WEBVTT - Why infrastructure is having a moment–Morrison 0:00:00.240 --> 0:00:02.800 Everything for us is a long game. It's never like, 0:00:03.520 --> 0:00:05.960 what's a business that I could just buy, put some 0:00:06.000 --> 0:00:11.240 cost out, fixed up and sell Wherever people are taking simplistic, 0:00:11.400 --> 0:00:15.320 top down views. If you're writing the details, you'll find opportunity. 0:00:15.560 --> 0:00:17.880 What we say is is this something that's critical to 0:00:17.920 --> 0:00:20.640 society in a society going to need more of this 0:00:20.760 --> 0:00:24.720 over the next few decades. We like investing in private 0:00:24.720 --> 0:00:27.600 companies to unlisted companies. The reason for that is it's 0:00:27.640 --> 0:00:28.760 going to sound nasty. 0:00:32.440 --> 0:00:35.280 Hello and welcome to Shared Lunch, brought to you by Shas's. 0:00:35.800 --> 0:00:37.720 My name is Sonya and at Shazas we're on a 0:00:37.720 --> 0:00:40.520 mission to create financial empowerment for everyone, which is why 0:00:40.560 --> 0:00:42.480 we do these chats. It's a chance to peek behind 0:00:42.479 --> 0:00:44.560 the curtain and chat about what's going on in the 0:00:44.560 --> 0:00:47.720 world of business today. On Shared Lunch, we're joined by 0:00:48.040 --> 0:00:52.000 Paul Newfield, who's the CEO of Morrison, a global infrastructure 0:00:52.000 --> 0:00:54.840 manager who is known as the manager of ASEX and 0:00:54.880 --> 0:00:58.639 INSIDEX listed INFANTOL. Before we get started, here's some important information. 0:00:58.760 --> 0:01:01.240 Investing in involves the rest You might lose the money 0:01:01.240 --> 0:01:04.640 you start with. We recommend talking to a licensed financial advisor. 0:01:05.360 --> 0:01:09.200 We also recommend reading product disclosure documents before deciding to invest. 0:01:09.480 --> 0:01:11.880 Everything you're about to see and here is current at 0:01:11.880 --> 0:01:12.760 the time of recording. 0:01:12.880 --> 0:01:16.319 Welcome Paul Hey, Thanks Sonya, thanks for joining us today. 0:01:16.920 --> 0:01:20.320 So you lead Morrison, which has about, from our records, 0:01:20.520 --> 0:01:24.000 twenty five billion US dollars in assets under management, seven 0:01:24.040 --> 0:01:28.000 off officers across five countries from Europe to Singapore, and 0:01:28.120 --> 0:01:32.360 over two hundred professionals working with you. So tell us 0:01:32.360 --> 0:01:34.600 how did it all begin for you? I think we 0:01:34.959 --> 0:01:37.560 know you studied philosophy and now you're managing this company. 0:01:37.680 --> 0:01:38.959 How did you get here? 0:01:39.160 --> 0:01:41.520 Obviously, what you're asking is when you do a philosophy degree, 0:01:41.520 --> 0:01:43.600 out of all of the many job of office that 0:01:43.640 --> 0:01:45.760 came to you after you finish your master's in the 0:01:45.760 --> 0:01:50.400 philosophy of love, why did you choose infrastructure. I did 0:01:50.440 --> 0:01:54.720 my degree, I then went backpacking, came back thinking I'd 0:01:54.720 --> 0:01:56.680 come back with ideas about what I do with my career, 0:01:56.800 --> 0:01:58.520 and instead I just came back with a credit card 0:01:58.600 --> 0:02:02.160 bill and literally went into the career's office at university 0:02:02.160 --> 0:02:04.120 and said, can you give me the whole list of 0:02:04.120 --> 0:02:07.240 any employers who come willing to look at philosophy grads 0:02:07.600 --> 0:02:10.520 and it was quite a shortlist and happened to have 0:02:10.600 --> 0:02:13.800 on at Boston Consulting. I didn't know anything about what 0:02:13.919 --> 0:02:18.000 strategy consulting was, but was lucky enough to kind of 0:02:18.000 --> 0:02:20.360 find this organization where they didn't care too much what 