War, 66 00:03:44,400 --> 00:03:48,160 Speaker 2: the invasion during March and May, portfolios are actually up. 67 00:03:48,800 --> 00:03:52,520 Speaker 2: So you know, in many ways for US crisises like 68 00:03:52,680 --> 00:03:57,240 Speaker 2: these tend to be less damaging to financial markets. And 69 00:03:57,640 --> 00:04:00,600 Speaker 2: if you look at what's happening in indices the moment, 70 00:04:01,280 --> 00:04:04,520 Speaker 2: it's almost surprising in some ways that the depth of 71 00:04:04,560 --> 00:04:07,240 Speaker 2: retricement we're saying hasn't been that great. 72 00:04:07,640 --> 00:04:10,560 Speaker 1: Yeah, you're actually echoing a number of people, including the 73 00:04:10,600 --> 00:04:13,680 Speaker 1: head of Goldman Sachs there who said but he said 74 00:04:13,720 --> 00:04:17,360 Speaker 1: he was surprised at the complacency of Marcus having said that. 75 00:04:17,360 --> 00:04:20,680 Speaker 1: There's a couple of issues obviously that are of concern. 76 00:04:20,800 --> 00:04:23,480 Speaker 1: I mean, our market at the ASX is down six 77 00:04:23,600 --> 00:04:25,680 Speaker 1: or seven percent so far this year. That's very far 78 00:04:25,720 --> 00:04:28,320 Speaker 1: away from where we hope we'd be. The US is 79 00:04:28,400 --> 00:04:32,600 Speaker 1: down this year a few percent, and I suppose crucially 80 00:04:33,800 --> 00:04:39,000 Speaker 1: the interest rate environment is going in an unexpected change direction. 81 00:04:39,200 --> 00:04:41,880 Speaker 1: So by that I mean bonds which were supposed to 82 00:04:41,880 --> 00:04:45,520 Speaker 1: be the great defender. We're seeing totally turns from bonds dropping. 83 00:04:45,760 --> 00:04:48,760 Speaker 1: If I've got that wrong, tell me, but total bonds 84 00:04:48,760 --> 00:04:51,880 Speaker 1: are dropping. So I understand what you're saying that there's 85 00:04:51,920 --> 00:04:54,599 Speaker 1: nothing scarier than a financial crisis in my life. I 86 00:04:54,600 --> 00:04:56,480 Speaker 1: don't think there was anything, And I can go back 87 00:04:56,520 --> 00:04:58,640 Speaker 1: to the nineteen eighty seven crash and whatever it was 88 00:04:58,720 --> 00:05:05,120 Speaker 1: anything as scary as fearsome as a genuine financial banking 89 00:05:05,279 --> 00:05:08,760 Speaker 1: crisis where you wonder is the whole system actually going 90 00:05:08,839 --> 00:05:11,159 Speaker 1: to stay as we know it? So okay, that's not 91 00:05:11,240 --> 00:05:13,520 Speaker 1: an issue just now. But in the nature of this 92 00:05:13,680 --> 00:05:17,960 Speaker 1: crisis then, and the resettings that are demanded perhaps of investors, 93 00:05:18,279 --> 00:05:20,560 Speaker 1: tell us a little bit more about that in terms 94 00:05:20,640 --> 00:05:25,320 Speaker 1: of what people should be doing. And I know you 95 00:05:25,320 --> 00:05:27,880 Speaker 1: can explain briefly if you would, what you've told investors 96 00:05:27,920 --> 00:05:29,400 Speaker 1: to do in the past, but we don't have you 97 00:05:29,440 --> 00:05:32,320 Speaker 1: as an advisor, So if you could tell the listeners 98 00:05:32,480 --> 00:05:35,320 Speaker 1: ideally what you think are the most important things going forward? 99 00:05:35,520 --> 00:05:38,679 Speaker 2: Yeah, yeah, Look, if we reflect back on those past 100 00:05:38,760 --> 00:05:42,839 Speaker 2: crisises and how investors are behaving now, I think what's 101 00:05:42,880 --> 00:05:46,360 Speaker 2: important has actually changes investor behavior, and probably that's coming 102 00:05:46,400 --> 00:05:51,360 Speaker 2: out through investor education. It's not because they're smarter or braver, 103 00:05:51,640 --> 00:05:54,680 Speaker 2: I don't think. I do think it's because portfolio is 104 00:05:54,720 --> 00:05:58,640 Speaker 2: a better diversified and more thoroughly constructed. And you know, 105 00:05:58,720 --> 00:06:01,479 Speaker 2: I've got the privilege of dealing with wealthier investors that 106 00:06:01,560 --> 00:06:05,880 Speaker 2: do have the ability to fully diversify into more diverse 107 00:06:05,960 --> 00:06:09,039 Speaker 2: portfolios that do protect them in times such as that. 108 00:06:10,040 --> 00:06:13,000 Speaker 2: So it's not really the investors that are handling the best. 109 00:06:13,000 --> 00:06:16,200 Speaker 2: Ones that are handling it with stronger nerves. They've probably 110 00:06:16,240 --> 00:06:21,640 Speaker 2: got better portfolios. And you know, we all as portfolio stewards, 111 00:06:21,800 --> 00:06:27,200 Speaker 2: we all understand that volatility will always prevail for us. 112 00:06:27,440 --> 00:06:30,800 Speaker 2: Risk is what we need to manage. Risk of bad decisions, 113 00:06:30,920 --> 00:06:35,320 Speaker 2: risks of emotions taking over, and risk of following the crowd, 114 00:06:35,480 --> 00:06:38,400 Speaker 2: or risk of doing something that isn't part of your 115 00:06:38,400 --> 00:06:41,560 Speaker 2: five year plan. And in this cycle, I think it's 116 00:06:41,600 --> 00:06:46,279 Speaker 2: particularly important, you know, to understand the divide in portfolios 117 00:06:46,279 --> 00:06:51,360 Speaker 2: that are built for one regime or one market outcome. Yeah, 118 00:06:51,360 --> 00:06:54,760 Speaker 2: if you look back to twenty twenty five, everyone was 119 00:06:54,880 --> 00:06:58,760 Speaker 2: very excited about growth and portfolios were tilted that way. 120 00:06:59,240 --> 00:07:02,040 Speaker 2: But certainly are parts in the portfolio that were probably boring. 