1 00:00:05,820 --> 00:00:10,200 Sean Aylmer: Welcome to the Fear & Greed Business Interview. I'm Sean Aylmer. Wall Street has been running 2 00:00:10,200 --> 00:00:12,929 Sean Aylmer: lately. It's hitting a bunch of new records. Luckily for 3 00:00:12,929 --> 00:00:15,480 Sean Aylmer: us, one of Australia's most well- known investors is on 4 00:00:15,480 --> 00:00:17,429 Sean Aylmer: the ground in New York and is happy to give 5 00:00:17,430 --> 00:00:19,829 Sean Aylmer: us his take on what's going on and where he's 6 00:00:19,829 --> 00:00:23,549 Sean Aylmer: seeing the opportunities. Remember, this is general information only and 7 00:00:23,550 --> 00:00:26,579 Sean Aylmer: you should always seek professional advice before making investment decisions. 8 00:00:26,820 --> 00:00:30,059 Sean Aylmer: Geoff Wilson is the founder, Chair and Chief Investment Officer 9 00:00:30,059 --> 00:00:33,568 Sean Aylmer: of Wilson Asset Management, and today he's joining me from 10 00:00:33,570 --> 00:00:35,729 Sean Aylmer: New York. Geoff, welcome back to Fear & Greed. 11 00:00:36,000 --> 00:00:39,479 Geoff Wilson: Sean always, always good to be on one of the great 12 00:00:39,479 --> 00:00:40,710 Geoff Wilson: Australian podcasts. 13 00:00:42,510 --> 00:00:45,989 Sean Aylmer: Ah, Geoff, you are far too generous. Tell me, what 14 00:00:45,990 --> 00:00:48,150 Sean Aylmer: are you doing in New York? You're over there with 15 00:00:48,150 --> 00:00:51,210 Sean Aylmer: the Wilson Asset Management team. What are you doing? 16 00:00:51,479 --> 00:00:54,239 Geoff Wilson: Yeah, well first of all, one of the funds we 17 00:00:54,270 --> 00:00:58,709 Geoff Wilson: manage is WHAMglobal. Katrina, who's the lead PM, she's actually 18 00:00:58,710 --> 00:01:00,480 Geoff Wilson: based in New York. She's been over here for a 19 00:01:00,480 --> 00:01:03,599 Geoff Wilson: couple of years. Pretty much half the team's over here 20 00:01:03,599 --> 00:01:07,920 Geoff Wilson: now because when you're investing globally and even by market 21 00:01:07,980 --> 00:01:13,080 Geoff Wilson: cap, there's 50% plus of the global market listed in 22 00:01:13,080 --> 00:01:16,350 Geoff Wilson: the US. So the opportunities are here, it works being 23 00:01:16,350 --> 00:01:18,869 Geoff Wilson: in the same time zone. In terms of me being 24 00:01:18,870 --> 00:01:23,459 Geoff Wilson: here, I hadn't been here since pre- pandemic, so everything 25 00:01:23,459 --> 00:01:26,249 Geoff Wilson: sort of aligned and it was a good opportunity to be over here. 26 00:01:26,670 --> 00:01:28,649 Sean Aylmer: Right. So tell me, what are some of the key 27 00:01:28,650 --> 00:01:31,950 Sean Aylmer: themes? Obviously we'll get to some of the sectors like 28 00:01:31,950 --> 00:01:34,410 Sean Aylmer: tech, et cetera, but before we do that, kind of 29 00:01:34,410 --> 00:01:37,709 Sean Aylmer: a bigger picture view of the small cap scene in 30 00:01:37,709 --> 00:01:41,519 Sean Aylmer: the US. Been a rough couple of years broadly for 31 00:01:41,520 --> 00:01:46,259 Sean Aylmer: small caps. What's the prognosis for 2024 as you are 32 00:01:46,260 --> 00:01:47,039 Sean Aylmer: reading it there? 