1 00:00:03,600 --> 00:00:06,200 Speaker 1: Welcome to Ask Fear and Greed, where we answer questions 2 00:00:06,240 --> 00:00:10,160 Speaker 1: about business, investing, economics, politics and more. I'm Michael Thompson 3 00:00:10,240 --> 00:00:11,479 Speaker 1: and hello Sean Al. 4 00:00:11,640 --> 00:00:13,280 Speaker 2: Hello Michael, Sean. 5 00:00:13,720 --> 00:00:21,119 Speaker 1: Today's question is a good one. Yes, our big institutional 6 00:00:21,160 --> 00:00:24,759 Speaker 1: investors too influential in markets. 7 00:00:25,880 --> 00:00:29,320 Speaker 3: Ah wow, what a vexed question that one. 8 00:00:29,480 --> 00:00:32,160 Speaker 1: There's a bit to this one, there's a lot to it. 9 00:00:33,360 --> 00:00:35,320 Speaker 1: Maybe start with some definitions for us. What are we 10 00:00:35,400 --> 00:00:38,519 Speaker 1: talking about when we are when we're talking about institutional investors. 11 00:00:38,200 --> 00:00:40,280 Speaker 3: And we're talking about large investors. So you and I 12 00:00:40,720 --> 00:00:44,680 Speaker 3: were baby investors. We're talking about the big guys. Stipprenuation 13 00:00:44,760 --> 00:00:47,600 Speaker 3: funds is the biggest example, but there's also lots of 14 00:00:47,600 --> 00:00:50,360 Speaker 3: managed funds. And when you invest in different organizations that 15 00:00:50,400 --> 00:00:53,800 Speaker 3: are not with super otherwise, there's sort of groups in 16 00:00:53,840 --> 00:00:57,280 Speaker 3: between you and I, the retail investors and the institutional investors. 17 00:00:57,320 --> 00:00:59,680 Speaker 3: They're called well a bunch of them. But let's say 18 00:00:59,720 --> 00:01:04,160 Speaker 3: high wealth individuals, family officers. So the Forest family has 19 00:01:04,160 --> 00:01:07,959 Speaker 3: billions of dollars, so they're not institutional investors, they're not 20 00:01:08,040 --> 00:01:10,440 Speaker 3: retail investors. There's somewhere in between, so that would be 21 00:01:10,440 --> 00:01:11,959 Speaker 3: a family office, high net wealth. 22 00:01:12,280 --> 00:01:14,160 Speaker 2: So that's the definition. 23 00:01:15,319 --> 00:01:19,360 Speaker 3: Are there too many, Well, I don't think there's too many, 24 00:01:19,400 --> 00:01:22,280 Speaker 3: but do they have too much influence? That's probably a 25 00:01:22,280 --> 00:01:28,280 Speaker 3: better way of thinking about it. And maybe so they 26 00:01:28,360 --> 00:01:34,040 Speaker 3: run the market. If you've got institutional support, you can 27 00:01:34,080 --> 00:01:37,240 Speaker 3: get away with anything. Well that's not true, but you're 28 00:01:37,280 --> 00:01:40,280 Speaker 3: doing okay. So let's take the example of Virgin Australia 29 00:01:40,319 --> 00:01:46,440 Speaker 3: trying to float it today. Came out with its prospectus. Now, 30 00:01:46,520 --> 00:01:48,360 Speaker 3: what it said ahead of that was that it was 31 00:01:48,360 --> 00:01:50,840 Speaker 3: fully covered for its capital rays, which has bit under 32 00:01:50,840 --> 00:01:54,320 Speaker 3: seven hundred million dollars. That means there's institutional investors that 33 00:01:54,480 --> 00:01:58,680 Speaker 3: will pick up all those shares if the allotment for 34 00:01:58,760 --> 00:02:01,240 Speaker 3: retail investors isn't picked up. 35 00:02:01,600 --> 00:02:05,320 Speaker 2: The problem is they become too powerful, the institutional shareholders. 36 00:02:05,600 --> 00:02:07,800 Speaker 3: And if you see that sometimes with smaller companies, they 37 00:02:07,800 --> 00:02:11,079 Speaker 3: if an institution buys twenty percent of a smaller company 38 00:02:11,160 --> 00:02:13,920 Speaker 3: and then decides to sell it, that smaller company's got 39 00:02:13,960 --> 00:02:14,600 Speaker 3: nowhere to go. 40 00:02:15,040 --> 00:02:16,399 Speaker 2: Yeah, you know, capital. 41 00:02:16,120 --> 00:02:19,920 Speaker 3: Raisings like the Virgin, the institutions really dominate that. You 42 00:02:19,960 --> 00:02:22,480 Speaker 3: also have a bit of a problem with common ownership, 43 00:02:22,600 --> 00:02:25,800 Speaker 3: so the same companies always turn up of the same 44 00:02:25,800 --> 00:02:28,840 Speaker 3: investors always turn up in different companies and so you 45 00:02:28,880 --> 00:02:31,160 Speaker 3: don't get a diversity of thought that. 46 00:02:31,240 --> 00:02:31,840 Speaker 2: Sort of thing. 