121 00:07:02,160 --> 00:07:06,320 Speaker 2: And you mentioned infrastrate markets other alternative asset classes that 122 00:07:06,440 --> 00:07:09,640 Speaker 2: might have lagged the growthier parts of the market, but 123 00:07:09,760 --> 00:07:14,080 Speaker 2: now they are actually performing okay. And you know, I 124 00:07:14,120 --> 00:07:17,440 Speaker 2: will challenge you slightly on the interst rate piece. You know, 125 00:07:17,520 --> 00:07:21,800 Speaker 2: where we park or have been parking our infrast rate 126 00:07:22,000 --> 00:07:27,600 Speaker 2: exposures is in floating rate securities, short duration, very liquid 127 00:07:27,800 --> 00:07:31,080 Speaker 2: you know T plus one style product issued by Aussie 128 00:07:31,120 --> 00:07:34,560 Speaker 2: banks and corporates that is available to you, you know, 129 00:07:34,640 --> 00:07:38,200 Speaker 2: for when you need to transition your portfolios into more 130 00:07:38,280 --> 00:07:41,440 Speaker 2: risky asset classes. But it can't. 131 00:07:42,320 --> 00:07:45,600 Speaker 1: It's great if you're in short term duration bonds right now, 132 00:07:46,360 --> 00:07:48,040 Speaker 1: but you can't be in them forever. And if you're 133 00:07:48,080 --> 00:07:50,000 Speaker 1: in them forever, it would take a lot of work 134 00:07:50,040 --> 00:07:53,200 Speaker 1: for rest of all, it probably wouldn't be the best investment. 135 00:07:53,240 --> 00:07:54,120 Speaker 1: Put it permanently. 136 00:07:54,280 --> 00:07:57,600 Speaker 2: No, no, and certainly not suggesting all of the portfolio. 137 00:07:57,800 --> 00:07:59,960 Speaker 2: I think some of our portfolios at the moment would 138 00:08:00,120 --> 00:08:04,040 Speaker 2: be fifteen to twenty percent in that type of investment. 139 00:08:04,640 --> 00:08:07,840 Speaker 2: And the way we manage risk for a new investor, 140 00:08:07,920 --> 00:08:11,679 Speaker 2: for example, if they're starting with a brand new portfolio today, 141 00:08:12,040 --> 00:08:15,200 Speaker 2: is probably start with one hundred percent in that floating 142 00:08:15,240 --> 00:08:19,200 Speaker 2: rate product, and then as one gets more comfort or 143 00:08:19,240 --> 00:08:23,160 Speaker 2: starts dollar cost averaging into other asset classes, you just 144 00:08:23,200 --> 00:08:26,160 Speaker 2: sell down one and bind to the riskier asset. 145 00:08:26,360 --> 00:08:29,280 Speaker 1: And what sort of ruling yield are you getting on that? 146 00:08:30,120 --> 00:08:33,560 Speaker 2: The rolling yield on sort of a diversified thirty to 147 00:08:33,600 --> 00:08:37,480 Speaker 2: thirty five name portfolio and fixed income five and a 148 00:08:37,520 --> 00:08:38,559 Speaker 2: half to six at the moment. 149 00:08:39,200 --> 00:08:41,760 Speaker 1: Okay, so it is better than the best cash. 150 00:08:42,040 --> 00:08:45,440 Speaker 2: Yeah, and importantly for investors to understand, it's actually better 151 00:08:45,480 --> 00:08:48,959 Speaker 2: than term deposits as well. And you know five ten 152 00:08:49,080 --> 00:08:52,920 Speaker 2: years ago banks would avail liquidity in term deposits, but 153 00:08:52,960 --> 00:08:55,679 Speaker 2: you just can't do that now. And so you know, 154 00:08:55,800 --> 00:08:59,960 Speaker 2: tds are locked up for the duration of their maturity period, 155 00:09:00,520 --> 00:09:04,800 Speaker 2: whereas you know, fixed income securities that we're referencing are 156 00:09:04,880 --> 00:09:07,040 Speaker 2: very liquid. They're deeper than equity markets. 157 00:09:07,280 --> 00:09:10,280 Speaker 1: Except to say, ben for the conservative investor, the cash 158 00:09:10,360 --> 00:09:13,960 Speaker 1: is government guaranteed, which you can't provide. 159 00:09:14,040 --> 00:09:17,360 Speaker 2: There's absolutely no denying that, and that's correct. But you know, 160 00:09:17,720 --> 00:09:20,760 Speaker 2: we feel risk adjusted, that's a risk worth taking, and 161 00:09:21,040 --> 00:09:24,679 Speaker 2: it's only be really been in those financial crises whereby 162 00:09:25,160 --> 00:09:27,240 Speaker 2: some of that has been questioned. 163 00:09:27,960 --> 00:09:31,760 Speaker 1: Is there parts of the market that you feel it 164 00:09:31,800 --> 00:09:36,439 Speaker 1: is now clear that people should never have been playing in. 165 00:09:36,480 --> 00:09:39,360 Speaker 1: For instance, I'm thinking of crypto and the more speculative 166 00:09:39,360 --> 00:09:41,920 Speaker 1: e ends of things it overplaced to AI stocks. I'm 167 00:09:41,920 --> 00:09:45,800 Speaker 1: talking about the really obviously frauthy part of investing. 168 00:09:45,960 --> 00:09:49,080 Speaker 2: Yeah, yeah, Look, I think it really comes down to 169 00:09:49,240 --> 00:09:53,600 Speaker 2: education of the investor. You know, we haven't participated in crypto. 170 00:09:54,320 --> 00:09:58,160 Speaker 2: We have participated in certain parts of AI, but I 171 00:09:58,200 --> 00:10:01,920 Speaker 2: think the investors need to really understand what they're investing 172 00:10:01,960 --> 00:10:05,600 Speaker 2: in and right size versus the risk that they feel 173 00:10:05,640 --> 00:10:08,920 Speaker 2: they're taking. You know, I don't have any great issue 174 00:10:08,960 --> 00:10:12,160 Speaker 2: with a portfolio having a three percent, three or five 175 00:10:12,200 --> 00:10:15,440 Speaker 2: percent allocation the digital currency, nor do I have a 176 00:10:15,480 --> 00:10:18,960 Speaker 2: problem having probably even larger exposure to some of that 177 00:10:19,080 --> 00:10:22,880 Speaker 2: growthier part of the market in AI tech. But you know, 178 00:10:23,200 --> 00:10:25,640 Speaker 2: you want a lot of names, a lot of diversification, 179 00:10:25,880 --> 00:10:28,319 Speaker 2: and increasingly good liquidity. 