1 00:00:03,460 --> 00:00:06,370 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:06,680 --> 00:00:10,249 Sean Aylmer: I spoke recently about Aware Super forcing companies to act on 3 00:00:10,250 --> 00:00:15,000 Sean Aylmer: climate change or risk losing investments from Australia's second largest Superfund. 4 00:00:15,380 --> 00:00:18,229 Sean Aylmer: It's the latest example of major investors putting companies on 5 00:00:18,259 --> 00:00:21,939 Sean Aylmer: notice about a lack of climate action. Aware Super has 6 00:00:21,939 --> 00:00:25,060 Sean Aylmer: publicly stated they'd prefer to engage with companies from within 7 00:00:25,230 --> 00:00:28,160 Sean Aylmer: and push for change but are now willing to divest 8 00:00:28,240 --> 00:00:31,519 Sean Aylmer: if there's no response. And with $150 billion of funds 9 00:00:31,520 --> 00:00:35,229 Sean Aylmer: under management, Aware Super has some weight behind it. Damian 10 00:00:35,229 --> 00:00:38,769 Sean Aylmer: Graham is the Chief Investment Officer at Aware Super. Damian, welcome 11 00:00:38,769 --> 00:00:39,240 Sean Aylmer: to Fear and Greed. 12 00:00:39,710 --> 00:00:40,670 Damian Graham: Thanks for having us. 13 00:00:41,269 --> 00:00:42,109 Sean Aylmer: Are company's listening? 14 00:00:42,659 --> 00:00:44,720 Damian Graham: Yeah, look, I think they are. And what I think 15 00:00:44,720 --> 00:00:47,600 Damian Graham: is critically important too, is that we believe companies are 16 00:00:48,030 --> 00:00:50,900 Damian Graham: in the main, very, very focused on ensuring that their 17 00:00:50,900 --> 00:00:53,920 Damian Graham: businesses are robust for the future. And so really thinking 18 00:00:53,920 --> 00:00:56,730 Damian Graham: about how they can manage climate risk as well. So we 19 00:00:56,730 --> 00:00:59,529 Damian Graham: see that very strongly when we're engaging with companies. And 20 00:00:59,529 --> 00:01:02,500 Damian Graham: as you noted, we have taken the decision to divest 21 00:01:02,500 --> 00:01:05,630 Damian Graham: from thermal coal producers, but that's not something we do 22 00:01:05,630 --> 00:01:08,139 Damian Graham: lightly and it's very much from an investment perspective. 23 00:01:08,480 --> 00:01:11,690 Sean Aylmer: It's been really interesting that the recent earning season, there 24 00:01:11,690 --> 00:01:16,900 Sean Aylmer: was so much talk about the environment, ESG (Environmental Social Governance), but climate change, particularly. 25 00:01:17,259 --> 00:01:20,669 Sean Aylmer: There's been a Governance Institute forum on in the last few days. 26 00:01:21,000 --> 00:01:23,979 Sean Aylmer: And there's been a lot on that about ESG. It's 27 00:01:23,979 --> 00:01:27,319 Sean Aylmer: obviously very top of mind, whether you're BHP and you 28 00:01:27,319 --> 00:01:30,190 Sean Aylmer: decide to merge your oil and gas assets with Woodside 29 00:01:30,479 --> 00:01:34,990 Sean Aylmer: or a retailer or a bank, it seems very relevant now. 30 00:01:35,350 --> 00:01:38,050 Damian Graham: I think it's become incredibly front of mind for so 31 00:01:38,050 --> 00:01:41,649 Damian Graham: many companies. And if you think about the investment landscape and 32 00:01:41,649 --> 00:01:45,130 Damian Graham: also just the economy more broadly, I think companies are 33 00:01:45,130 --> 00:01:48,660 Damian Graham: very much saying we do need to support the transition 34 00:01:48,660 --> 00:01:51,919 Damian Graham: to a lower carbon future. And that is the expectation 35 00:01:51,920 --> 00:01:55,500 Damian Graham: of investors and becoming much more widespread in expectations, and 36 00:01:55,500 --> 00:01:59,249 Damian Graham: even with regulators. So the regulator that oversights our fund, APRA (Australian Prudential Regulation Authority), 37 00:01:59,620 --> 00:02:02,540 Damian Graham: has certainly guided that trustees need to very much consider 38 00:02:02,540 --> 00:02:05,790 Damian Graham: the climate change risk when they're considering the long-term future 39 00:02:05,840 --> 00:02:06,021 Damian Graham: for their retirees. 