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Speaker 1: This is what the plus i'mv and It's Friday, the

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Speaker 1: thirty first of October. Today will be the first episode

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Speaker 1: in the two part interview with Chris Judd, two time

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Speaker 1: AFL Brownlow medallist, Premiership captain and founder of Serate Macro Funds.

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Speaker 1: In part one, Brett and Justin will be talking to

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Speaker 1: Chris about his football career, his transition into investing and

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Speaker 1: why he started his own investment fund. But before that,

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Speaker 1: here are the top three business news stories from Australia

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Speaker 1: and around the world. NAB has promised to increase its

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Speaker 1: lending to Australian real estate developers by twenty percent and

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Speaker 1: has also set aside thirty billion dollars for first home

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Speaker 1: buyer loans. In other news, Australia's quarterly September inflation has

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Speaker 1: jumped to three point two percent compared to the last

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Speaker 1: quarter when it was just two point one percent. This

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Speaker 1: means inflation is now outside the Reserve Bank of Australia's

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Speaker 1: ideal range of two to three percent. This Tuesday, the

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Speaker 1: RBA will be making a call on whether to pause,

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Speaker 1: cut or increase the cash rate. And finally, in Vidia

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Speaker 1: has made history as the first company to reach a

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Speaker 1: market valuation of five trillion US dollars. That's it from

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Speaker 1: me today. I'll posit over to brand Justin for their

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Speaker 1: insightful conversation with.

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Speaker 2: Chris Judd today on what the Flux In conversation, we're

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Speaker 2: excited to welcome Chris Chart and name that many of

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Speaker 2: our listeners would instantly associate with greatness on the footy field,

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Speaker 2: but he's also had a second act in investing. So

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Speaker 2: Chris played fourteen seasons in the AFL, first with West

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Speaker 2: Coast then Carlton, and over that time he became one

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Speaker 2: of the game's most decorated players, captain of both clubs,

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Speaker 2: two Brownlow medals, as well as leading West Coast to

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Speaker 2: a premiership in two thousand and six. But what many

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Speaker 2: might not know fully is how serious he's become in

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Speaker 2: the world of investing. Chris founded Serity Macro fund, operating

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Speaker 2: in the macro equity space, and in today's conversation, we're

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Speaker 2: going to unpack how lessons from elite sport translate to markets,

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Speaker 2: how he evaluates investments, and the challenges that he's faced

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Speaker 2: from being a public figure to a fund manager, and

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Speaker 2: maybe even where Chris is placing his bets today, So

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Speaker 2: welcome to What the Flux Juddy.

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Speaker 3: Thank you Justin and Brenton.

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Speaker 4: Congratulations on the pronunciation of sarity.

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Speaker 2: We have to listen to a few we did our research.

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Speaker 2: Have you had that challenge.

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Speaker 3: Often, sir Ruti or cherity?

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Speaker 2: Just think of that before you made the name.

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Speaker 3: No, I didn't have.

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Speaker 5: It's a bit of a lesson for all of us.

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Speaker 3: Cool.

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Speaker 5: So you achieved so much in your football career. How

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Speaker 5: often do you actually reflect on those achievements or is

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Speaker 5: it just a chapter of your life that you've now

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Speaker 5: completely moved on from.

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Speaker 4: Just feels a chapter that's completely closed, which I'm happy about. Yeah,

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Speaker 4: I sort of have no interest in sort of spending

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Speaker 4: all my forties, fifties and sixties talking or thinking about

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Speaker 4: things I did in my late teens and twenties.

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Speaker 3: So I'm excited that I've got.

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Speaker 4: A young family and a small business and lots of

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Speaker 4: things to keep the head occupied.

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Speaker 3: Yeah, it's nice for it. It sort of feels like

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Speaker 3: primary school. You know.

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Speaker 4: I had a great time in primary school grade two.

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Speaker 4: I was the quickest kid in the year. I had

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Speaker 4: a full head of hair, I had a girlfriend. I'm

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Speaker 4: sure if we actually spoke. I remember beating grade fours

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Speaker 4: and running races. You know, there was peak cycle in

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Speaker 4: grade two, but it was great. That's gone, you know,

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Speaker 4: I don't think about that anymore. And footy was a

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Speaker 4: bit the same at a great time. Had a very

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Speaker 4: fortunate career, but it was it was a long time ago,

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Speaker 4: and really excited that there's other things occupying my time now.