0:02:20.400 --> 0:02:23.200 your degree was and they would teach you the basics 0:02:23.200 --> 0:02:28.120 of business. And then literally one day I was having 0:02:28.160 --> 0:02:32.720 a bad day at work and I caught up with Rachel, 0:02:32.720 --> 0:02:35.080 who was an old colleague and friend who now worked 0:02:35.080 --> 0:02:37.160 at Morrison, and she said, oh, this is great. I've 0:02:37.160 --> 0:02:40.080 been telling Lloyd Morrison about you. You should meet Lloyd. The 0:02:40.200 --> 0:02:41.680 next thing I know, I get this text message from 0:02:41.760 --> 0:02:44.480 Lloyd Morrison, who at the time was a real big 0:02:44.639 --> 0:02:47.480 figure in New Zealand, not just in business but campaigning 0:02:47.520 --> 0:02:50.840 to change the flag, always very prominent on issues that 0:02:50.840 --> 0:02:53.080 were important for the long term good of the country 0:02:53.080 --> 0:02:56.200 and the world. And he said, I'm going to be 0:02:56.240 --> 0:02:59.000 an Auckland. I'd love to have a coffee. We did that. 0:02:59.080 --> 0:03:01.640 We talked about all kinds of things, none of which 0:03:01.639 --> 0:03:03.400 were my CV. In fact, you hadn't seen my CV. 0:03:04.000 --> 0:03:07.040 And at the end of that conversation he said, you 0:03:07.040 --> 0:03:09.160 should to come and work for me if you want to. 0:03:09.160 --> 0:03:10.600 If you don't, You're an idiot. And then I got 0:03:10.639 --> 0:03:13.320 another text from him saying I wasn't kidding. Come and 0:03:13.320 --> 0:03:17.359 meet the team. What really excited me was here is 0:03:17.400 --> 0:03:21.800 this guy who had started what was basically the world's 0:03:21.800 --> 0:03:26.200 first infrastructure investment firm when the asset class didn't exist, 0:03:26.720 --> 0:03:28.720 and had been able to do that because New Zealand 0:03:28.760 --> 0:03:31.960 was so early introducing private capital into things like renewable 0:03:32.080 --> 0:03:35.080 energy and airports, and then had gone to take that 0:03:35.120 --> 0:03:37.880 to the world and had this complete attitude of well, 0:03:37.880 --> 0:03:39.680 if anyone can do it, why wouldn't it be us, 0:03:40.080 --> 0:03:45.720 And having spent my career in professional services were surrounded 0:03:45.760 --> 0:03:51.200 by really smart, overachieving, insecure people who always fear and failure. 0:03:52.080 --> 0:03:54.680 I was like, here's a guy who's really smart, overachieving, 0:03:55.120 --> 0:03:58.640 but doesn't have any fear of failure, and so I 0:03:58.680 --> 0:04:01.920 basically resigned. Look up the job offer what a story. 0:04:02.200 --> 0:04:04.560 I think. Definitely known for the impact of the infrastructure 0:04:04.560 --> 0:04:05.600 and to art as well. 0:04:05.680 --> 0:04:08.240 Right, Yeah, and actually that was one of the cool things. 0:04:09.200 --> 0:04:12.920 Lloyd was. Yeah, great sport of the arts and all 0:04:13.000 --> 0:04:17.040 kinds of music, so from opera, some quite obscure or 0:04:17.120 --> 0:04:20.680 kestral things through to great Wellington bands who I liked, 0:04:21.640 --> 0:04:24.120 and so to think like, here's this guy who's got 0:04:24.120 --> 0:04:27.520 such broad interests and genuinely seem to and all things 0:04:27.560 --> 0:04:31.000 start with what does the world need more of? And 0:04:31.440 --> 0:04:33.160 how do I make that happen? And when you think 0:04:33.200 --> 0:04:36.800 about it, even today, we never spend any time fussing 0:04:36.839 --> 0:04:40.159 on an investment idea to say is this infrastructure or not? 0:04:40.720 --> 0:04:43.640 What we say is is this something that's critical to society? 