40 00:02:06,021 --> 00:02:10,670 Sean Aylmer: And so it's a financial decision as much as an environmental decision? 41 00:02:11,120 --> 00:02:15,250 Damian Graham: Oh, it's absolutely financial. So we have a financial interest 42 00:02:15,250 --> 00:02:17,500 Damian Graham: duty to bear for our members. And so when we're 43 00:02:17,500 --> 00:02:20,180 Damian Graham: thinking around climate risk, we very much bring the lens 44 00:02:20,180 --> 00:02:23,870 Damian Graham: of how do we make sure that we are positioned properly 45 00:02:23,870 --> 00:02:26,739 Damian Graham: from the long-term investment outcome, and we can maximise the 46 00:02:27,730 --> 00:02:31,120 Damian Graham: risk-return outcome for members. So if you think about divesting from 47 00:02:31,120 --> 00:02:33,990 Damian Graham: thermal coal, for instance, as I mentioned earlier, that's done 48 00:02:34,060 --> 00:02:36,550 Damian Graham: to try to reduce the risk of stranded asset risk 49 00:02:36,609 --> 00:02:39,880 Damian Graham: in the portfolio from thermal coal, not being utilised in 50 00:02:39,880 --> 00:02:40,960 Damian Graham: future the way it is today. 51 00:02:41,540 --> 00:02:43,980 Sean Aylmer: I like that idea of moving away from stranded assets, 52 00:02:43,980 --> 00:02:46,660 Sean Aylmer: but thermal coal, and then sort of further up the 53 00:02:46,660 --> 00:02:48,660 Sean Aylmer: spectrum, not quite as dirty, but some of those oil 54 00:02:48,660 --> 00:02:51,410 Sean Aylmer: and gas assets, there must be a price that they're 55 00:02:51,410 --> 00:02:53,519 Sean Aylmer: worth buying in because we still need to turn the 56 00:02:53,519 --> 00:02:55,209 Sean Aylmer: lights on at the end of the day. And you 57 00:02:55,209 --> 00:02:56,940 Sean Aylmer: know, we can't rely on renewables yet. 58 00:02:57,340 --> 00:03:00,890 Damian Graham: No, and I think that's right. If you think about our broader 59 00:03:00,959 --> 00:03:03,709 Damian Graham: transition plan. So the board signed off on a refreshed 60 00:03:03,829 --> 00:03:07,209 Damian Graham: portfolio transition plan to help us to manage the climate 61 00:03:07,209 --> 00:03:09,450 Damian Graham: change risk. And they did that a little bit more 62 00:03:09,450 --> 00:03:11,909 Damian Graham: than 12 months ago. We've got the goal that we 63 00:03:11,910 --> 00:03:16,850 Damian Graham: reduce our carbon emissions footprint in the portfolio by about 45% 64 00:03:17,049 --> 00:03:20,720 Damian Graham: by 2030. So to your point, we don't think that 65 00:03:20,720 --> 00:03:24,109 Damian Graham: people are going to stop using fossil fuels to generate electricity and 66 00:03:24,109 --> 00:03:26,859 Damian Graham: other power tomorrow. But we do think if we're going 67 00:03:26,859 --> 00:03:30,219 Damian Graham: to get to that 45% reduction by 2030, we need 68 00:03:30,220 --> 00:03:33,720 Damian Graham: to continue to reduce our emissions and support the economy 69 00:03:33,720 --> 00:03:36,550 Damian Graham: to reduce the emissions more broadly. So that's what's driving 70 00:03:36,750 --> 00:03:39,910 Damian Graham: our focus on ensuring we're not adding to our overarching 71 00:03:39,910 --> 00:03:41,170 Damian Graham: fossil fuel exposure. 72 00:03:41,770 --> 00:03:47,719 Sean Aylmer: You mentioned APRA, the Australian Prudential Regulation Authority, leaning on Superfunds to do 73 00:03:47,720 --> 00:03:50,640 Sean Aylmer: something about it. From the other side, your members, what 74 00:03:50,640 --> 00:03:51,220 Sean Aylmer: do they think? 75 00:03:51,840 --> 00:03:54,660 Damian Graham: Yeah, it's a really key point. I mean, if you 76 00:03:54,660 --> 00:03:57,700 Damian Graham: think about our purpose as an organisation, we're here to 77 00:03:57,700 --> 00:04:00,390 Damian Graham: deliver strong returns to our members, but we also want 78 00:04:00,390 --> 00:04:01,890 Damian Graham: to be able to do that in a way that they can 79 00:04:01,890 --> 00:04:05,100 Damian Graham: be proud of and then we can support a better community outcome. 