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Speaker 2: So we're going to stay on top of footage a

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Speaker 2: little fine. When you ran out on the field ninety

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Speaker 2: thousand people, one hundred thousand people, what was that mental

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Speaker 2: process like like going out hearing the raw in a

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Speaker 2: big game of footage?

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Speaker 3: Oh, it was magical. You know.

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Speaker 4: All I ever wanted to do from the age of

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Speaker 4: about three till becoming an autut was player fell footing

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Speaker 4: and to be out there on the big stage in

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Speaker 4: front of fans and with teammates who you love was magical.

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Speaker 4: So yeah, I mean I always had a spoken about

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Speaker 4: a bit before a different mindset mentally lean into games

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Speaker 4: like I was very much driven by negative thoughts. So

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Speaker 4: you know, any sort of performance psychologists or people telling

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Speaker 4: young kids how they should visualize performance should think positively

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Speaker 4: about what's coming, you know, during the season from sort

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Speaker 4: of Wednesday onwards, I would flood my brain with negative

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Speaker 4: thoughts about how I was going to play, and then

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Speaker 4: I was going to lose the game and I was going.

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Speaker 3: To let it run down and did that help you?

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Speaker 3: And that's what sort of helped me.

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Speaker 4: And it sort of ended with you know, just before

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Speaker 4: running out, I would sort of say to my mind,

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Speaker 4: we we'll see who's right. Play games on yourself, sort

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Speaker 4: of that disassociation between your thoughts and your elf, and

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Speaker 4: that's sort of how played out for fourteen years. So

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Speaker 4: it was a different a different mental preparation the most

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Speaker 4: and perhaps a little bit a little bit tiring, but

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Speaker 4: it was always a relief to actually run out there

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Speaker 4: on the field because by then the thoughts had stopped

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Speaker 4: and it was just an arm wrestle to see who

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Speaker 4: was right the thoughts or me.

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Speaker 5: That's fascinating. And so last one on footy. Do you

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Speaker 5: think that your experiences playing professional sport helped you in

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Speaker 5: business or investing?

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Speaker 3: They have? I mean, I think I'd be a better

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Speaker 3: investor if I said have done it. Yeah, that's really

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Speaker 3: interesting one.

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Speaker 4: But I certainly think I'm a much been investor now

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Speaker 4: than I would be if I was just sitting on

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Speaker 4: a couch scratching masks for years instead of playing professional sport. Yeah,

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Speaker 4: and it certainly does. You know, I think there's an

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Speaker 4: advantage to any profession if you think differently from the

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Speaker 4: people you're competing with.

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Speaker 3: And I certainly get that.

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Speaker 4: We don't get stuck in consensus fuse perhaps, or or

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Speaker 4: get stuck believing that a relationship has to continue forever

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Speaker 4: because it has in the past. That maybe some managers

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Speaker 4: do who've been an industry for thirty years and to

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Speaker 4: convince things have to work a certain way because that's

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Speaker 4: how they've always worked for them in their professional careers. So,

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Speaker 4: particularly a time like today when things are changing so

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Speaker 4: rapidly and there's lots of things professional investors seeing today

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Speaker 4: they've never seen before in their professional lives. You know,

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Speaker 4: there are perhaps some advantages coming from a parallel field.

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Speaker 2: Yeah, So, JD, we did a bit of digging. You

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Speaker 2: did your first investment when you were sixteen, and so

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Speaker 2: I've got a couple bit of cash from the aas Yes,

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Speaker 2: that's right. How did that one go? And then is

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Speaker 2: that what really prompted you to get passionate?

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Speaker 4: Tell us the truth that went well, so that went well,

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Speaker 4: not through skill but through luck. So it was awa,

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Speaker 4: I believe doubled. I've even got taken over. The other

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Speaker 4: thing we will look at buying was Woolworths, which would

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Speaker 4: have been a much better hold, forever, more boring investment,

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Speaker 4: and so that was Look, that was a good start

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Speaker 4: purely through luck.

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Speaker 3: But yeah, look, I.

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Speaker 4: Think there were just a number of things that appealed

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Speaker 4: to me with investing. You know, like, I'm naturally highly disagreeable.

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Speaker 4: Any time you make an investment, you're effectively saying that

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Speaker 4: the market is wrong on the price of this asset,

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Speaker 4: and I'm right, And that is a trait I think

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Speaker 4: more suited to people who are highly disagreeable. And I'm

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Speaker 4: highly competitive, and particularly with listed investments, there's just a

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Speaker 4: scoreboard available every day to see if you've won or

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Speaker 4: you've lost, So it sort of scratches those two itches.