0:04:44.080 --> 0:04:46.120 And is society going to need more of this over 0:04:46.120 --> 0:04:48.719 the next few decades. And that leads you to places 0:04:48.920 --> 0:04:55.160 like investing in renewable energy, secure storage of data, which 0:04:55.200 --> 0:04:57.880 is actually a really great way to think about investing 0:04:57.880 --> 0:04:59.640 because it's good for the world. But also you tend 0:04:59.640 --> 0:05:02.640 to find and you make better returns because you're investing 0:05:02.680 --> 0:05:04.080 in things the world's going to need more of. You're 0:05:04.080 --> 0:05:07.240 always making putting your marginal dollar at work into something 0:05:07.279 --> 0:05:10.120 that has got its own investment options inside it. 0:05:10.400 --> 0:05:13.680 Yeah, So tell us about how Morrison is structured. You 0:05:13.760 --> 0:05:17.880 well known for managing Infertil, So tell us about the group. 0:05:18.000 --> 0:05:21.719 We started purely as the manager of Infertil and for 0:05:21.760 --> 0:05:26.200 the longest time all Morrison was was the manager of Infertils. 0:05:26.240 --> 0:05:30.680 Infertils unusual in the New Zealand market, probably usual in 0:05:30.680 --> 0:05:33.800 most markets, and that it doesn't have its own management team. 0:05:34.000 --> 0:05:37.080 What it has as an independent board and then Morrison 0:05:37.160 --> 0:05:41.560 managing it under a contract and so that was set 0:05:41.640 --> 0:05:46.000 up way back in nineteen ninety four. And then as 0:05:46.000 --> 0:05:49.919 infertill has succeeded and growing, Morrison's always tried to invest 0:05:49.920 --> 0:05:52.880 in building our team and capability ahead of Infertl's needs, 0:05:53.279 --> 0:05:55.640 so that you're trying to find what's the next great idea. 0:05:56.600 --> 0:06:00.000 So how we structured, we're basically two hundred and twenty 0:06:00.040 --> 0:06:03.080 people around the world. A small set of people have 0:06:03.120 --> 0:06:06.120 got very dedicated roles to specific funds like Infantal, so 0:06:06.200 --> 0:06:09.799 Jason is the Infantal CEO with an Infantal finance function 0:06:09.839 --> 0:06:13.760 underneath him. And then a bunch of people who are 0:06:13.800 --> 0:06:16.599 out there just trying to find the best investment ideas 0:06:16.600 --> 0:06:19.480 in the world. So those are people sitting in offices 0:06:19.520 --> 0:06:23.719 in New York, London and Singapore, etc. Combing the world 0:06:23.720 --> 0:06:28.400 for good investment ideas. You've got people who are just 0:06:28.480 --> 0:06:32.039 kind of deep research thinkers who are saying ask that 0:06:32.080 --> 0:06:34.159 question of what will the world need more of? So 0:06:34.200 --> 0:06:36.880 they're doing quite top down research, and then you've got 0:06:36.880 --> 0:06:40.279 people who are real kind of grease out of the 0:06:40.320 --> 0:06:44.800 fingernail operators. So typically, whenever we've invested in a business 0:06:44.800 --> 0:06:48.160 and you found a great CEO or a great chief 0:06:48.200 --> 0:06:53.520 development officer or someone with really special skills, if you've 0:06:53.520 --> 0:06:55.600 sold that business, we've tried to hold on to that person. 0:06:56.000 --> 0:06:57.799 So you end up with a team that's this unusual 0:06:57.880 --> 0:07:02.040 mix of some quite deal oriented finant people, some people 0:07:02.080 --> 0:07:04.320 are these very kind of esoteric big picture thinkers, and 0:07:04.360 --> 0:07:09.760 then some very practical operators. And where the magic happens, 0:07:09.760 --> 0:07:12.480 and it's quite hard to make the mix work culturally. 