80 00:04:05,430 --> 00:04:08,480 Damian Graham: When we get feedback from our members on investment related issues, though, 81 00:04:08,480 --> 00:04:11,530 Damian Graham: there is a strong component of that feedback that does talk 82 00:04:11,530 --> 00:04:14,510 Damian Graham: to climate action. So that is certainly the number one 83 00:04:14,589 --> 00:04:17,719 Damian Graham: investment related issue that we hear from members about how 84 00:04:17,719 --> 00:04:19,460 Damian Graham: we're managing climate risk on their behalves. 85 00:04:20,330 --> 00:04:23,409 Sean Aylmer: So moving away from the environment and climate risk, the 86 00:04:23,409 --> 00:04:26,229 Sean Aylmer: Super guarantee raise this year to 10% from nine and 87 00:04:26,229 --> 00:04:28,489 Sean Aylmer: a half per cent, and it will continue to rise over the next 88 00:04:28,490 --> 00:04:30,760 Sean Aylmer: couple of years. Now that means a lot of additional 89 00:04:30,760 --> 00:04:34,460 Sean Aylmer: money being invested in Super. Does that mean anything for 90 00:04:34,460 --> 00:04:39,010 Sean Aylmer: Aware Super's strategy, how it thinks about its investments, how 91 00:04:39,010 --> 00:04:40,750 Sean Aylmer: it goes ahead in the next couple of years, because 92 00:04:40,750 --> 00:04:42,140 Sean Aylmer: more money will come through the door? 93 00:04:42,690 --> 00:04:45,140 Damian Graham: Yeah, we are certainly expecting to continue to grow as 94 00:04:45,140 --> 00:04:47,950 Damian Graham: a fund. So, as you mentioned, we've tipped up a 95 00:04:47,950 --> 00:04:51,130 Damian Graham: little bit more than $150 billion, and we do have 96 00:04:51,130 --> 00:04:53,950 Damian Graham: an aspirational target that that will become more than $250 97 00:04:53,950 --> 00:04:57,039 Damian Graham: billion in the not too distant future and we're not 98 00:04:57,039 --> 00:04:58,539 Damian Graham: going to be alone. So I think the system is 99 00:04:58,539 --> 00:05:00,770 Damian Graham: growing and we need to be positioned to be able 100 00:05:00,770 --> 00:05:04,880 Damian Graham: to invest additional amounts of money. And when we think 101 00:05:04,880 --> 00:05:06,830 Damian Graham: about that, we try to look at that from a 102 00:05:06,830 --> 00:05:10,929 Damian Graham: longer-term perspective and identify themes that we think are really attractive, 103 00:05:11,260 --> 00:05:15,150 Damian Graham: tailwinds that can really support strong long-term returns. So we, 104 00:05:15,450 --> 00:05:18,609 Damian Graham: with regard to our investment strategy, are very much focused 105 00:05:18,610 --> 00:05:21,960 Damian Graham: on how do we continue to invest, deliver strong returns 106 00:05:22,370 --> 00:05:25,049 Damian Graham: at lower cost to our members, but do that at 107 00:05:25,050 --> 00:05:28,539 Damian Graham: an increasing size and our portfolio themes look to try 108 00:05:28,539 --> 00:05:32,430 Damian Graham: to position us to areas of the investment markets that 109 00:05:32,430 --> 00:05:35,120 Damian Graham: we feel give us those attractive opportunities. 110 00:05:35,419 --> 00:05:38,549 Sean Aylmer: Okay. Along those lines, and you mentioned tailwinds, a lot 111 00:05:38,550 --> 00:05:42,069 Sean Aylmer: of Superfunds you talked to talk about tailwinds and there seems to be lots 112 00:05:42,070 --> 00:05:45,339 Sean Aylmer: of tailwinds in infrastructure. The thing that I wonder about 113 00:05:45,609 --> 00:05:49,370 Sean Aylmer: because from Sydney Airport down there are offers and investments 114 00:05:49,419 --> 00:05:53,859 Sean Aylmer: in infrastructure assets. How can we assure that Superfunds who 115 00:05:53,859 --> 00:05:56,700 Sean Aylmer: are cashed up aren't overpaying for those assets? 