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Speaker 4: And yeah, look, my grandfather loved his stocks. My old

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Speaker 4: man had no interest, and neither did my mum. But

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Speaker 4: perhaps it skipped a generation that interest. And it's certainly

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Speaker 4: you know something that I'm incredibly passionate about today.

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Speaker 5: Was there a point where you realized I'm actually not

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Speaker 5: bad at investing. I might make it my profession.

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Speaker 4: Yeah, Like I I met a guy when I was

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Speaker 4: twenty eight who I would say taught me how to

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Speaker 4: invest in listed equities and particularly small cap equities, which

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Speaker 4: to me means he taught me.

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Speaker 3: How to sell them.

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Speaker 4: You know, so properties if you buy well, I don't

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Speaker 4: think you really need to sell them. Listed equities, particularly

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Speaker 4: the small and the skill is in the selling, and

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Speaker 4: I felt he taught me how to do that, so

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Speaker 4: I started learning them. But I always envisis myself running

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Speaker 4: and operating business because the entrepreneurs I admired most that's

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Speaker 4: what they did. And I started working after foty years

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Speaker 4: an analyst in a VC fund, still not thinking i'd

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Speaker 4: become an investor, still with a view that I would

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Speaker 4: eventually either buy or start up an operating business somewhere,

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Speaker 4: and then the VC investing was a great opportunity, but

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Speaker 4: I didn't like any of those investments for my own money.

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Speaker 4: At the same time, I was doing really well investing

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Speaker 4: listed equities on the side, and then I just had

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Speaker 4: this moment. I love investing the listed equities. I'm doing

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Speaker 4: really well at it. Why is this not where I'm

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Speaker 4: spending my energy. So it was just sort of an

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Speaker 4: iteration of over about eighteen months. And I actually really

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Speaker 4: helped doing a personality test too, which was at about

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Speaker 4: the same time, which came back with just you know,

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Speaker 4: this bottom three percent for agreeability and which I've already mentioned,

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Speaker 4: but it was it came back as a personality it

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Speaker 4: was suited to ideas and certainly not suited to managing

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Speaker 4: large numbers of people. And I'm just not energized by

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Speaker 4: hr issues or you know, hearing about how someone's got

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Speaker 4: a headache or someone you know, girlfriend dumpedon, or just

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Speaker 4: my empathy is a bit low, so.

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Speaker 3: You know, and it's why I'd be a crap coach.

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Speaker 4: The idea of having cough's without an year olds because

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Speaker 4: they feel sad is just not what I'm built for.

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Speaker 4: And there's nothing that's great people that are built for that.

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Speaker 4: So but ideas and concepts, I just love exploring them

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Speaker 4: and can think about them menlessly. So eventually got to

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Speaker 4: that point where I realized that a startup or buying

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Speaker 4: and operating business with a large number of employees probably

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Speaker 4: wouldn't be the best best use of my skills, and

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Speaker 4: initially just started investing my own capital, and then after

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Speaker 4: a while felt, you know, I was almost the guy

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Speaker 4: surfing around the corner from Bell's Beach telling people he

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Speaker 4: could be in the comp if you wanted to, and

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Speaker 4: people would say, what are you doing, and I'd say,

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Speaker 4: I'm a full time investor, and they'd look at you

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Speaker 4: like you're employed, and.

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Speaker 3: That was starting to piss me off. I was starting

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Speaker 3: in a chip on my shoulder.

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Speaker 4: And at the same time, I'd already hired Tom, who's

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Speaker 4: our analyst. I'd hired him as my analyst in a

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Speaker 4: private capacity, and he was going really well. And I thought,

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Speaker 4: if you'd got in your young early twenties and you're ambitious,

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Speaker 4: which he is, and he's super smart, the right move

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Speaker 4: for him would be to go and work for a

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Speaker 4: fun to be part of something bigger. And that would

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Speaker 4: have been, you know, no good because he was going

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Speaker 4: really well and then got approached by a family office

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Speaker 4: to manage some money for them, and before we knew

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Speaker 4: the fund was born.