180 00:10:28,640 --> 00:10:29,839 Speaker 1: I want to talk to you, and we're going to 181 00:10:29,880 --> 00:10:32,360 Speaker 1: talk to the next part about basically what to do 182 00:10:32,440 --> 00:10:35,839 Speaker 1: now where we go we have portfolios, what we should 183 00:10:35,840 --> 00:10:38,360 Speaker 1: be looking for. But here's the thing, just quickly on 184 00:10:38,360 --> 00:10:41,640 Speaker 1: that one other things I'm throwing questions at random. That's 185 00:10:41,640 --> 00:10:44,239 Speaker 1: the nature of the show. Thank you for being cooperative 186 00:10:44,280 --> 00:10:44,600 Speaker 1: so far. 187 00:10:44,679 --> 00:10:46,760 Speaker 2: It's all good gold. Gold. 188 00:10:47,160 --> 00:10:50,120 Speaker 1: Where you stand? I start by saying, Morgan Stanley's chief 189 00:10:50,120 --> 00:10:52,240 Speaker 1: investment officer a few months ago and people could have 190 00:10:52,320 --> 00:10:54,319 Speaker 1: up to twenty percent in it? This is Morgan Stanley, 191 00:10:54,320 --> 00:10:56,040 Speaker 1: the biggest worth advisor in the world. Where do you 192 00:10:56,040 --> 00:10:56,560 Speaker 1: stand on it? 193 00:10:56,920 --> 00:10:58,920 Speaker 2: I read that with great interest, so did I. 194 00:10:59,160 --> 00:11:00,000 Speaker 1: But what did you conclude? 195 00:11:00,400 --> 00:11:03,400 Speaker 2: I think he's onto something m h. And we'll obviously 196 00:11:03,440 --> 00:11:06,400 Speaker 2: explore this in the next part of the pod. But look, 197 00:11:06,440 --> 00:11:10,120 Speaker 2: I think gold and other real assets as we call them, 198 00:11:10,800 --> 00:11:14,880 Speaker 2: certainly have a part in portfolios. What's been interesting, I think, 199 00:11:14,960 --> 00:11:18,360 Speaker 2: James over the last couple of weeks is how gold 200 00:11:18,360 --> 00:11:21,320 Speaker 2: has behaved. One would expect during crisis is like this, 201 00:11:21,480 --> 00:11:24,880 Speaker 2: gold returns as a place of safety, a safe haven 202 00:11:24,960 --> 00:11:28,680 Speaker 2: for investors. But gold has actually rolled over. And I 203 00:11:28,840 --> 00:11:33,720 Speaker 2: just think that's probably due to the aggressive run it's 204 00:11:33,720 --> 00:11:36,600 Speaker 2: had in twenty twenty five. On a twelve month basis, 205 00:11:37,040 --> 00:11:40,440 Speaker 2: it's been a great performing asset. I feel, you know, 206 00:11:40,480 --> 00:11:43,240 Speaker 2: the beginning of town have probably been taking a little 207 00:11:43,280 --> 00:11:45,800 Speaker 2: bit off the table in their gold exposures because they've 208 00:11:45,800 --> 00:11:48,680 Speaker 2: made good money. But yeah, we're happy to still be 209 00:11:48,720 --> 00:11:51,080 Speaker 2: allocating to gold at the moment. Absolutely interesting. 210 00:11:51,200 --> 00:12:04,079 Speaker 1: Okay, take short break back in the moment, folks. Hello, 211 00:12:04,160 --> 00:12:07,640 Speaker 1: welcome back to The Australian's Money Puzzle podcast. I'm James Kirby. 212 00:12:07,640 --> 00:12:11,520 Speaker 1: I'm talking to Ben James of the Escala Partners Group, 213 00:12:11,520 --> 00:12:14,880 Speaker 1: which is one of the more prominent of the boutique 214 00:12:15,000 --> 00:12:17,120 Speaker 1: You might like the word boutique, I don't know, but 215 00:12:17,480 --> 00:12:21,959 Speaker 1: Australian boutique style wealth managers, of which there are not many. 216 00:12:22,080 --> 00:12:24,240 Speaker 1: There's really only a handful. If you look at that 217 00:12:24,520 --> 00:12:26,640 Speaker 1: one point fifty advisors list, you have the big names, 218 00:12:26,640 --> 00:12:28,960 Speaker 1: the global names, then you have a handful of local 219 00:12:29,080 --> 00:12:31,640 Speaker 1: boutique groups, and then you have sort of spread of 220 00:12:31,679 --> 00:12:33,920 Speaker 1: all sorts of shapes and sizes that might take. And 221 00:12:33,960 --> 00:12:36,000 Speaker 1: I've been looking at I've actually been running the list 222 00:12:36,040 --> 00:12:40,080 Speaker 1: for ten years. So it's an opinion, but it's an 223 00:12:40,120 --> 00:12:44,559 Speaker 1: informed opinion. Okay, Now, Ben, let's talk about what people 224 00:12:44,600 --> 00:12:48,240 Speaker 1: should be doing, because I mean everyone's listening. They know 225 00:12:48,320 --> 00:12:51,000 Speaker 1: where they are. All their power is now what they 226 00:12:51,000 --> 00:12:54,240 Speaker 1: can do. Next, Let's assume a few things. I want 227 00:12:54,280 --> 00:12:55,800 Speaker 1: to put a few sort of lines on the ground. 