116 00:05:57,070 --> 00:06:00,210 Damian Graham: Yeah, I think discipline is incredibly important. So if you 117 00:06:00,210 --> 00:06:03,580 Damian Graham: think about something that Aware Super's done probably over the last 118 00:06:03,680 --> 00:06:06,510 Damian Graham: six or seven years now, is that we were a little bit 119 00:06:06,510 --> 00:06:09,300 Damian Graham: later to invest in infrastructure than some of the other 120 00:06:09,300 --> 00:06:12,589 Damian Graham: funds in Australia. But over that last six or seven years, 121 00:06:12,650 --> 00:06:16,310 Damian Graham: we've looked to ensure that we approach investing in infrastructure 122 00:06:16,310 --> 00:06:18,539 Damian Graham: in a way that tries to reduce the risk that 123 00:06:18,539 --> 00:06:21,479 Damian Graham: we do overpay for what we feel are more developed 124 00:06:21,479 --> 00:06:24,820 Damian Graham: or core assets. So typically the airports or the ports, 125 00:06:24,820 --> 00:06:27,409 Damian Graham: et cetera, and we've looked at different areas that we 126 00:06:27,409 --> 00:06:30,610 Damian Graham: feel offer very similar sort of return opportunities and similar 127 00:06:30,930 --> 00:06:34,140 Damian Graham: revenue opportunities that we can invest in that may be 128 00:06:34,140 --> 00:06:37,359 Damian Graham: a little bit more attractively priced and have different characteristics 129 00:06:37,359 --> 00:06:39,680 Damian Graham: to them. So a great example of that is that 130 00:06:39,700 --> 00:06:42,359 Damian Graham: we undertook some research probably about four or five years 131 00:06:42,359 --> 00:06:46,210 Damian Graham: ago now and felt that the registries businesses around Australia 132 00:06:46,270 --> 00:06:49,529 Damian Graham: and globally had a lot of monopoly style characteristics that 133 00:06:49,529 --> 00:06:52,659 Damian Graham: infrastructure has as well. So we started to invest in 134 00:06:52,659 --> 00:06:55,909 Damian Graham: registries and we invested in the land titles registry in 135 00:06:55,909 --> 00:06:59,349 Damian Graham: New South Wales and also bought the same concession in Victoria. 136 00:06:59,659 --> 00:07:01,809 Damian Graham: And we felt that was a really strong opportunity that 137 00:07:01,900 --> 00:07:04,909 Damian Graham: had a lot of the characteristics of other infrastructure, but 138 00:07:04,909 --> 00:07:08,460 Damian Graham: it was much more competitively and attractively priced. And I 139 00:07:08,460 --> 00:07:11,630 Damian Graham: do think also that the additional weight of money that's 140 00:07:11,630 --> 00:07:15,970 Damian Graham: going into infrastructure in Australia probably suggests that we'll invest 141 00:07:16,020 --> 00:07:18,640 Damian Graham: overseas in infrastructure more than we were going to with 142 00:07:18,640 --> 00:07:20,100 Damian Graham: that growth driving that dynamic. 143 00:07:20,380 --> 00:07:22,489 Sean Aylmer: Okay. Stay with me Damian and we'll be back in 144 00:07:22,489 --> 00:07:22,739 Sean Aylmer: a minute. 145 00:07:27,910 --> 00:07:30,920 Sean Aylmer: My guest this morning is Damian Graham, Chief Investment Officer 146 00:07:30,920 --> 00:07:34,220 Sean Aylmer: at Aware Super. It's been reported in recent days that 147 00:07:34,220 --> 00:07:37,759 Sean Aylmer: Aware Super is going to offload agricultural assets in Victoria. 148 00:07:38,030 --> 00:07:39,710 Sean Aylmer: And they were estimated at least in the media to 149 00:07:39,710 --> 00:07:43,540 Sean Aylmer: be worth about $150 million. Is that just an area 150 00:07:43,540 --> 00:07:46,309 Sean Aylmer: where the price is good so you get out? Is 151 00:07:46,310 --> 00:07:47,940 Sean Aylmer: it an area you don't like as much? I'm just 152 00:07:47,940 --> 00:07:49,280 Sean Aylmer: interested in your thinking around that. 153 00:07:49,560 --> 00:07:52,970 Damian Graham: Yeah, I think we do have some agricultural assets more broadly, 154 00:07:52,970 --> 00:07:55,600 Damian Graham: so not just the farming assets