0:07:12.720 --> 0:07:14.680 Whether the magic happens is when you get those people 0:07:15.280 --> 0:07:18.760 looking at the same problem from different angles and really 0:07:18.840 --> 0:07:21.320 debating and trying to find the truth. And so we 0:07:21.360 --> 0:07:23.600 spend a lot of time trying to find make sure 0:07:23.600 --> 0:07:26.880 the people are smart at all those criteria, but actually 0:07:26.920 --> 0:07:30.560 are people who like a debate like challenge can deal 0:07:30.600 --> 0:07:32.000 with people who are different because it's always a lot 0:07:32.040 --> 0:07:33.640 easier to just work with people who are like you. 0:07:34.480 --> 0:07:37.520 But when you make that all happen, that works really beautifully. 0:07:37.760 --> 0:07:40.040 And so how do you go about making investment decisions? 0:07:40.400 --> 0:07:43.760 With a lot of angst and thoughtfulness. I took you 0:07:43.800 --> 0:07:48.040 through an example of an investment process because I think 0:07:48.080 --> 0:07:51.720 it is quite weird and unusual the way we've ended 0:07:51.800 --> 0:07:54.840 up doing this, but it's evolved and we've got to 0:07:54.920 --> 0:07:59.840 learn what's worked over thirty idears. So how did we 0:08:00.040 --> 0:08:05.360 end up buying Canberra data centers? Way back and it's 0:08:05.360 --> 0:08:10.240 probably about twenty twelve. Some of that research team was 0:08:10.360 --> 0:08:14.760 charged with this question of we can see booming demand 0:08:14.960 --> 0:08:19.040 for data storage and transmission, but we want to have 0:08:19.120 --> 0:08:22.160 investments that are really downside protected and we know that 0:08:22.200 --> 0:08:24.200 if you look at a lot of sectors that are 0:08:24.200 --> 0:08:26.960 exposed to data, they're still very high risk or they 0:08:27.000 --> 0:08:29.680 don't manage to maintain their margins. So that team did 0:08:29.680 --> 0:08:31.120 a lot of research and what's going to drive the 0:08:31.120 --> 0:08:34.400 growth of data? Then they looked at what are all 0:08:34.440 --> 0:08:37.080 of the physical assets that you need to support that 0:08:37.520 --> 0:08:40.280 and then said which have got the biggest barriers to entry, 0:08:41.040 --> 0:08:45.120 strongest market positions. And conclusion from that work was they 0:08:45.160 --> 0:08:49.400 really liked data centers, the fiber that connects up data 0:08:49.400 --> 0:08:54.800 centers and telecommunications towers that mobile operators use. And then 0:08:54.840 --> 0:08:57.000 within data centers we said, oh, some of this feels 0:08:57.000 --> 0:08:59.480 too much like kind of a property play where you 0:08:59.480 --> 0:09:01.320 know you've got a contract, but at some point your 0:09:01.320 --> 0:09:03.840 tenants could move out. Some of it feels a little 0:09:03.840 --> 0:09:06.319 bit too much like venture at too much risk exposure. 0:09:06.880 --> 0:09:09.240 And so we wanted to find the lowest risk way 0:09:09.280 --> 0:09:12.240 to invest in that because often what we're looking for 0:09:12.400 --> 0:09:17.080 is very long term contracts or very strong market position 0:09:17.160 --> 0:09:20.560 in a stable market structure, and that's not always what 0:09:20.600 --> 0:09:24.920 you find with tech companies. And so the team found 0:09:24.920 --> 0:09:27.520 this business called Canbra Data Centers, which back then was 0:09:28.320 --> 0:09:31.920 two locations in Canberra. And when you look through the 0:09:31.960 --> 0:09:37.000 government tendersment publishes all of their tenders publicly, you found 0:09:37.040 --> 0:09:40.880 this company one about ninety percent of all government tenders 0:09:41.200 --> 0:09:42.760 and you're like, okay, how is it when the government's 0:09:42.840 --> 0:09:45.920 running an arms link competitive process one company's winning so much. 0:09:46.520 --> 0:09:48.920 And what you found was they had done some really 0:09:48.920 --> 0:09:52.600 smart positioning about how they set up their business. They 0:09:52.679 --> 0:09:56.560 had the most secure operations, the most secure backup