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Speaker 2: Nice and so with the fund, which I've seen has

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Speaker 2: done pretty well over the last twelve months and not

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Speaker 2: since inception, so Flux listeners thirty six and a half

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Speaker 2: percent over the past twelve months to September twenty twenty

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Speaker 2: five and then also twenty seven percent annualized since inception,

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Speaker 2: so very impressive numbers. What is the investment philosophy of

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Speaker 2: the fund and how do you decide what to invest in?

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Speaker 4: Yeah, so we're we call ourselves a macro fund, which

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Speaker 4: means our which means to us, our idea generation comes

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Speaker 4: from top down macro themes, so we can invest anywhere

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Speaker 4: in the world. We generally just invest in Australian listed equities,

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Speaker 4: but if there's a macro theme we really like and

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Speaker 4: we can't express it here, we will go overseas if

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Speaker 4: we find appropriately valued companies to express that macro thematic view.

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Speaker 4: The next thing we do is really focusing on liquidity

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Speaker 4: in terms of the style of company we buy. So

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Speaker 4: whenquidity is loose, and liquidity to us is metrics like

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Speaker 4: money supply, central bank balance sheets, you know, interest rates,

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Speaker 4: these sorts of broad metrics largely focused on the US

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Speaker 4: because that's where most of the liquidity is. When liquidity

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Speaker 4: is loose, we want to be in companies that are

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Speaker 4: perhaps more of a growth bend and smaller companies. When

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Speaker 4: liquidity is really tight, like when we started the fund,

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Speaker 4: there was negative money supplying the US, which is like

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Speaker 4: a one in one hundred yuro event. When liquidity is tight,

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Speaker 4: we want to be in larger cap positions, or if

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Speaker 4: they're small, we want them to be producing a lot

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Speaker 4: of amount of free cash flow today. And we meet management,

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Speaker 4: we do our topped up, we do our bottom up analysis,

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Speaker 4: and then and then we execute the trade. So generally,

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Speaker 4: the separation of work is I spend most of my

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Speaker 4: time in the macro and liquidity. I'll often give Tom

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Speaker 4: the analyst, a short list of two or three stocks.

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Speaker 4: He'll then build financial models and do this sort of

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Speaker 4: stuff that he's much better at than me, and then

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Speaker 4: we'll meet management and ultimately be my decision which company

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Speaker 4: we invest in, and how that portfolio structuring works is

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Speaker 4: relation to other investments.

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Speaker 5: And given your long only, how often on average would

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Speaker 5: you say you're actually transacting.

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Speaker 4: Most days, but very rarely on a new position. Okay,

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Speaker 4: so we're super focused on not just what companies do

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Speaker 4: we like, but we really want companies we like the

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Speaker 4: most at this valuation to be our biggest holdings. So

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Speaker 4: you know, generally two percent is a small position for US,

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Speaker 4: four percent is a large position. Right now, We've got

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Speaker 4: one position that's a bit of a six percent, so

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Speaker 4: that feels really that feels quite large for us, But

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Speaker 4: it would be really annoying for us if one percent

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Speaker 4: position doubled in a way, because we were almost there.

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Speaker 4: We liked it, but we didn't have a big enough

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Speaker 4: bet on it. So whilst I don't know how often

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Speaker 4: a new position would come in, I.

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Speaker 3: Don't think even every month.

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Speaker 4: We're trading around most days just to try and get

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Speaker 4: the portfolio construction where we.

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Speaker 2: Want it interesting And is it mainly Is your portfolio

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Speaker 2: made up mainly of small caps?

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Speaker 3: It is at the minute, but we've still got some

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Speaker 3: large caps. Yeah, and not much of it.

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Speaker 4: We probably have about five percent and overseas currently Yeah, okay, Jaddy.

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Speaker 5: Looking ahead, is there a particular bold idea or opportunity

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Speaker 5: that you are thinking about investing in.

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Speaker 4: Yeah, Well, I'd like to think all of our ideas

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Speaker 4: are bold and we've executed on them.

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Speaker 3: I mean, I think.

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Speaker 2: Is there a particular industry that excites you?

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Speaker 3: Yeah?

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Speaker 4: Look, I think robotics and you know, to say AI,

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Speaker 4: I'm not that into a coincidentally, so I mean for

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Speaker 4: us AI, what's interesting is electricity generation. We feel that's

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Speaker 4: where the bottleneck is deep seak. China's AI large language

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Speaker 4: model is open source and in a lot of ways,

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Speaker 4: demonetized AI large language models overnight in our view, So

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Speaker 4: where we feel the most interesting bottleneck is in that

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Speaker 4: electricity capacity, particularly.