33 00:01:47,370 --> 00:01:52,680 Geoff Wilson: Yeah, I think both here in the US and in Australia, we're 34 00:01:52,680 --> 00:01:59,550 Geoff Wilson: both pretty bullish about those smaller undervalued growth companies and 35 00:02:00,059 --> 00:02:04,049 Geoff Wilson: the money has been flowing to the larger end of 36 00:02:04,049 --> 00:02:08,880 Geoff Wilson: the market and it really has left the mid and small 37 00:02:08,970 --> 00:02:13,470 Geoff Wilson: indexes significantly behind. The interesting thing is over the last few 38 00:02:13,470 --> 00:02:16,139 Geoff Wilson: months, that seems to be changing a little bit, and 39 00:02:16,139 --> 00:02:20,609 Geoff Wilson: I think it's interesting over here you've got the Magnificent 40 00:02:20,610 --> 00:02:24,689 Geoff Wilson: 7, the tech companies that have really driven the market 41 00:02:24,690 --> 00:02:29,970 Geoff Wilson: significantly higher over the last 12 months plus. But it 42 00:02:29,970 --> 00:02:33,239 Geoff Wilson: really seems to be broadening out now over here, which 43 00:02:33,240 --> 00:02:35,969 Geoff Wilson: is a very positive sign for the market over here 44 00:02:35,969 --> 00:02:36,600 Geoff Wilson: in the US. 45 00:02:37,139 --> 00:02:40,049 Sean Aylmer: Okay, Geoff, so what's your broad take on the market 46 00:02:40,049 --> 00:02:40,709 Sean Aylmer: going forward? 47 00:02:41,369 --> 00:02:44,220 Geoff Wilson: Well, if you look at where we are, we're in 48 00:02:44,220 --> 00:02:48,180 Geoff Wilson: an election year and I think for the last 100 49 00:02:48,180 --> 00:02:53,310 Geoff Wilson: years, I think in three quarters of the election years, 50 00:02:53,370 --> 00:02:57,298 Geoff Wilson: the market has gone up and I think it's increased 51 00:02:57,299 --> 00:03:01,350 Geoff Wilson: a little over 7%. Also, a couple of other things. 52 00:03:01,380 --> 00:03:04,680 Geoff Wilson: One is when you're in a period where interest rates 53 00:03:04,680 --> 00:03:09,240 Geoff Wilson: are being cut, the market tends to go up in 54 00:03:09,780 --> 00:03:14,340 Geoff Wilson: those. Also, you mentioned earlier how the US market's hitting 55 00:03:14,340 --> 00:03:17,639 Geoff Wilson: record highs, and what you tend to find is when 56 00:03:17,639 --> 00:03:20,520 Geoff Wilson: a market's hitting a record high, it tends to do 57 00:03:20,520 --> 00:03:23,820 Geoff Wilson: that for a longer period of time. It just doesn't 58 00:03:23,820 --> 00:03:28,049 Geoff Wilson: hit a record high and then it falls significantly. I 59 00:03:28,050 --> 00:03:31,919 Geoff Wilson: mean, the statistics go something like if an index has 60 00:03:31,919 --> 00:03:35,730 Geoff Wilson: been hitting a record high for 12 months at something 61 00:03:35,730 --> 00:03:39,870 Geoff Wilson: like 83% of the time in the next 12 months, 62 00:03:39,870 --> 00:03:44,070 Geoff Wilson: it's going to be at least 12% plus higher. So 63 00:03:44,070 --> 00:03:49,590 Geoff Wilson: I think everything's set up for this year being 2024, 64 00:03:49,590 --> 00:03:53,940 Geoff Wilson: calendar 2024, to be a pretty reasonable market even though 65 00:03:53,940 --> 00:03:57,480 Geoff Wilson: we've seen some strong performance in the early part. 66 00:03:57,900 --> 00:03:59,640 Sean Aylmer: Stay with me, Geoff, we'll be back in a minute. 