power, 0:09:57.920 --> 0:10:01.760 They had got some very security conscious government agents as 0:10:01.800 --> 0:10:05.120 early customers, and so other government agencies could see that 0:10:05.120 --> 0:10:06.920 that was a safe pace to be and then they 0:10:07.000 --> 0:10:10.679 got this ecosystem benefit of once one government agencies and 0:10:10.720 --> 0:10:12.480 there others want to share data with them, and so 0:10:12.520 --> 0:10:14.640 they want to be in the same location. Like wow, 0:10:14.720 --> 0:10:20.760 that's fascinating. At that point, the original backers of that 0:10:20.920 --> 0:10:25.000 business were looking to exit. We tried to buy it 0:10:25.040 --> 0:10:28.760 and we failed. They sold to someone else, and we 0:10:28.760 --> 0:10:32.160 were very disappointed. And the team kept talking to the 0:10:32.200 --> 0:10:34.800 founder of that business, Greg Borer, who's this amazing entrepreneur, 0:10:34.840 --> 0:10:37.800 for three years, and talking to the private equity firm 0:10:37.840 --> 0:10:40.360 who had invested in it, and finally we got to 0:10:40.360 --> 0:10:43.760 a point where they said, okay, we're thinking about an exit, 0:10:43.960 --> 0:10:45.640 tell us your price, and they gave us a period 0:10:45.679 --> 0:10:48.880 of exclusivity. So after like by then we'd probably been 0:10:48.880 --> 0:10:50.160 work on that there for five years and then you 0:10:50.160 --> 0:10:52.719 had this really intense six weeks of trying to get 0:10:52.720 --> 0:10:56.800 the deal done. So yeah, so not everything is quite 0:10:56.880 --> 0:10:59.800 as secure as route as that, but that's generally the principle. 0:11:00.360 --> 0:11:03.160 Find a problem in the world's got to solve, Try 0:11:03.200 --> 0:11:06.080 and find the business that's best positioned to solve that problem, 0:11:06.200 --> 0:11:09.559 be willing to pay an absolutely fair price, and then 0:11:09.640 --> 0:11:12.960 keep investing to grow it. So that business. Originally we 0:11:13.040 --> 0:11:16.199 put eight hundred million Ausie dollars into it to buy it, 0:11:17.040 --> 0:11:20.400 and we've continued to invest capital and grew it from 0:11:20.480 --> 0:11:24.520 Canberra into Sydney and too Melbourne into New Zealand and 0:11:24.600 --> 0:11:26.520 today it's worth over thirteen billion. 0:11:26.760 --> 0:11:28.520 And it sounds like you played a bit of the 0:11:28.559 --> 0:11:31.880 long game with it too, Like does Horizon play into 0:11:32.080 --> 0:11:32.880 those decisions? 0:11:33.000 --> 0:11:37.360 Yeah, Everything for us is a long game, starting with 0:11:37.400 --> 0:11:41.480 the fact that the money we invest is very long term. 0:11:41.520 --> 0:11:44.200 So if you think about the Morrison business overall, you've 0:11:44.240 --> 0:11:47.079 got Infrato and then most of our other clients are 0:11:47.120 --> 0:11:50.839 either sovereign wealth funds or pension funds and so they 0:11:50.920 --> 0:11:56.959 typically have twenty thirty year horizons. So that's great because 0:11:57.000 --> 0:11:59.480 it drives a culture for us of always thinking about 0:11:59.480 --> 0:12:02.040 the long term. It's never like what's a business that 0:12:02.080 --> 0:12:04.640 I could just buy, pull some cost out, fixed up 0:12:04.640 --> 0:12:06.600 and sell. It's what's a business that I'd want to 0:12:06.600 --> 0:12:08.800 own for decades, which then means you do do that 0:12:08.880 --> 0:12:11.640 really long term thinking about finding the right business, and 0:12:11.679 --> 0:12:15.280 then you're willing to spend two or three years trying 0:12:15.280 --> 0:12:17.640 to own the best business rather than just responding to 0:12:17.679 --> 0:12:19.960 what gets brought to you by investment banks. 