that we're looking to 155 00:07:55,770 --> 00:07:58,059 Damian Graham: bring to market in Victoria, but we do think it's 156 00:07:58,060 --> 00:08:00,710 Damian Graham: a good time for us to provide that opportunity to 157 00:08:00,710 --> 00:08:03,670 Damian Graham: another owner. And it's not a huge investment for us. 158 00:08:03,770 --> 00:08:06,300 Damian Graham: And so as we grow, we're certainly looking to reshape 159 00:08:06,300 --> 00:08:09,330 Damian Graham: our portfolio always to make sure we've got the right 160 00:08:09,520 --> 00:08:12,749 Damian Graham: blend of assets and that each individual asset is the right 161 00:08:12,750 --> 00:08:15,330 Damian Graham: size for us as we grow larger. So it's probably 162 00:08:15,330 --> 00:08:17,460 Damian Graham: the right time. I think it's a good time for us 163 00:08:17,460 --> 00:08:20,209 Damian Graham: to bring that asset to market. It's done well, it's 164 00:08:20,210 --> 00:08:23,420 Damian Graham: performed well. We've been developing it into a very organically 165 00:08:23,420 --> 00:08:26,590 Damian Graham: friendly style of farming approach. And we think it's a great time for 166 00:08:26,590 --> 00:08:27,510 Damian Graham: us to bring that to market. 167 00:08:27,820 --> 00:08:30,239 Sean Aylmer: Damian, you know I'm going to ask about cryptocurrency, don't you? 168 00:08:30,239 --> 00:08:33,010 Damian Graham: It's a very hot topic. 169 00:08:33,150 --> 00:08:35,260 Sean Aylmer: It's very hot topic. We have a debate within Fear 170 00:08:35,260 --> 00:08:37,599 Sean Aylmer: and Greed, and I honestly don't see the intrinsic value 171 00:08:37,600 --> 00:08:40,630 Sean Aylmer: of it and some of my colleagues do. So what's your 172 00:08:40,630 --> 00:08:43,579 Sean Aylmer: view on Bitcoin and crypto as generally forming part of 173 00:08:43,579 --> 00:08:44,530 Sean Aylmer: an investment strategy? 174 00:08:45,069 --> 00:08:47,949 Damian Graham: Yeah, I'd start by saying that we've probably had very 175 00:08:47,949 --> 00:08:51,650 Damian Graham: similar conversations in our investment team and different forum internally. 176 00:08:52,340 --> 00:08:54,650 Sean Aylmer: Yours are probably just a bit more sophisticated than ours 177 00:08:54,870 --> 00:08:55,700 Sean Aylmer: I'd just like to say. 178 00:08:55,920 --> 00:08:59,350 Damian Graham: Well, I think your point's very valid though, that when 179 00:08:59,350 --> 00:09:03,520 Damian Graham: I look at cryptocurrencies and Bitcoins probably not the best example 180 00:09:03,900 --> 00:09:06,760 Damian Graham: of a fully functioning cryptocurrency, but it's obviously the one 181 00:09:06,760 --> 00:09:10,410 Damian Graham: that's most well known. I can see that some rationale 182 00:09:10,410 --> 00:09:13,990 Damian Graham: for why an effective cryptocurrency could be very useful in 183 00:09:13,990 --> 00:09:16,750 Damian Graham: future and why some people want to invest in it. 184 00:09:17,230 --> 00:09:19,530 Damian Graham: I guess the thing that I've struggled with most since 185 00:09:19,530 --> 00:09:22,209 Damian Graham: I've thought about cryptocurrencies is it's very hard to form 186 00:09:22,209 --> 00:09:24,270 Damian Graham: a view of what they should be worth. And then it 187 00:09:24,270 --> 00:09:26,699 Damian Graham: goes to that intrinsic value that you mentioned before. So I've 188 00:09:27,319 --> 00:09:30,929 Damian Graham: certainly formed a similar view to date. We continue to 189 00:09:30,929 --> 00:09:34,589 Damian Graham: look at all investments and cryptocurrencies no different, but to 190 00:09:34,589 --> 00:09:37,229 Damian Graham: date we haven't been able to define a value that 191 00:09:37,230 --> 00:09:40,130 Damian Graham: we would put on a particular cryptocurrency, Bitcoin, a good example. 192 00:09:40,270 --> 00:09:42,400 Damian Graham: And so we felt that they're too speculative for our 193 00:09:42,400 --> 00:09:45,869 Damian Graham: members. And so we haven't included them in our investment strategy. 