228 00:12:55,800 --> 00:12:57,280 Speaker 1: First of all, to see that we're all on the 229 00:12:57,320 --> 00:13:00,240 Speaker 1: same page. Do you agree there's an inflation shop here? 230 00:13:00,320 --> 00:13:02,680 Speaker 1: Do you agree that was unexpected? Do you agree that 231 00:13:02,720 --> 00:13:05,080 Speaker 1: the structural inflation here that is not going to go 232 00:13:05,200 --> 00:13:06,800 Speaker 1: back into the bottle anytime soon? 233 00:13:07,840 --> 00:13:12,640 Speaker 2: Yes, to the first couple of questions, and regarding getting 234 00:13:12,640 --> 00:13:15,839 Speaker 2: the toothpaste into the tube, about whether the central banks 235 00:13:15,880 --> 00:13:18,760 Speaker 2: can do that, I'm not quite sure. I'll probably agree 236 00:13:18,800 --> 00:13:21,840 Speaker 2: on that point as well. So I think what investors 237 00:13:21,840 --> 00:13:25,360 Speaker 2: are grappling with now probably they didn't expect to be 238 00:13:25,800 --> 00:13:27,040 Speaker 2: in this position a year ago. 239 00:13:27,760 --> 00:13:29,920 Speaker 1: Yes, I mean they were still talking about cuts to 240 00:13:30,160 --> 00:13:33,200 Speaker 1: US interest rates. Yeah, I mean until a few weeks ago. 241 00:13:33,240 --> 00:13:35,600 Speaker 1: I mean I never believed it, have to say, but 242 00:13:35,760 --> 00:13:38,120 Speaker 1: because the bond market said that was not true. But 243 00:13:38,400 --> 00:13:40,480 Speaker 1: they were talking about that. That seems to be off 244 00:13:40,480 --> 00:13:42,880 Speaker 1: the table now. So okay, let's assume that we're in 245 00:13:42,920 --> 00:13:47,520 Speaker 1: a structurally higher inflation environment. Let's assume the two to 246 00:13:47,559 --> 00:13:50,760 Speaker 1: three percent target of the RBA, for instance, is a 247 00:13:50,760 --> 00:13:55,079 Speaker 1: pipe dream in our market just now. So what should 248 00:13:55,080 --> 00:13:55,880 Speaker 1: investors be doing? 249 00:13:56,200 --> 00:14:00,920 Speaker 2: Look, investors should be focusing on having a port with 250 00:14:01,120 --> 00:14:05,760 Speaker 2: many different leavers in it. We focus on diversification across 251 00:14:05,800 --> 00:14:08,400 Speaker 2: asset classes, which we've talked about a little bit so far, 252 00:14:09,120 --> 00:14:12,000 Speaker 2: but you also need to sort of position within those 253 00:14:12,040 --> 00:14:15,920 Speaker 2: asset classes diversification as well. You know, in your public 254 00:14:16,000 --> 00:14:20,400 Speaker 2: equity market, whether it's Aussie or international, it's fine to 255 00:14:20,480 --> 00:14:24,360 Speaker 2: have some growth, one needs to have some value. Really, 256 00:14:24,720 --> 00:14:27,280 Speaker 2: probably even more so now than a year ago. One 257 00:14:27,320 --> 00:14:30,280 Speaker 2: needs to be looking at a long short, more nimble 258 00:14:30,360 --> 00:14:33,840 Speaker 2: manager increasingly, James, and you'd be well aware of this, 259 00:14:33,880 --> 00:14:35,480 Speaker 2: and I know you've talked about it in some of 260 00:14:35,520 --> 00:14:39,360 Speaker 2: the other pods. Is the evolution in the alternatives market. 261 00:14:40,120 --> 00:14:43,200 Speaker 2: And you know, alternatives, for those people that are aware, 262 00:14:43,280 --> 00:14:46,840 Speaker 2: are really investment strategies that are designed to be non 263 00:14:46,880 --> 00:14:51,720 Speaker 2: aligned or uncorrelated to your other parts of your portfolio. 264 00:14:52,680 --> 00:14:55,760 Speaker 2: And you know, with a question of what to do now, 265 00:14:56,240 --> 00:14:59,920 Speaker 2: we're basically filling that latter bucket. We're filling and invest 266 00:15:00,240 --> 00:15:02,640 Speaker 2: in alternative assets. 267 00:15:02,960 --> 00:15:06,720 Speaker 1: Okay, can you specify what they are because I'm guessing 268 00:15:06,760 --> 00:15:10,480 Speaker 1: it's not actually private credit on listed private credit. I'm 269 00:15:10,520 --> 00:15:13,720 Speaker 1: guessing it's not some of the more obvious because you 270 00:15:13,720 --> 00:15:17,080 Speaker 1: say they're non correlated. Yeah, spell them out if you would. 271 00:15:17,720 --> 00:15:20,920 Speaker 2: Yeah. I mean, one great example that we've been investing 272 00:15:21,000 --> 00:15:25,160 Speaker 2: in recently is a royalty stream fund So you know, 273 00:15:25,480 --> 00:15:29,560 Speaker 2: these provide returns linked to production of a mine, or 274 00:15:29,640 --> 00:15:33,920 Speaker 2: revenue for a healthcare product, or even for music or 275 00:15:34,160 --> 00:15:39,200 Speaker 2: movie royalties. These are income style products that are designed 276 00:15:39,200 --> 00:15:43,280 Speaker 2: to perform well regardless of the economic backdrop that would 277 00:15:43,280 --> 00:15:47,160 Speaker 2: be one. I think infrastructure and even energy transition is 278 00:15:47,160 --> 00:15:50,360 Speaker 2: a very interesting space for us at the moment. We 279 00:15:50,480 --> 00:15:53,080 Speaker 2: talked about gold as being a real asset. I think 280 00:15:53,160 --> 00:15:56,440 Speaker 2: infrastructure probably is very aligned to being similar. 281 00:15:56,840 --> 00:15:59,800 Speaker 1: Infrastructure has been. It's been a sleeper for a while, hasn't. 282 00:15:59,840 --> 00:16:01,640 Speaker 1: It is great for a long time, but it's not 283 00:16:01,640 --> 00:16:02,800 Speaker 1: been great for the last few years. 