0:12:20.080 --> 0:12:23.160 Did geography play and play a part in that with 0:12:23.240 --> 0:12:24.120 it being in Australia. 0:12:24.280 --> 0:12:30.080 Yeah, definitely. Infrastructure is a kind of business where you 0:12:30.880 --> 0:12:34.439 need to be local because you're owning assets that are 0:12:34.520 --> 0:12:38.800 kind of critical to their communities. So for the longest time, 0:12:39.200 --> 0:12:43.120 everything Morrison did was New Zealand through the eighties early nineties. 0:12:43.760 --> 0:12:48.400 Then when Australia started doing its first infrastructure privatizations, Morrison 0:12:48.440 --> 0:12:50.160 kind of jumped the ditch and set up here in 0:12:50.240 --> 0:12:54.040 the nineties and was successful in those, and so we'd 0:12:54.120 --> 0:12:58.160 become i think enough of part of the furniture in 0:12:58.160 --> 0:13:01.280 Australia that when an asset like that came up, we 0:13:01.360 --> 0:13:04.520 felt like we were natural owners. And clearly the Australian 0:13:04.520 --> 0:13:07.680 government really cares who owns that data center, given that 0:13:07.760 --> 0:13:10.200 their own government agencies are in it and they've got 0:13:10.280 --> 0:13:12.960 very secure data loads. And so the fact in that 0:13:12.960 --> 0:13:18.640 that we were local Australia and New Zealand local infratill 0:13:18.760 --> 0:13:22.560 is Australia, New Zealand and the investment partner that we 0:13:22.640 --> 0:13:25.000 brought for in Fronto that was Commonwealth Super So that's 0:13:25.000 --> 0:13:28.439 the pension scheme for government and military employees. So it's 0:13:28.480 --> 0:13:31.240 kind of a perfect match with the end customers of 0:13:31.280 --> 0:13:35.320 that business. So today obviously our footprints global, so we 0:13:35.400 --> 0:13:37.400 look at those same ideas and a lot of different locations. 0:13:37.400 --> 0:13:40.800 But back in twenty thirteen when we started looking at that, 0:13:41.240 --> 0:13:42.720 we wouldn't have looked at it if it wasn't in 0:13:42.760 --> 0:13:43.800 Australia and New Zealand. 0:13:43.880 --> 0:13:46.840 How does it differ between the private companies and the 0:13:46.840 --> 0:13:49.199 public companies knowing that you've got a mix of both. 0:13:49.600 --> 0:13:56.640 We like investing in private companies are unlisted companies and 0:13:56.679 --> 0:13:59.920 the reason for that is it's going to sound nasty. 0:14:00.040 --> 0:14:03.079 We like control, but what I really mean by that 0:14:04.000 --> 0:14:05.960 we want to invest in things where you can fundamentally 0:14:05.960 --> 0:14:09.000 make the business better and drive the direction of the business, 0:14:09.040 --> 0:14:12.240 which means you want to be able to determine strategy. 0:14:12.320 --> 0:14:14.960 You want to be able to determine who's in the 0:14:14.960 --> 0:14:18.800 management team, having great people there and work in partnership 0:14:18.800 --> 0:14:21.480 with them. So that works really well in private markets, 0:14:21.480 --> 0:14:25.080 so you can have a long term perspective infratil. Is 0:14:25.760 --> 0:14:30.200 this quite amazing b strip because infertil is a daily 0:14:30.240 --> 0:14:34.840 liquid stock that you can buy for a minimum unit 0:14:34.920 --> 0:14:38.440 of whatever it is today eleven dollars fifty, but gives 0:14:38.520 --> 0:14:42.880 you access to unlisted private market assets with this long duration, 0:14:43.800 --> 0:14:45.920 and that's really rere in fact one of the big 0:14:45.960 --> 0:14:48.080 trends in our industry of infrastructure funds and management. At 0:14:48.120 --> 0:14:51.560 the moment, all the US firms are trying to create 0:14:51.680 --> 0:14:54.160 these what they call semi liquid vehicles that will attract 0:14:54.640 --> 0:14:58.200 retail and high net wealth money into them, and