194 00:09:46,189 --> 00:09:47,189 Sean Aylmer: Do people always ask you about crypto's? 195 00:09:48,160 --> 00:09:51,250 Damian Graham: It's a pretty common question. It's very high profile clearly, 196 00:09:51,709 --> 00:09:54,189 Damian Graham: but I do think it's a great example of innovation. 197 00:09:54,730 --> 00:09:57,829 Damian Graham: And we seek out in our portfolio to continue to 198 00:09:57,829 --> 00:10:02,079 Damian Graham: find innovative ways, innovative companies or investments that can drive 199 00:10:02,079 --> 00:10:05,370 Damian Graham: long-term value because investing really is just about how do 200 00:10:05,370 --> 00:10:09,360 Damian Graham: you get access to strong long-term growing revenue streams. And by owning those, 201 00:10:10,050 --> 00:10:13,290 Damian Graham: you can create value for members through time. So innovation 202 00:10:13,410 --> 00:10:16,500 Damian Graham: is important and Bitcoin's a great example of an amazing innovation 203 00:10:16,500 --> 00:10:18,340 Damian Graham: that could have very long standing impact. 204 00:10:18,699 --> 00:10:20,309 Sean Aylmer: Another thing that's been in the news in the last 205 00:10:20,309 --> 00:10:23,559 Sean Aylmer: week or so comes from APRA and its annual performance 206 00:10:23,610 --> 00:10:26,689 Sean Aylmer: of Superfunds, testing of Superfunds, and APRA in the last couple of years has 207 00:10:26,689 --> 00:10:30,589 Sean Aylmer: very much pushed transparency among Superfunds and heat maps and 208 00:10:30,589 --> 00:10:31,870 Sean Aylmer: rankings and all sorts of things. 209 00:10:31,870 --> 00:10:32,509 Damian Graham: It's true, yeah. 210 00:10:32,550 --> 00:10:34,010 Sean Aylmer: Now, it came out and it sort of said there 211 00:10:34,010 --> 00:10:37,309 Sean Aylmer: were 13 funds, not Aware Super, I hasten to add, 212 00:10:37,910 --> 00:10:40,010 Sean Aylmer: who failed the test. It's part of the governance of 213 00:10:40,010 --> 00:10:42,449 Sean Aylmer: Your Future, Your Super reforms. Do you actually think it 214 00:10:42,449 --> 00:10:44,350 Sean Aylmer: will make a difference to fund performance? 215 00:10:45,010 --> 00:10:46,920 Damian Graham: Look, I think it will. And the old saying of 216 00:10:46,920 --> 00:10:51,079 Damian Graham: what gets measured gets managed. I do think that it will drive some 217 00:10:51,079 --> 00:10:54,449 Damian Graham: consolidation in the industry. I think we've been long advocates 218 00:10:54,449 --> 00:10:57,510 Damian Graham: of the view that it's useful to look at performance 219 00:10:57,510 --> 00:11:00,380 Damian Graham: of funds and ensure that people are in strong funds 220 00:11:00,380 --> 00:11:03,300 Damian Graham: and that will be their best opportunity to have a good 221 00:11:03,300 --> 00:11:05,859 Damian Graham: retirement outcome if they're in a well performing fund for a 222 00:11:05,860 --> 00:11:08,699 Damian Graham: long period of time. So we do think that's important. 223 00:11:08,760 --> 00:11:12,949 Damian Graham: We think that going through a process and whilst the performance tests 224 00:11:12,949 --> 00:11:14,879 Damian Graham: and the performance measurements that APRA has come out with 225 00:11:14,880 --> 00:11:17,410 Damian Graham: aren't perfect, we think that in the scheme of things, 226 00:11:17,490 --> 00:11:20,349 Damian Graham: they're a valuable approach to try to get the industry 227 00:11:20,350 --> 00:11:21,699 Damian Graham: operating as best as possible. 228 00:11:22,209 --> 00:11:24,679 Sean Aylmer: It's been a pretty remarkable 18 months and your Chief Investment 229 00:11:24,679 --> 00:11:28,770 Sean Aylmer: Officer of the second largest Superfund. That's a lot of responsibility. 