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Speaker 3: In the US.

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Speaker 4: China's way ahead in the terms of the amount of

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Speaker 4: electricity they can produce, and at times in certain areas

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Speaker 4: they've got surplus electricity, which is pretty neat problem because

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Speaker 4: of their hydro electric So in terms of AI, that's

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Speaker 4: a theme we're really excited about how the US.

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Speaker 3: Can improve their electrical grid.

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Speaker 4: We think that's a significant issue that's probably not top

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Speaker 4: of mind if you were to say, you know, critical

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Speaker 4: minerals is.

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Speaker 3: The you know, the sexist investmentmatic right now.

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Speaker 4: You know, the antimody stocks and rare earth stocks or

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Speaker 4: raw earth stocks.

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Speaker 3: Is Trump and these are reasonably large companies, some of

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Speaker 3: them like MP materials, so like that's really sexy right here.

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Speaker 4: But you know, that electricity grid is another one which

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Speaker 4: we think is really interesting. We also think at the

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Speaker 4: end of the day, the US couldn't win the proxy

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Speaker 4: war in Ukraine between China because they couldn't match the

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Speaker 4: manufacturing capacity of China, China, and to a lesser extent, Russia.

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Speaker 4: You know Russia's mintal production, China's manufacturing capacity.

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Speaker 3: And you can't win a.

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Speaker 4: Hot war if you're bringing up the adversary and saying

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Speaker 4: can you send us some bullets. So whilst bringing manufacturing

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Speaker 4: back to the US has been framed by the Trump

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Speaker 4: administration is an economic issue, we think it's more a

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Speaker 4: Department of Defense issue, and we think it's wildly important.

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Speaker 4: So things that can improve efficiency of manufacturing in the US, automation,

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Speaker 4: three D printing, these sorts of things are going to

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Speaker 4: be necessary because you've got to remember the US has

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Speaker 4: squashed migration currently, so they're not growing the labor force

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Speaker 4: that can do that manufacturing work. If it's the same

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Speaker 4: as your grand pass manufacturing work, and we don't think

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Speaker 4: we'll be. We think we highly automated using robots and

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Speaker 4: three D printing in these sort of technology. So we

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Speaker 4: think that's interesting and in a way is the same

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Speaker 4: sort of trade as the rare earth trade.

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Speaker 3: It's just expressed in a slightly different way.

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Speaker 2: Jodi asked one before we get into our flux five,

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Speaker 2: which is our fast five questions, if we would have

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Speaker 2: this conversation again in five years talking Culton talking investments.

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Speaker 2: What let's put Culton's to side. From now, where would

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Speaker 2: you see sarity being?

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Speaker 1: Like?

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Speaker 2: What where would you like sarity to be? From both

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Speaker 2: funds under management? Do you think your approach would change?

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Speaker 2: What do you think five years from now you'll be.

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Speaker 4: So we take great pride in being a small fund,

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Speaker 4: and we always plan on protecting that edge because we

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Speaker 4: think it's significant. So we want to close the fund

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Speaker 4: at one hundred and fifty million bucks. We're currently about seventy.

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Speaker 4: We want to then grow that one hundred and fifty

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Speaker 4: to three hundred, give everyone half their money back, and

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Speaker 4: see how many times we can do that.

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Speaker 3: That's the goal.

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Speaker 4: So in five years time, I hope we have closed

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Speaker 4: the fund, and I would hope we're closing on that point.

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Speaker 3: Where we can give investors half their money back, or

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Speaker 3: we may have done it if without being too.

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Speaker 4: Smug, because I know the market gods don't like smugness,

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Speaker 4: and they'll punish me for that. You don't want to

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Speaker 4: punish anyone market. God's punished bread, not me. So yes,

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Speaker 4: that's sort of how we're looking. We're not trying to

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Speaker 4: manage tenbion bucks. We're not chasing institutional super fund money.

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Speaker 4: We want to be able to move quickly and be

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Speaker 4: more agile than other funds.

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Speaker 3: So that's sort of the very broad road map of

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Speaker 3: where we're going.

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Speaker 1: Thanks for listening. Part two of the podcast with Chris

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Speaker 1: Judd will come out on Monday, the third of November,

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Speaker 1: where brettan Justin speak to Chris about his investments within

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Speaker 1: the Serty Macrofund and what excites him for the future.

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Speaker 1: We'll see you then,