67 00:04:06,300 --> 00:04:09,238 Sean Aylmer: I'm speaking to Geoff Wilson, Chair and Chief Investment Officer 68 00:04:09,240 --> 00:04:14,400 Sean Aylmer: of Wilson Asset Management. What about by sector? What areas 69 00:04:14,400 --> 00:04:16,320 Sean Aylmer: of the market look attractive to you? 70 00:04:17,040 --> 00:04:20,760 Geoff Wilson: Well, I actually think, again, you want to look at 71 00:04:20,760 --> 00:04:23,759 Geoff Wilson: the unloved areas. I mean, one area that has been 72 00:04:23,759 --> 00:04:28,469 Geoff Wilson: unloved is more the medium and smaller sized companies. They 73 00:04:28,469 --> 00:04:32,940 Geoff Wilson: are the cheapest, they've been relative to the large companies 74 00:04:32,940 --> 00:04:36,480 Geoff Wilson: I think for the last couple of decades. So all 75 00:04:36,480 --> 00:04:39,839 Geoff Wilson: the money's been going to over here, maybe it's the 76 00:04:39,839 --> 00:04:43,830 Geoff Wilson: Magnificent Seven. What'll happen is that the rally will broaden 77 00:04:43,830 --> 00:04:48,810 Geoff Wilson: out and then those more medium, smaller sized companies will 78 00:04:48,810 --> 00:04:54,480 Geoff Wilson: start performing. Also, I tend to like to invest in 79 00:04:54,480 --> 00:04:57,389 Geoff Wilson: areas that aren't the flavor of the month, and it's 80 00:04:57,389 --> 00:05:02,490 Geoff Wilson: really looking for areas or sectors that have found things 81 00:05:02,490 --> 00:05:07,200 Geoff Wilson: have been difficult or their valuations sort of depressed. 82 00:05:07,770 --> 00:05:11,609 Sean Aylmer: Can we drill down on that and what are you 83 00:05:11,610 --> 00:05:14,520 Sean Aylmer: seeing? Where are some of the opportunities in terms of 84 00:05:14,520 --> 00:05:19,380 Sean Aylmer: sectors? Are we kind of talking about retail, which have 85 00:05:19,469 --> 00:05:21,748 Sean Aylmer: obviously been hit by cost of living? Are we talking, 86 00:05:21,750 --> 00:05:24,480 Sean Aylmer: I mean, where's property fit in? Where's mining? That type 87 00:05:24,480 --> 00:05:24,840 Sean Aylmer: of thing. 88 00:05:25,560 --> 00:05:29,130 Geoff Wilson: Yeah, well, I mean first of all, first time I've 89 00:05:29,130 --> 00:05:33,329 Geoff Wilson: been back in New York since pre- COVID, and unfortunately 90 00:05:33,660 --> 00:05:36,089 Geoff Wilson: it is a changed city. I lived here in the 91 00:05:36,089 --> 00:05:38,849 Geoff Wilson: latter part of the 80s. I was here for the 92 00:05:38,849 --> 00:05:39,809 Geoff Wilson: '87 crash. 93 00:05:40,589 --> 00:05:42,569 Sean Aylmer: Weren't you a star rugby player, Geoff, over there? 94 00:05:43,980 --> 00:05:47,880 Geoff Wilson: Well, that's another story. That's another story. 95 00:05:48,510 --> 00:05:48,779 Sean Aylmer: Right. 96 00:05:49,740 --> 00:05:52,770 Geoff Wilson: Nearly had a game. We probably don't have enough time on the podcast. 97 00:05:53,190 --> 00:05:53,640 Sean Aylmer: Perhaps not. 98 00:05:53,640 --> 00:05:58,260 Geoff Wilson: SO going back on retail, one of the difficult things 99 00:05:58,260 --> 00:06:00,329 Geoff Wilson: is over here, anyone who hasn't been to New York 100 00:06:00,330 --> 00:06:03,930 Geoff Wilson: for a while, some of those fantastic department stores just 101 00:06:03,930 --> 00:06:08,039 Geoff Wilson: don't exist anymore, like Barneys, et cetera, and retail is 102 00:06:08,040 --> 00:06:11,428 Geoff Wilson: difficult over here. It's interesting, you're seeing a lot more of 103 00:06:11,428 --> 00:06:16,500 Geoff Wilson: the individual shops. Obviously everyone went online. New York is 104 00:06:16,500 --> 00:06:20,610 Geoff Wilson: still suffering. Everyone hasn't fully come back in terms of 105 00:06:20,850 --> 00:06:23,730 Geoff Wilson: the work from home, et cetera, et cetera. But in 106 00:06:23,730 --> 00:06:28,649 Geoff Wilson: terms of looking at sectors, retail is a sector that's 107 00:06:28,650 --> 00:06:33,178 Geoff Wilson: been unloved and to me, there's definitely some value there. 108 00:06:34,709 --> 00:06:38,969 Sean Aylmer: Beyond the US, are there other regions that you think 109 00:06:38,970 --> 00:06:41,100 Sean Aylmer: look good? I mean, you made the point upfront that 110 00:06:41,100 --> 00:06:45,660 Sean Aylmer: within in your world, small and mids, it's about 50% 111 00:06:45,750 --> 00:06:48,359 Sean Aylmer: of the market. What about outside that? And I suppose 112 00:06:48,360 --> 00:06:50,609 Sean Aylmer: I'm thinking of Europe because that really has been sold 113 00:06:50,610 --> 00:06:54,988 Sean Aylmer: off and European markets have not had the time of 114 00:06:54,990 --> 00:06:56,640 Sean Aylmer: it that Wall Street has, for example. 115 00:06:57,270 --> 00:07:01,469 Geoff Wilson: There are some good individual companies in Europe. I actually 116 00:07:01,470 --> 00:07:06,120 Geoff Wilson: think the UK unfortunately, has some significant structural problems, which 117 00:07:06,660 --> 00:07:11,939 Geoff Wilson: unfortunately they put in place in early 2000. And Sean 118 00:07:11,940 --> 00:07:13,890 Geoff Wilson: you probably think, " Oh look, at least we're having a 119 00:07:13,890 --> 00:07:19,860 Geoff Wilson: good podcast. And Geoff hasn't talked about franking and franking credits." 120 00:07:19,950 --> 00:07:22,230 Sean Aylmer: Oh, well you almost made it. We almost made it. 121 00:07:22,530 --> 00:07:25,950 Geoff Wilson: True. But unfortunately in the UK, they had a similar 122 00:07:25,950 --> 00:07:29,009 Geoff Wilson: system to that called the Advanced Corporation Tax, and they 123 00:07:29,010 --> 00:07:31,440 Geoff Wilson: had it in for 26 years and they got rid of it 124 00:07:31,440 --> 00:07:35,160 Geoff Wilson: just before 2000. And you know how when you have 125 00:07:35,160 --> 00:07:38,070 Geoff Wilson: those type of systems, like we have the franking system, 126 00:07:38,070 --> 00:07:43,080 Geoff Wilson: it encourages the local investor to invest in your own 127 00:07:43,259 --> 00:07:46,859 Geoff Wilson: companies. And that's what we see in Australia and they 128 00:07:46,859 --> 00:07:49,470 Geoff Wilson: had that in the UK. And I think back around 129 00:07:49,470 --> 00:07:55,620 Geoff Wilson: 2000, UK pension funds owned something like 40% on average 130 00:07:55,620 --> 00:07:58,440 Geoff Wilson: of all listed companies in the UK, and they took 131 00:07:58,440 --> 00:08:03,360 Geoff Wilson: that system away unfortunately. When the incentive to invest in 132 00:08:03,360 --> 00:08:07,830 Geoff Wilson: the UK companies went, then they went offshore, and now 133 00:08:07,830 --> 00:08:11,550 Geoff Wilson: I think UK pension funds, their exposure to UK stocks 134 00:08:11,550 --> 00:08:12,330 Geoff Wilson: is something like 4%. 