they're 0:14:58.240 --> 0:15:01.760 doing all these really arcane struck suring to create something 0:15:01.760 --> 0:15:04.360 which looks like what INFRAT was in nineteen ninety four, 0:15:04.400 --> 0:15:07.920 but not quite as liquid now. That's partly to do 0:15:08.040 --> 0:15:10.040 with the US regulation that means you couldn't create an 0:15:10.080 --> 0:15:13.240 inftill there, but it means inflil is this really cool 0:15:13.280 --> 0:15:15.120 thing that you know, you can sit there in Australia 0:15:15.160 --> 0:15:17.400 New Zealand as a retail investor and get access to 0:15:17.440 --> 0:15:20.400 something that otherwise only the biggest institutional investors in the 0:15:20.400 --> 0:15:21.000 world can do. 0:15:21.200 --> 0:15:25.000 You're also credited with integrating sustainable investment in a broader sense. 0:15:25.160 --> 0:15:27.760 Can you tell us about Morrison's philosophy. 0:15:27.280 --> 0:15:31.960 In that Yeah, it starts from Lloyd Morrison and that 0:15:32.120 --> 0:15:36.040 idea of we will only do well we're investing in 0:15:36.080 --> 0:15:38.640 things that the world needs more of. And if you're 0:15:38.640 --> 0:15:41.120 investing in things the world needs less of. You should 0:15:41.120 --> 0:15:44.080 anticipate that. Sooner or later that catches up with you. You know, 0:15:44.120 --> 0:15:48.080 regulators toughened rules on you. Whereas if you're buying investing 0:15:48.120 --> 0:15:51.040 in something the world needs more of, you can buy 0:15:51.480 --> 0:15:53.440 an initial business, but then keep putting more and more 0:15:53.480 --> 0:15:55.920 capital into it, normally at higher average returns because you 0:15:55.960 --> 0:15:57.880 really know what you're doing as you grow that business. 0:15:58.560 --> 0:16:01.400 So that leads you to know what are the big 0:16:01.400 --> 0:16:04.880 problems the world needs to solve. Decapitalization is an obvious one. 0:16:05.320 --> 0:16:07.640 And having got our start in New Zealand, like you've 0:16:07.640 --> 0:16:10.080 got this weird superpower, right, which New Zealand's got a 0:16:10.080 --> 0:16:12.720 lot of rain and wind and not so much coal. 0:16:13.200 --> 0:16:16.680 So New Zealand's already ninety percent renewables and we could 0:16:16.720 --> 0:16:19.320 start investing in renewables in nineteen ninety four, and then 0:16:19.360 --> 0:16:20.800 as the rest of the world has caught up with that, 0:16:20.840 --> 0:16:22.440 we've said, well, here's a problem the world's got to 0:16:22.440 --> 0:16:25.000 solve that we've got an advantage in. So that's the 0:16:25.040 --> 0:16:29.160 starting point. Is actually, it's not a sustainability idea, it's 0:16:29.160 --> 0:16:32.560 actually just an investment idea. I think where a lot 0:16:32.560 --> 0:16:34.920 of our industries got itself into trouble in recent years 0:16:35.240 --> 0:16:38.000 has been where it's tried to tick the box on 0:16:38.320 --> 0:16:43.120 ESG and market ESG without actually thinking does this make 0:16:43.160 --> 0:16:45.840 my investment better? So for us, we've always just tried 0:16:45.880 --> 0:16:49.720 to stay strictly on the what is, what will good 0:16:49.760 --> 0:16:51.360 deliver the best returns and what are we good at? 0:16:52.080 --> 0:16:54.960 So while we're pulling the thread of you know, big 0:16:55.000 --> 0:16:58.120 ideas well, what's going on in the broader environment, we 0:16:58.200 --> 0:17:00.960 are seeing a lot of political volatility. You know, is 0:17:00.960 --> 0:17:02.960 there anything you know what worries you the most about 0:17:03.000 --> 0:17:06.080 that or excites you the most about that? 0:17:06.440 --> 0:17:11.080 Try and be an optimist. So the optimistic point of 0:17:11.160 --> 0:17:19.600 view is wherever there's dislocation, there's opportunities, and wherever people 0:17:19.640 --> 0:17:24.439 are taking simplistic, top down views, if you're writing the detail, 0:17:24.520 --> 0:17:31.320 you'll find opportunity. So for example, right now, the last 0:17:31.320 --> 0:17:34.880 thing most investors want to hear about is a US 0:17:34.960 --> 0:17:40.960 renewable energy idea, because they're like, don't Trump hate renewbal energy. 