284 00:16:02,840 --> 00:16:05,040 Speaker 2: Is that fair to say, Yeah, that's fair to say. 285 00:16:05,120 --> 00:16:07,560 Speaker 2: But you know, we've had a different environment in that time, 286 00:16:08,120 --> 00:16:11,760 Speaker 2: low inflation, and now we're probably facing, as we just discussed, 287 00:16:12,240 --> 00:16:16,680 Speaker 2: an inflation of the environment, and real asset infrastructure funds 288 00:16:16,680 --> 00:16:22,000 Speaker 2: with long duration contracts often inflation protected contracts, you know, 289 00:16:22,120 --> 00:16:25,320 Speaker 2: like a transurban for example. We all know as inflation 290 00:16:25,600 --> 00:16:27,840 Speaker 2: goes up, we're paying more on our toll roads. It's 291 00:16:27,840 --> 00:16:31,360 Speaker 2: a good example of what other infrastructure assets to. 292 00:16:31,720 --> 00:16:34,800 Speaker 1: It sounds like it's mostly infrastructure funds been rather than 293 00:16:35,040 --> 00:16:37,960 Speaker 1: shares for the average Astrian investry. There's that many of 294 00:16:38,000 --> 00:16:40,600 Speaker 1: them left. Cube has just gone off YEP, which I 295 00:16:40,640 --> 00:16:44,240 Speaker 1: suppose was infrastructure, Sydney Airport of course being the famous one. 296 00:16:44,760 --> 00:16:48,200 Speaker 1: So you mentioned transurban utilities. Did they fit into that? 297 00:16:48,320 --> 00:16:51,720 Speaker 2: Yeah, they would fit into certain infrastructure funds absolutely. 298 00:16:51,320 --> 00:16:51,720 Speaker 1: Mm hmm. 299 00:16:52,040 --> 00:16:55,240 Speaker 2: Okay, and really the evolution and you mentioned private credit 300 00:16:55,320 --> 00:16:58,560 Speaker 2: and we've seen how aggressively that's grown. We're seeing the 301 00:16:58,600 --> 00:17:03,080 Speaker 2: similar thing now and structure. More and more infrastructure managers 302 00:17:03,120 --> 00:17:05,840 Speaker 2: are knocking on our door, so I think you know, 303 00:17:05,880 --> 00:17:08,440 Speaker 2: they're seeing where the money is flowing sort of our 304 00:17:08,560 --> 00:17:11,640 Speaker 2: end of town. So i'd expect that trend to continue. 305 00:17:12,200 --> 00:17:14,920 Speaker 1: And your clients are knocking on their doors both sounds 306 00:17:14,920 --> 00:17:15,160 Speaker 1: of it. 307 00:17:15,440 --> 00:17:22,960 Speaker 2: Well, they're getting well advised so often reverse inquiry, James, And. 308 00:17:22,960 --> 00:17:27,200 Speaker 1: What would you expect that? It's a difficult question. Yeah, 309 00:17:27,280 --> 00:17:32,960 Speaker 1: but an infrastructure fund, what's interest range should an investor 310 00:17:32,960 --> 00:17:35,760 Speaker 1: listening to the show usefully expect from one? As you 311 00:17:35,800 --> 00:17:36,920 Speaker 1: know above the cash feed? 312 00:17:37,560 --> 00:17:40,040 Speaker 2: Well, look, depending on where the cash road is, let's 313 00:17:40,080 --> 00:17:42,600 Speaker 2: just talk about the net returns we'd expect from them 314 00:17:42,640 --> 00:17:46,280 Speaker 2: depending on their risk profiles. You know, some are really 315 00:17:46,400 --> 00:17:49,800 Speaker 2: long and hold assets where more of the IRR is 316 00:17:49,840 --> 00:17:53,720 Speaker 2: delivered via capital growth. Some of the other funds that 317 00:17:53,720 --> 00:17:57,240 Speaker 2: we look at, their IRR is driven by yield. So 318 00:17:57,359 --> 00:18:00,000 Speaker 2: for those driven by yield, we'd expect to sort of 319 00:18:00,119 --> 00:18:03,880 Speaker 2: say a seven to nine percent star return through a cycle, 320 00:18:04,320 --> 00:18:06,840 Speaker 2: with a lot of that actually coming back as income 321 00:18:07,000 --> 00:18:11,920 Speaker 2: into portfolios. Whereas those who were more growth focused, we'd 322 00:18:11,920 --> 00:18:15,000 Speaker 2: be expecting sort of third eighty to fifteen percent, whereby 323 00:18:15,160 --> 00:18:17,399 Speaker 2: most of the capitalties returned at sort of at the 324 00:18:17,400 --> 00:18:18,640 Speaker 2: back end of the investment. 325 00:18:19,240 --> 00:18:21,280 Speaker 1: Do you include data centers in that. 326 00:18:21,520 --> 00:18:24,920 Speaker 2: Yes, they'd absolutely be a part of certain infrastructure funds. 327 00:18:25,160 --> 00:18:28,040 Speaker 1: Okay, okay, very interesting, all right. Now, one of the 328 00:18:28,080 --> 00:18:30,040 Speaker 1: points I know that I wanted to bring up with 329 00:18:30,080 --> 00:18:33,520 Speaker 1: you was we told at the very started we before 330 00:18:33,520 --> 00:18:35,840 Speaker 1: we went on there, we were talking about the traditional 331 00:18:35,840 --> 00:18:41,080 Speaker 1: notion of the sixty forty portfolio and that forty percent 332 00:18:41,200 --> 00:18:46,240 Speaker 1: was defensive, and that defensive element was substantially do on 333 00:18:46,359 --> 00:18:48,920 Speaker 1: the pin by bonds. But when I talk to people 334 00:18:49,000 --> 00:18:52,320 Speaker 1: like you, I think that forty percent is all sorts 335 00:18:52,320 --> 00:18:55,720 Speaker 1: of different assets that weren't necessarily in the mix before. 336 00:18:56,880 --> 00:19:02,040 Speaker 1: Is that the case? And have bonds shrunk and in 337 00:19:02,119 --> 00:19:04,160 Speaker 1: terms of the pie when you have a bar charge 338 00:19:04,160 --> 00:19:06,320 Speaker 1: in front of you looking at FilmOn's portfolio. 339 00:19:06,600 --> 00:19:10,240 Speaker 2: Absolutely, And if you take yourself back to the old 340 00:19:10,440 --> 00:19:13,040 Speaker 2: you know, live to one hundred argument, you know your age. 341 00:19:13,080 --> 00:19:15,399 Speaker 2: I'm fifty four, I should have fifty four percent of 342 00:19:15,440 --> 00:19:18,480 Speaker 2: my money in bonds, and that is not how my 343 00:19:18,560 --> 00:19:22,560 Speaker 2: portfolio has reflected. But you know, I think it takes 344 00:19:22,600 --> 00:19:24,760 Speaker 2: me back to that whole question about whether a sixty 345 00:19:24,840 --> 00:19:29,200 Speaker 2: forty seventy thirty portfolio is still fit to purpose. And 346 00:19:29,440 --> 00:19:32,240 Speaker 2: we've been doing a lot of thinking about this internally. 