230 00:11:28,969 --> 00:11:31,770 Sean Aylmer: So I can't let you go without asking what the 231 00:11:31,770 --> 00:11:33,209 Sean Aylmer: outlook for the next 12 months is? 232 00:11:34,000 --> 00:11:36,319 Damian Graham: Yeah, it's a great question. And again, it's probably a 233 00:11:36,319 --> 00:11:38,370 Damian Graham: little bit like the Bitcoin question. It's one that I 234 00:11:38,370 --> 00:11:40,839 Damian Graham: get asked quite a lot. I've been of the view 235 00:11:40,839 --> 00:11:44,740 Damian Graham: that we've had some really strong conditions that were likely to 236 00:11:44,740 --> 00:11:48,040 Damian Graham: support growth assets like equities, certainly coming out of the 237 00:11:48,100 --> 00:11:51,469 Damian Graham: COVID crisis, where we saw the potential for a strong 238 00:11:51,469 --> 00:11:55,809 Damian Graham: rebound in economics and very strongly supportive policy stance. So 239 00:11:55,829 --> 00:11:58,579 Damian Graham: whether it's very low interest rates or whether it's very, 240 00:11:58,579 --> 00:12:02,490 Damian Graham: very stimulatory central bank policy. And my view is that 241 00:12:02,490 --> 00:12:05,589 Damian Graham: they're likely to continue. So we're likely to see ultra 242 00:12:05,589 --> 00:12:09,400 Damian Graham: low interest rates for some time. We're likely to see stimulatory, 243 00:12:09,400 --> 00:12:13,660 Damian Graham: supportive economic policy, but probably not quite as stimulatory and 244 00:12:13,660 --> 00:12:16,469 Damian Graham: supportive as it has been. So rate of change is 245 00:12:16,469 --> 00:12:18,880 Damian Graham: always important to markets. And I think there may be some 246 00:12:18,880 --> 00:12:20,749 Damian Graham: change in the next 12 months just to some of 247 00:12:20,750 --> 00:12:22,929 Damian Graham: the stance. And we heard commentary out of the US 248 00:12:22,929 --> 00:12:26,809 Damian Graham: Federal Reserve, just the likelihood that they may reduce their buying of 249 00:12:26,809 --> 00:12:29,900 Damian Graham: bonds for instance, in the medium term. So I think that will 250 00:12:29,900 --> 00:12:33,150 Damian Graham: change a little bit. We've also seen incredibly strong recovery 251 00:12:33,150 --> 00:12:35,709 Damian Graham: in earnings for companies. And when you look at the 252 00:12:35,709 --> 00:12:38,880 Damian Graham: last 12 months, they've been incredibly strong, really coming off 253 00:12:38,880 --> 00:12:42,709 Damian Graham: that very significant fall that happened early last year, and 254 00:12:42,709 --> 00:12:45,540 Damian Graham: it's not likely we'll continue to see that type of 255 00:12:45,540 --> 00:12:48,679 Damian Graham: earnings growth. So when I think about the 12 months ahead, 256 00:12:49,020 --> 00:12:51,510 Damian Graham: some of the conditions for strong market returns are there, 257 00:12:51,510 --> 00:12:53,670 Damian Graham: but I think there's a little bit of a weakening in 258 00:12:53,670 --> 00:12:57,959 Damian Graham: some other facets, and that's more likely to see average returns 259 00:12:57,959 --> 00:12:59,859 Damian Graham: rather than the stellar returns we've seen in the last 260 00:12:59,860 --> 00:13:03,360 Damian Graham: 12 months. So my best estimate, and again, I call 261 00:13:03,360 --> 00:13:07,809 Damian Graham: it that because forecasting short-term market returns is always very difficult, 262 00:13:08,240 --> 00:13:11,290 Damian Graham: but my best estimate is that we'll see more average 263 00:13:11,290 --> 00:13:14,119 Damian Graham: returns somewhere in the sort of high single digit returns 264 00:13:14,120 --> 00:13:16,670 Damian Graham: for markets. And that would be a good outcome after 265 00:13:16,670 --> 00:13:19,379 Damian Graham: a year that we've seen stellar returns. So members I 266 00:13:19,380 --> 00:13:21,699 Damian Graham: expect to get more like the targeted returns we have 267 00:13:21,699 --> 00:13:22,530 Damian Graham: for our options. 