47 00:02:32,800 --> 00:02:35,440 Speaker 1: When we're talking about super funds, right, and we've spoken 48 00:02:35,440 --> 00:02:40,120 Speaker 1: in the past to the Australian Council of Superannuation Investors, 49 00:02:40,560 --> 00:02:43,400 Speaker 1: and this is a big group of super funds that 50 00:02:43,560 --> 00:02:47,359 Speaker 1: own between them a very large stake in pretty much 51 00:02:47,400 --> 00:02:49,080 Speaker 1: every ASX two hundred company. 52 00:02:49,200 --> 00:02:50,919 Speaker 2: Yes, right, And. 53 00:02:50,960 --> 00:02:56,840 Speaker 1: They talk about the conversations that they have with management 54 00:02:57,360 --> 00:03:00,359 Speaker 1: of these companies that it is not just how they 55 00:03:00,360 --> 00:03:04,680 Speaker 1: are influencing the companies through buying and selling them, but 56 00:03:04,800 --> 00:03:07,800 Speaker 1: also through the access that they have to those companies, 57 00:03:07,800 --> 00:03:10,160 Speaker 1: the conversations that they have and are able to kind 58 00:03:10,160 --> 00:03:13,520 Speaker 1: of make their wishes known to them. 59 00:03:14,080 --> 00:03:17,320 Speaker 3: That is a great argument for the big institutions. And 60 00:03:17,800 --> 00:03:20,960 Speaker 3: the great example is the shift to renewables. So the 61 00:03:21,000 --> 00:03:23,800 Speaker 3: pressure that's put on the banks, for example, by the 62 00:03:23,840 --> 00:03:27,400 Speaker 3: institutional shareholders to make sure the banks are aiming for 63 00:03:27,480 --> 00:03:30,200 Speaker 3: net zero or woodside in Santos all and gas companies 64 00:03:30,200 --> 00:03:33,480 Speaker 3: for that matter, those institutional investors can do that. I 65 00:03:33,480 --> 00:03:40,800 Speaker 3: suppose the crux of it, our institutional investors influence disproportionate 66 00:03:41,840 --> 00:03:46,080 Speaker 3: to what it should be given our economy and that's 67 00:03:46,120 --> 00:03:48,680 Speaker 3: a gray line. And you know, when you've got Australian 68 00:03:48,720 --> 00:03:53,720 Speaker 3: Retirement Trust, Aussie super these organizations spending hundreds of billions 69 00:03:53,760 --> 00:03:57,560 Speaker 3: of dollars investing, they have a huge amount of influence. 70 00:03:58,160 --> 00:03:59,960 Speaker 3: They can do things as you were saying, and talk 71 00:04:00,040 --> 00:04:03,760 Speaker 3: to management, get the ins and outs, make good investment decisions. 72 00:04:05,080 --> 00:04:06,400 Speaker 3: You want to make sure that a bunch of them 73 00:04:06,400 --> 00:04:08,960 Speaker 3: are talking to management. You don't want just one organization 74 00:04:09,080 --> 00:04:11,440 Speaker 3: because then they do you know, what they say goes, 75 00:04:11,480 --> 00:04:13,280 Speaker 3: and that's not particularly healthy. 76 00:04:14,120 --> 00:04:17,080 Speaker 2: But so that is good. But do they have too 77 00:04:17,160 --> 00:04:17,840 Speaker 2: much power? 78 00:04:18,080 --> 00:04:21,200 Speaker 3: And it's really easy to make an argument that they 79 00:04:21,240 --> 00:04:24,280 Speaker 3: do because what you and I think probably doesn't matter 80 00:04:24,320 --> 00:04:24,720 Speaker 3: that much. 81 00:04:25,760 --> 00:04:29,960 Speaker 1: But then again, we are typically investors through our super 82 00:04:30,000 --> 00:04:32,960 Speaker 1: funds anyway, so that they are still representing our views 83 00:04:33,400 --> 00:04:34,719 Speaker 1: perhaps through our superfund. 84 00:04:35,520 --> 00:04:38,880 Speaker 3: Yes, I mean that's democracy. I mean anythinghow and easy 85 00:04:38,920 --> 00:04:41,440 Speaker 3: as the Prime minister because I voted or I didn't 86 00:04:41,520 --> 00:04:44,120 Speaker 3: vote for him, because I voted or didn't vote for 87 00:04:44,160 --> 00:04:46,560 Speaker 3: my local member. In fact, I think we even had 88 00:04:46,560 --> 00:04:50,040 Speaker 3: an able candidate my lectorate. So you get the gist 89 00:04:50,040 --> 00:04:53,920 Speaker 3: of what I'm saying. So I think it's really good 90 00:04:54,000 --> 00:04:56,920 Speaker 3: to have a strong superinnovation sector. An outcome of that 91 00:04:57,200 --> 00:04:59,960 Speaker 3: is big institutional investors. 