347 00:19:32,880 --> 00:19:36,840 Speaker 2: I don't think those styles of portfolios are fit for 348 00:19:36,920 --> 00:19:41,000 Speaker 2: today's world. I think that style of portfolio was really 349 00:19:41,080 --> 00:19:46,080 Speaker 2: set for a world of low inflation, stable geopolitics, predictable 350 00:19:46,119 --> 00:19:50,760 Speaker 2: policy from governments, a global growth market where trade was 351 00:19:50,800 --> 00:19:53,399 Speaker 2: free and open. But you know, I think it was 352 00:19:53,480 --> 00:19:56,760 Speaker 2: Mark Carney, the Canadian who mentioned recently that the curtains 353 00:19:56,840 --> 00:20:00,880 Speaker 2: come down on that old rules based order. Today's more 354 00:20:00,960 --> 00:20:03,520 Speaker 2: volatile returns are more dispersed. 355 00:20:03,840 --> 00:20:06,000 Speaker 1: Can I just I just for the listener, Can I 356 00:20:06,080 --> 00:20:09,880 Speaker 1: just clarify something. It's the composition of the defensive part 357 00:20:09,920 --> 00:20:13,399 Speaker 1: of the portfolio's changed rather than it being in place. 358 00:20:13,520 --> 00:20:14,040 Speaker 1: Is that right? 359 00:20:14,400 --> 00:20:17,560 Speaker 2: That's absolutely correct? And you know I talked a little 360 00:20:17,560 --> 00:20:20,160 Speaker 2: bit about alternatives, and we can dive a little bit 361 00:20:20,160 --> 00:20:25,080 Speaker 2: deeper into why that's replacing our fixed income allocation. 362 00:20:25,000 --> 00:20:27,040 Speaker 1: Or do just tell us briefly what you're thinking. 363 00:20:27,160 --> 00:20:30,840 Speaker 2: Yeah, I mean, look, it was interesting because twenty twenty 364 00:20:30,840 --> 00:20:33,480 Speaker 2: two was a really challenging year for investors and we 365 00:20:33,560 --> 00:20:36,000 Speaker 2: had a lot of clients new money coming in that 366 00:20:36,119 --> 00:20:39,919 Speaker 2: year and correlation of that whole year was a terrible 367 00:20:40,000 --> 00:20:43,600 Speaker 2: year for investors because everything was correlated. I think equities 368 00:20:43,600 --> 00:20:46,480 Speaker 2: were down twenty but the bond market was down about 369 00:20:46,480 --> 00:20:52,639 Speaker 2: thirteen as well. So nothing worked. And I think that 370 00:20:52,720 --> 00:20:55,040 Speaker 2: it was a real kill switch moment for us because 371 00:20:55,040 --> 00:20:59,720 Speaker 2: it highlighted that inflation mattered. And so now look, rather 372 00:20:59,800 --> 00:21:04,439 Speaker 2: than building a rules based portfolio of balanced growth, defensive, 373 00:21:05,240 --> 00:21:08,800 Speaker 2: you know, we're really looking to build portfolios and I 374 00:21:08,880 --> 00:21:12,800 Speaker 2: mentioned the word levers before where we have you know, 375 00:21:12,880 --> 00:21:18,120 Speaker 2: different outcomes that we prepare for and then invest in 376 00:21:18,320 --> 00:21:23,520 Speaker 2: different investment products that match those allocations or where we 377 00:21:23,560 --> 00:21:27,119 Speaker 2: think that macro event will play out. So you know, 378 00:21:27,160 --> 00:21:30,400 Speaker 2: at the moment, we're saying inflation probably looks like it's 379 00:21:30,400 --> 00:21:33,200 Speaker 2: going to be around for longer, how do we invest 380 00:21:33,240 --> 00:21:36,600 Speaker 2: for that? And you know, We've talked about goal, we've 381 00:21:36,640 --> 00:21:40,639 Speaker 2: talked about infrastructure. Will real estate come back in probably, 382 00:21:40,920 --> 00:21:43,280 Speaker 2: but there's also other things we need to invest for. 383 00:21:43,480 --> 00:21:46,560 Speaker 2: Growth may come back, so we can't ignore growth, but 384 00:21:46,640 --> 00:21:48,240 Speaker 2: how do we invest in that as well? 385 00:21:48,280 --> 00:21:51,080 Speaker 1: So inflation thinking is at the heart of it. Now 386 00:21:51,240 --> 00:21:53,679 Speaker 1: that is okay, Now, I just want thing before we 387 00:21:53,720 --> 00:21:56,560 Speaker 1: order questions. This for questions, which I've got some for you. 388 00:21:57,040 --> 00:21:59,520 Speaker 1: The major super funds, the big super funds. I've had 389 00:21:59,520 --> 00:22:02,600 Speaker 1: people coming through to me during the week. These are 390 00:22:02,680 --> 00:22:05,440 Speaker 1: not academics as such, but people who spent their whole 391 00:22:05,440 --> 00:22:09,720 Speaker 1: life talking and looking at portfolio construction. They're making the 392 00:22:09,720 --> 00:22:12,120 Speaker 1: point that they think the big super funds are exactly 393 00:22:12,119 --> 00:22:15,080 Speaker 1: what you're saying you shouldn't have. That is that they 394 00:22:15,119 --> 00:22:20,399 Speaker 1: are all schools in their construction and heavily reliant on bonds. 395 00:22:20,400 --> 00:22:22,600 Speaker 1: And now I know they were early into on listed assets, 396 00:22:22,640 --> 00:22:25,200 Speaker 1: but I wonder do you have any sense whether their 397 00:22:25,240 --> 00:22:32,040 Speaker 1: portfolios are appropriate for the era where it seem to 398 00:22:32,040 --> 00:22:32,560 Speaker 1: be entering. 