268 00:13:22,790 --> 00:13:25,439 Sean Aylmer: Okay. And just finally, I spoke to Alexander Hassell recently 269 00:13:25,439 --> 00:13:28,849 Sean Aylmer: from Your Financial Wellness about research showing women are reporting 270 00:13:28,849 --> 00:13:31,540 Sean Aylmer: higher levels of financial stress and retiring with about half 271 00:13:31,540 --> 00:13:34,719 Sean Aylmer: the level of Super as men. You were partners in 272 00:13:34,719 --> 00:13:38,219 Sean Aylmer: that research. Obviously, it's something you think about and you're 273 00:13:38,219 --> 00:13:40,779 Sean Aylmer: concerned about and probably need to help members with? 274 00:13:41,209 --> 00:13:45,030 Damian Graham: Absolutely, I think it is. And that research was fantastically 275 00:13:45,030 --> 00:13:48,250 Damian Graham: important to us because we as a fund have about 70% of 276 00:13:48,250 --> 00:13:51,599 Damian Graham: our members are female, the industries that we support tend to have 277 00:13:51,599 --> 00:13:54,640 Damian Graham: a high proportion of female workers, but we know that 278 00:13:54,640 --> 00:13:56,829 Damian Graham: their experience is certainly not where we need it to 279 00:13:56,829 --> 00:14:00,160 Damian Graham: be with regard to saving for retirement. And that also 280 00:14:00,160 --> 00:14:03,360 Damian Graham: goes for younger members as well. And the Your Financial Wellness 281 00:14:03,390 --> 00:14:06,329 Damian Graham: feedback was that there's a high level of stress for 282 00:14:06,329 --> 00:14:09,069 Damian Graham: women and also younger people with regard to financial stress. 283 00:14:09,069 --> 00:14:11,969 Damian Graham: So not an ideal situation. We do think a lot 284 00:14:11,969 --> 00:14:15,660 Damian Graham: about that way of investing and also way of educating and supporting 285 00:14:15,660 --> 00:14:18,630 Damian Graham: people because there's two sides to it. Certainly, we want 286 00:14:18,630 --> 00:14:20,860 Damian Graham: to invest and have the right options that support people 287 00:14:20,860 --> 00:14:23,630 Damian Graham: to have the right level of risk in their portfolio 288 00:14:23,630 --> 00:14:26,330 Damian Graham: when they're young and then obviously manage risk differently as they 289 00:14:26,420 --> 00:14:28,840 Damian Graham: get older. But also we want them to interact with 290 00:14:28,840 --> 00:14:32,120 Damian Graham: their Super as best they can so they can have the best 291 00:14:32,430 --> 00:14:35,670 Damian Graham: probability of a successful retirement. And it's interesting, if you 292 00:14:35,670 --> 00:14:37,840 Damian Graham: look back at COVID last year, we did see across 293 00:14:37,840 --> 00:14:41,310 Damian Graham: the industry, certainly people in Super who went to a 294 00:14:41,310 --> 00:14:44,460 Damian Graham: lower risk portfolio at the wrong time, they may not 295 00:14:44,460 --> 00:14:46,820 Damian Graham: have got the education and the guidance that would have 296 00:14:46,820 --> 00:14:48,960 Damian Graham: been optimal. But at that point in time, they didn't 297 00:14:48,960 --> 00:14:51,510 Damian Graham: see the recovery. They didn't experience the positives in their recovery, 298 00:14:51,510 --> 00:14:55,160 Damian Graham: they saw the fall. And so they certainly have put themselves in 299 00:14:55,160 --> 00:14:57,610 Damian Graham: a worse position than they would've been if they had maintained that 300 00:14:57,610 --> 00:14:58,590 Damian Graham: long-term strategy. 301 00:14:58,870 --> 00:15:00,479 Sean Aylmer: Damian, thank you for talking to Fear and Greed. 302 00:15:00,870 --> 00:15:02,070 Damian Graham: Thanks very much. Take care. 303 00:15:02,370 --> 00:15:05,400 Sean Aylmer: That was Damian Graham, Chief Investment Officer at Aware Super. 304 00:15:06,020 --> 00:15:07,950 Sean Aylmer: This is a Fear and Greed Daily Interview. Join me 305 00:15:07,950 --> 00:15:10,170 Sean Aylmer: every morning for the full Fear and Greed podcast with 306 00:15:10,170 --> 00:15:13,050 Sean Aylmer: all the business news you need to know. I'm Sean Aylmer. 307 00:15:13,250 --> 00:15:13,639 Sean Aylmer: Enjoy your day.