135 00:08:13,290 --> 00:08:13,800 Sean Aylmer: Oh, wow. 136 00:08:13,860 --> 00:08:17,309 Geoff Wilson: So there's been a big outflow of capital. Now the 137 00:08:17,309 --> 00:08:22,410 Geoff Wilson: good thing is that outflow is finished. I mean, the 138 00:08:22,410 --> 00:08:27,420 Geoff Wilson: UK government's looking at legislating to force UK super and 139 00:08:27,420 --> 00:08:30,870 Geoff Wilson: pension funds to invest in UK companies. I'll be over 140 00:08:30,870 --> 00:08:33,300 Geoff Wilson: there in a couple of months time, so I'll be 141 00:08:33,300 --> 00:08:34,740 Geoff Wilson: able to do a podcast from there and give you 142 00:08:34,740 --> 00:08:36,360 Geoff Wilson: the full rundown. 143 00:08:36,360 --> 00:08:36,600 Sean Aylmer: Excellent. 144 00:08:37,110 --> 00:08:40,140 Geoff Wilson: But yeah, so to me there is some value there, 145 00:08:40,379 --> 00:08:45,179 Geoff Wilson: but we still think why we're more inclined on the US is this is the 146 00:08:45,179 --> 00:08:50,189 Geoff Wilson: presidential election year and a lot of money's being pumped 147 00:08:50,190 --> 00:08:53,789 Geoff Wilson: into the system, whether it's through infrastructure, obviously the incumbent 148 00:08:53,790 --> 00:08:56,490 Geoff Wilson: wants to be reelected, Biden to be re- elected. So 149 00:08:56,490 --> 00:09:01,230 Geoff Wilson: everything he can do in terms of putting the US 150 00:09:01,260 --> 00:09:04,860 Geoff Wilson: economy on the strongest footing possible, and then you tend 151 00:09:04,860 --> 00:09:08,400 Geoff Wilson: to find next year, to me, I think we're pretty 152 00:09:08,400 --> 00:09:11,339 Geoff Wilson: good for this 12 months, but then next year things 153 00:09:11,340 --> 00:09:13,650 Geoff Wilson: will be a bit more challenging. So no matter who 154 00:09:13,650 --> 00:09:16,858 Geoff Wilson: wins the first year of a presidential election in the 155 00:09:16,859 --> 00:09:20,040 Geoff Wilson: US tends to be a more challenging one for equity markets. 156 00:09:21,030 --> 00:09:23,400 Sean Aylmer: One final question, Geoff, and it kind of comes down 157 00:09:23,400 --> 00:09:25,650 Sean Aylmer: to the franking question. If I'm sitting here in Australia 158 00:09:25,650 --> 00:09:28,828 Sean Aylmer: and I'm investing in one of your funds, I get 159 00:09:28,830 --> 00:09:32,458 Sean Aylmer: the benefit of franking credits if I'm investing in the 160 00:09:32,460 --> 00:09:35,100 Sean Aylmer: local equities like the small and mid- cap equities fund. 161 00:09:35,369 --> 00:09:38,640 Sean Aylmer: How's it work if I'm going into Wilson Asset Management 162 00:09:38,640 --> 00:09:42,750 Sean Aylmer: global, I'm not getting the benefit of the franking credits, so 163 00:09:42,840 --> 00:09:46,050 Sean Aylmer: presumably the returns in that I want, the capital returns 164 00:09:46,050 --> 00:09:49,170 Sean Aylmer: to be higher than what I'd expect locally, or is 165 00:09:49,170 --> 00:09:51,180 Sean Aylmer: that a bit of an ignorant question? I'm not sure. 166 00:09:51,570 --> 00:09:53,549 Geoff Wilson: I mean, that's a fair comment, but in the end, 167 00:09:54,059 --> 00:09:55,980 Geoff Wilson: well, I suppose it depends who you are as an 168 00:09:55,980 --> 00:10:00,240 Geoff Wilson: investor. Because if you happen to be, well, more my 169 00:10:00,240 --> 00:10:04,080 Geoff Wilson: age, maybe not your age, Sean, and you're in the 170 00:10:04,080 --> 00:10:06,509 Geoff Wilson: pension phase with your super fund, then you get the 171 00:10:06,509 --> 00:10:10,738 Geoff Wilson: benefit of using the franking credits. If you're younger, then 172 00:10:10,740 --> 00:10:13,800 Geoff Wilson: you actually want the capital growth. And obviously we know, 173 00:10:14,040 --> 00:10:16,828 Geoff Wilson: how do you get the franking credits when company pays 174 00:10:16,830 --> 00:10:19,588 Geoff Wilson: fully franked dividends, you get the franking credits, but also 175 00:10:19,590 --> 00:10:23,879 Geoff Wilson: when the company pays tax. Now WHAMglobal is domiciled in 176 00:10:23,880 --> 00:10:27,420 Geoff Wilson: Australia, so even though we invest globally, any profit we 177 00:10:27,420 --> 00:10:31,800 Geoff Wilson: make, we pay tax in Australia. Yeah, but you don't 178 00:10:31,800 --> 00:10:34,978 Geoff Wilson: get the free benefit of getting fully franked dividends as well. 179 00:10:35,070 --> 00:10:38,400 Sean Aylmer: Yep, yep, yep. Okay. Geoff, I hope you're enjoying ... Well, 180 00:10:38,400 --> 00:10:39,809 Sean Aylmer: enjoy the rest of your ... So how long are you 181 00:10:39,809 --> 00:10:40,770 Sean Aylmer: in New York for? 182 00:10:40,980 --> 00:10:44,100 Geoff Wilson: Yeah, for another couple of weeks. Yeah, seen some fascinating 183 00:10:44,580 --> 00:10:48,239 Geoff Wilson: people over here. Bill Ackman, one of probably the smartest 184 00:10:48,240 --> 00:10:51,328 Geoff Wilson: hedge fund players and talking about the listed investment company 185 00:10:51,330 --> 00:10:54,990 Geoff Wilson: space. He has a big listed investment company or closed- 186 00:10:54,990 --> 00:10:58,080 Geoff Wilson: end fund, and he's going to do another significantly bigger 187 00:10:58,080 --> 00:11:01,080 Geoff Wilson: one. He's a big bull of the space, which I 188 00:11:01,080 --> 00:11:05,939 Geoff Wilson: was very positive. And saw an activist, Boaz Weinstein, who's 189 00:11:05,969 --> 00:11:09,210 Geoff Wilson: from Saba, who's putting a lot of pressure on closed- 190 00:11:09,210 --> 00:11:11,939 Geoff Wilson: end funds globally and in the US and in Australia. 191 00:11:11,940 --> 00:11:15,089 Geoff Wilson: So we can cover off on those at another point 192 00:11:15,090 --> 00:11:15,600 Geoff Wilson: in time. 193 00:11:16,020 --> 00:11:18,240 Sean Aylmer: We will. Geoff, thank you for talking to Fear & Greed. 194 00:11:18,719 --> 00:11:19,350 Geoff Wilson: Thanks, Sean. 195 00:11:19,740 --> 00:11:22,319 Sean Aylmer: That was Geoff Wilson, Chairman and Chief Investment Officer of 196 00:11:22,320 --> 00:11:25,650 Sean Aylmer: Wilson Asset Management. This is the Fear & Greed Business Interview. 197 00:11:25,650 --> 00:11:28,650 Sean Aylmer: Remember, this is general information only and you should always 198 00:11:28,650 --> 00:11:32,580 Sean Aylmer: seek professional advice before making investment decisions. Join us every 199 00:11:32,580 --> 00:11:35,340 Sean Aylmer: morning for the full episode of Fear & Greed, Australia's best 200 00:11:35,340 --> 00:11:38,249 Sean Aylmer: business podcast. I'm Sean Aylmer. Enjoy your day.