399 00:22:32,960 --> 00:22:35,840 Speaker 2: It's a really good question. Often where we reflect on 400 00:22:36,320 --> 00:22:38,600 Speaker 2: you know, I think we see a quarterly update on 401 00:22:38,640 --> 00:22:41,000 Speaker 2: what the future fund's doing, and we look through their 402 00:22:41,040 --> 00:22:44,200 Speaker 2: allocation and we always marvel about how small the allocation 403 00:22:44,400 --> 00:22:47,320 Speaker 2: is towards the equity is you know how large it 404 00:22:47,359 --> 00:22:50,600 Speaker 2: is to things like private credit and private equity. But 405 00:22:50,760 --> 00:22:53,400 Speaker 2: I think groups like that have probably got it right 406 00:22:53,640 --> 00:22:57,680 Speaker 2: for our style of investors. The other super fund I'm 407 00:22:57,680 --> 00:23:02,159 Speaker 2: probably not well qualified enough to comment those where you 408 00:23:02,240 --> 00:23:04,440 Speaker 2: don't need to be active. I think what this world 409 00:23:04,520 --> 00:23:07,280 Speaker 2: is showing us, and so those that are being a 410 00:23:07,280 --> 00:23:10,560 Speaker 2: little bit more active and a little bit more tactical 411 00:23:10,760 --> 00:23:12,760 Speaker 2: I suppose the word is I would think would be 412 00:23:12,800 --> 00:23:14,520 Speaker 2: well positioned for the current environment. 413 00:23:14,840 --> 00:23:17,160 Speaker 1: Okay, all right, pretty good, We'll take short break. We'll 414 00:23:17,160 --> 00:23:27,400 Speaker 1: go to deal with some questions. Back in a moment. Hello, 415 00:23:27,520 --> 00:23:30,879 Speaker 1: Welcome back to the Australians Money Puzzle podcast. James Kirby 416 00:23:30,960 --> 00:23:35,040 Speaker 1: here with Ben James from a Scale of Partners. Now, Ben, 417 00:23:35,119 --> 00:23:36,680 Speaker 1: I just we're running out of time. I just do 418 00:23:36,760 --> 00:23:39,920 Speaker 1: two of these questions. The one from Susie I will 419 00:23:40,040 --> 00:23:42,679 Speaker 1: leave to another day. Can I just bounce down to 420 00:23:42,680 --> 00:23:45,159 Speaker 1: the one from Andrew who says, as of today, the 421 00:23:45,359 --> 00:23:48,439 Speaker 1: ASX two hundred is pretty much flat due to the 422 00:23:48,560 --> 00:23:51,320 Speaker 1: recent uncertainty in the Middle East. Yes, it is worse 423 00:23:51,359 --> 00:23:54,359 Speaker 1: than flat depending on the time period. Andrew although the 424 00:23:54,400 --> 00:23:59,200 Speaker 1: conflict is still paying out. This seems like an opportunity 425 00:23:59,240 --> 00:24:02,160 Speaker 1: for those with the capacity to put in extra concessional 426 00:24:02,240 --> 00:24:06,000 Speaker 1: contributions to get to the thirty thousand limit. Yes, would 427 00:24:06,080 --> 00:24:10,119 Speaker 1: you agree? But he then says, do you think the 428 00:24:10,160 --> 00:24:13,520 Speaker 1: conflict could have an impact on the expected dividends paid 429 00:24:13,760 --> 00:24:19,760 Speaker 1: in the future or what did some companies pause their distributions? Well, 430 00:24:19,760 --> 00:24:23,200 Speaker 1: we saw that in COVID, no talk of it yet. 431 00:24:23,760 --> 00:24:25,480 Speaker 1: What do you guys think, is that come out with 432 00:24:25,520 --> 00:24:27,400 Speaker 1: your investment committee and is it a concern. 433 00:24:27,640 --> 00:24:30,480 Speaker 2: Look, I'll take the first part of the question about 434 00:24:30,480 --> 00:24:34,000 Speaker 2: the concession or contribution. I'd absolutely be making the benefit 435 00:24:34,160 --> 00:24:36,560 Speaker 2: of that opportunity. I think the governments are going to 436 00:24:36,600 --> 00:24:40,120 Speaker 2: get harder and harder for investors to get money in, 437 00:24:40,760 --> 00:24:43,840 Speaker 2: so I think the question about getting money into super 438 00:24:44,000 --> 00:24:47,679 Speaker 2: should absolutely be taken up. So I would encourage that 439 00:24:47,720 --> 00:24:51,879 Speaker 2: to happen. The second question regarding dividends, look more and 440 00:24:51,960 --> 00:24:55,080 Speaker 2: more what we're seeing in the Aussie equity market a 441 00:24:55,160 --> 00:24:58,560 Speaker 2: gradual dilution of the dividend yield across the ASEX two 442 00:24:58,680 --> 00:25:04,280 Speaker 2: hundred moment it's probably three point seven to eight. Maybe yes, 443 00:25:04,280 --> 00:25:05,679 Speaker 2: I could be a little bit wrong with to be 444 00:25:05,680 --> 00:25:09,280 Speaker 2: four and a half. Yeah, yeah, yeah, so it has shrunk, 445 00:25:09,359 --> 00:25:11,600 Speaker 2: and that's for a number of reasons. You know, the 446 00:25:11,640 --> 00:25:15,760 Speaker 2: makeup of the ASEX two hundred is changing payout ratios 447 00:25:15,760 --> 00:25:19,159 Speaker 2: in some companies that are lowering. But we look to 448 00:25:19,359 --> 00:25:21,520 Speaker 2: fixed income and we've talked a lot about that as 449 00:25:21,560 --> 00:25:25,560 Speaker 2: being a replacement for some of those dividends. They're great 450 00:25:25,880 --> 00:25:28,359 Speaker 2: for investors when you can get them franking credits and 451 00:25:28,440 --> 00:25:31,360 Speaker 2: magnificent as well. But I think oss the investors will 452 00:25:31,359 --> 00:25:35,360 Speaker 2: start looking at their portfolio through total return rather than 453 00:25:35,440 --> 00:25:37,280 Speaker 2: a yield plus a total return. 454 00:25:37,119 --> 00:25:41,520 Speaker 1: Because of the dividend shrinkage. Basicly yeah, okay, yeah, I 455 00:25:41,560 --> 00:25:43,800 Speaker 1: think so. But on the specific question of whether there 456 00:25:43,840 --> 00:25:48,840 Speaker 1: might be dividend pauses, skips or whatever, basically dividends not 457 00:25:48,880 --> 00:25:50,880 Speaker 1: being paid, is there a risk. 458 00:25:50,880 --> 00:25:53,600 Speaker 2: That's an absolute risk? Investors are always dealing with risk. 459 00:25:53,720 --> 00:25:56,440 Speaker 2: I think the risk of that happening would be if 460 00:25:56,440 --> 00:26:00,600 Speaker 2: we entered really into that economic crisis and when companies 461 00:26:00,680 --> 00:26:04,920 Speaker 2: try and shore up their balance sheets for obvious reasons. 