92 00:05:00,000 --> 00:05:01,120 Speaker 2: So you sort of have to put up with it. 93 00:05:01,240 --> 00:05:03,600 Speaker 1: Okay, it's a good one though, isn't it. 94 00:05:03,800 --> 00:05:06,160 Speaker 2: And there's no right answer. It depends where you're coming from. 95 00:05:06,240 --> 00:05:08,599 Speaker 3: And so you know, there are activist investors, guys like 96 00:05:08,640 --> 00:05:12,880 Speaker 3: Jeff Wilson, who from Wilson Asset Management, who will the 97 00:05:13,720 --> 00:05:17,119 Speaker 3: current three million dollars superannuation tax that they're talking about. 98 00:05:17,160 --> 00:05:21,800 Speaker 3: So he's very active in that particular issue. Now he's 99 00:05:21,839 --> 00:05:24,720 Speaker 3: not in well maybe Jeff is an institutional investor, but 100 00:05:24,720 --> 00:05:26,760 Speaker 3: he's kind of somewhere in the middle. And I think 101 00:05:26,760 --> 00:05:29,000 Speaker 3: when you have really active people talking about that stuff, 102 00:05:29,000 --> 00:05:32,120 Speaker 3: I think that's a really really good thing. Previously he's 103 00:05:32,120 --> 00:05:35,000 Speaker 3: been reactive against for or against Meyer and some of 104 00:05:35,000 --> 00:05:38,440 Speaker 3: those sorts of companies as well, So I think it's good. 105 00:05:38,440 --> 00:05:41,240 Speaker 3: You just don't want any one organization to have a 106 00:05:41,279 --> 00:05:43,080 Speaker 3: disproportionate amount of power. 107 00:05:43,120 --> 00:05:46,440 Speaker 1: It does transparency matter then in this that you can 108 00:05:46,520 --> 00:05:49,559 Speaker 1: see what the issues are and where the money is going. 109 00:05:49,640 --> 00:05:51,400 Speaker 1: As long as you can see where it is going, 110 00:05:51,480 --> 00:05:53,640 Speaker 1: then you can at least understand the influence that's happening 111 00:05:53,720 --> 00:05:54,360 Speaker 1: behind the scenes. 112 00:05:55,720 --> 00:05:58,159 Speaker 3: Yes, the flip side to that, though, is if you 113 00:05:58,240 --> 00:06:01,320 Speaker 3: are a big institutional investor, get access to management. 114 00:06:01,960 --> 00:06:04,160 Speaker 2: If someone owns five percent of my company, I'm going 115 00:06:04,200 --> 00:06:04,800 Speaker 2: to talk to them. 116 00:06:05,320 --> 00:06:09,360 Speaker 3: You or I point zero five percent of the company, 117 00:06:09,720 --> 00:06:11,480 Speaker 3: we don't get a look in, and so they're kind 118 00:06:11,480 --> 00:06:13,880 Speaker 3: of getting information that we're not getting. Now, that's not 119 00:06:14,279 --> 00:06:18,159 Speaker 3: supposed to happen. It's everyone or shareholders should be treated equally. 120 00:06:17,920 --> 00:06:18,520 Speaker 2: In that sense. 121 00:06:19,000 --> 00:06:21,560 Speaker 3: But if they've got a one on one with them, see, yeah, 122 00:06:21,600 --> 00:06:23,120 Speaker 3: well they're going to know more about the company than 123 00:06:23,160 --> 00:06:25,000 Speaker 3: you or I who are just reading the reports. 124 00:06:26,240 --> 00:06:27,280 Speaker 1: Oh this is a good one. 125 00:06:27,920 --> 00:06:28,679 Speaker 2: We could go on forever. 126 00:06:28,720 --> 00:06:30,239 Speaker 1: We might have to have a part to our first 127 00:06:30,279 --> 00:06:33,479 Speaker 1: ever Ask Fear and Greed. Anyway, thank you very much, Sean, 128 00:06:33,520 --> 00:06:35,440 Speaker 1: thank you, Michael. All right, and if you've got your 129 00:06:35,440 --> 00:06:38,120 Speaker 1: own question, then please send it on through via fearangreed 130 00:06:38,120 --> 00:06:40,080 Speaker 1: dot com to au or any of the social media 131 00:06:40,120 --> 00:06:43,400 Speaker 1: platforms Instagram, LinkedIn Facebook. We will get your messages on there. 132 00:06:43,440 --> 00:06:45,719 Speaker 1: We will put your question on the list. I'm Michael 133 00:06:45,760 --> 00:06:47,719 Speaker 1: Thompson and this was Ask Fear and Greed.