462 00:26:04,960 --> 00:26:07,400 Speaker 2: But whether that's going to happen in the next twelve months, 463 00:26:07,440 --> 00:26:08,240 Speaker 2: I'm not sociure. 464 00:26:08,480 --> 00:26:11,680 Speaker 1: Probably not, yeah, all right, probably not. But of course, 465 00:26:12,000 --> 00:26:14,000 Speaker 1: one last thing something I think I should have picked 466 00:26:14,080 --> 00:26:19,840 Speaker 1: up on. You mentioned infrastructure, and you mentioned energy transition 467 00:26:20,600 --> 00:26:24,120 Speaker 1: and possibly property. Could you be a bit more specific 468 00:26:24,119 --> 00:26:27,080 Speaker 1: about what you guys are thinking about there in terms 469 00:26:27,119 --> 00:26:31,320 Speaker 1: of going forward for investors. When you say energy transition, 470 00:26:32,200 --> 00:26:35,080 Speaker 1: I wonder what you mean for the investor and property, 471 00:26:35,960 --> 00:26:37,760 Speaker 1: I wonder which end of property you're thinking of. 472 00:26:38,080 --> 00:26:42,040 Speaker 2: Yeah, both the good questions. Look. On the energy transition side, 473 00:26:42,080 --> 00:26:45,800 Speaker 2: we're dealing with an oil crisis right now, and you know, 474 00:26:45,880 --> 00:26:50,439 Speaker 2: with crisises come opportunities. Do investors will they start looking 475 00:26:50,480 --> 00:26:54,560 Speaker 2: at uranium? It will nuclear come back on the horizon. 476 00:26:55,040 --> 00:26:58,720 Speaker 2: I think investors need to be open to where an 477 00:26:58,760 --> 00:27:01,680 Speaker 2: opportunity presents as a resort of the crisis somewhere else. 478 00:27:02,000 --> 00:27:05,119 Speaker 2: So that's something that we're looking at that dives into 479 00:27:05,160 --> 00:27:09,200 Speaker 2: something more deeper than like a resources investment. I think 480 00:27:09,240 --> 00:27:12,919 Speaker 2: that makes something worth considering energy transition in other things 481 00:27:13,040 --> 00:27:16,960 Speaker 2: like infrastructure funds around solar. When I think every time 482 00:27:17,080 --> 00:27:20,640 Speaker 2: we get these type of focuses on one part of 483 00:27:20,680 --> 00:27:25,040 Speaker 2: the commodity market currently being oil, you know something else 484 00:27:25,080 --> 00:27:28,439 Speaker 2: pops up. The second part of the question, property, I 485 00:27:28,480 --> 00:27:32,760 Speaker 2: think we're looking at property where we can underpin high yield. 486 00:27:33,320 --> 00:27:35,159 Speaker 2: I'll take it from the last world months. We've been 487 00:27:35,200 --> 00:27:38,879 Speaker 2: investing in sort of retail shopping centers. We think demand 488 00:27:39,440 --> 00:27:43,080 Speaker 2: for these styles and assets will continue and where we 489 00:27:43,119 --> 00:27:45,439 Speaker 2: can get a large part of our return from yield, 490 00:27:45,480 --> 00:27:48,560 Speaker 2: again that total return being skewed to yield. We're very 491 00:27:48,640 --> 00:27:52,280 Speaker 2: happy to be investing alongside good partners in that space. 492 00:27:52,880 --> 00:27:56,400 Speaker 2: Melbourne's a challenge. I think I'm a Melbourne and we're 493 00:27:56,440 --> 00:28:00,600 Speaker 2: looking at moving our offices right now. There's plenty of opportunity, 494 00:28:00,840 --> 00:28:02,960 Speaker 2: but our lace is locked in your twenty twenty eight 495 00:28:03,200 --> 00:28:06,000 Speaker 2: and I'm being told that in twenty twenty eight there'll 496 00:28:06,000 --> 00:28:10,000 Speaker 2: be a shortage. So you know, we're actually looking at 497 00:28:10,320 --> 00:28:13,480 Speaker 2: whether office in Melbourne is something worth looking at. Based 498 00:28:13,480 --> 00:28:13,919 Speaker 2: on those. 499 00:28:13,880 --> 00:28:17,199 Speaker 1: Thoughts, we have listeners from all around the country, so 500 00:28:17,240 --> 00:28:19,879 Speaker 1: I don't want to bore them with local talk. But 501 00:28:20,040 --> 00:28:22,679 Speaker 1: the vacancy rate on the same killder Road District office 502 00:28:22,680 --> 00:28:24,920 Speaker 1: district is thirty five percent, so I don't think there's 503 00:28:24,920 --> 00:28:27,320 Speaker 1: going to be a shortage too soon. But hey, you 504 00:28:27,400 --> 00:28:29,840 Speaker 1: never know that realistate agents might be telling you the truth. 505 00:28:29,880 --> 00:28:32,240 Speaker 2: Ben, I'm talking more Colins Straight College. 506 00:28:32,359 --> 00:28:35,840 Speaker 1: Of course, You're you're talking at Prime Prime Prime Prime. Yes, indeed, 507 00:28:35,960 --> 00:28:37,800 Speaker 1: thanks very much for coming on the show, Ben James. 508 00:28:37,840 --> 00:28:38,640 Speaker 1: Great to talk to you. 509 00:28:38,680 --> 00:28:39,960 Speaker 2: Great to talk to you, James. 510 00:28:40,240 --> 00:28:43,320 Speaker 1: That was Ben James of Escala Partners. Thanks folks for listening. 511 00:28:43,480 --> 00:28:46,640 Speaker 1: Do keep the emails rolling the money puzzle at the 512 00:28:46,680 --> 00:28:50,040 Speaker 1: Australian dot com dot au. We'll just have one show 513 00:28:50,080 --> 00:28:52,720 Speaker 1: next week, not too because of Easter, watch out for that. 514 00:28:53,040 --> 00:28:55,640 Speaker 1: Today's show was produced by Tiffany I can talk to 515 00:28:55,680 --> 00:29:03,280 Speaker 1: you soon, Agin Stan