0:17:41.600 --> 0:17:44.960 But if you can actually work through the detail of 0:17:45.000 --> 0:17:47.359 what things will do well and what won't and exactly 0:17:47.520 --> 0:17:51.720 how will tax credits work and what energy demand from 0:17:51.840 --> 0:17:56.080 US data centers means that can they Actually I'll turn 0:17:56.080 --> 0:17:59.359 inshing fact, there's all this talk about we're going to 0:17:59.440 --> 0:18:04.520 not to renew will do gas generation. If you wanted 0:18:04.600 --> 0:18:10.480 to buy a gas turbine for a power plant right now, 0:18:10.520 --> 0:18:12.639 the earliest delivery you'd get would be twenty twenty nine 0:18:12.720 --> 0:18:17.119 or twenty thirty. So one way or another, if you 0:18:17.200 --> 0:18:20.960 need energy to fuel the data center, you're going to 0:18:21.000 --> 0:18:24.800 be using some combination of solar wind batteries unless you 0:18:24.800 --> 0:18:26.680 happen to live in the area nuclear plant that can 0:18:27.160 --> 0:18:30.320 has got access capacity. So you kind of work through 0:18:30.320 --> 0:18:32.440 all of that, and you see there's actually these really 0:18:32.520 --> 0:18:37.720 interesting micro opportunities that seem quite counterintuitive. So that's the 0:18:37.720 --> 0:18:40.439 optimist in anything great opportunity when everyone else is going 0:18:40.480 --> 0:18:43.520 to running. One way to work out where the opportunity is. Underneath. 0:18:45.480 --> 0:18:51.000 The deep worry I have is there's a risk that 0:18:51.840 --> 0:18:55.719 some things which have underpinned the whole global capital system 0:18:56.440 --> 0:19:01.200 get strained and ultimately, you know, people always talk about 0:19:01.280 --> 0:19:05.920 US exceptionalism, like what does US exceptionalism really mean? Apart 0:19:05.960 --> 0:19:09.439 from being a wonderful dynamic economy, which it definitely is, 0:19:10.240 --> 0:19:15.280 it means because you've got the reserve currency every year 0:19:15.359 --> 0:19:18.680 you get to buy all the world's stuff, run whatever 0:19:18.680 --> 0:19:21.960 it is about a seven percent budget deficit, and then 0:19:22.040 --> 0:19:24.879 hand them bits of paper saying I'll give you money 0:19:24.960 --> 0:19:27.840 later in ten or twenty years, and you keep low 0:19:27.880 --> 0:19:31.520 interest rates because you're the world's kind of reserve currency. 0:19:32.240 --> 0:19:37.680 I think that if the combination of lack of trust 0:19:37.880 --> 0:19:43.760 in US institutions along with lack of fiscal discipline means 0:19:43.760 --> 0:19:47.720 that you have a blowout in the US's ability to 0:19:47.760 --> 0:19:51.880 borrow long term, I just think that will uncover all 0:19:51.960 --> 0:19:55.359 kinds of problems in the financial system that we haven't contemplated. 0:19:55.359 --> 0:19:57.600 Because no one thought that US ten year rates would 0:19:57.600 --> 0:20:00.600 go above a certain number. So that's probably the biggest 0:20:00.840 --> 0:20:04.119 where in everything we do basically prices off US ten 0:20:04.200 --> 0:20:06.160 year bond rates, you then kind of adding your risk 0:20:06.200 --> 0:20:08.760 adjustice on top of that. What happens if that's no 0:20:08.840 --> 0:20:10.840 longer considered the risk free rate in the world. 0:20:11.400 --> 0:20:13.200 How do you think about that? Why do you think 0:20:13.240 --> 0:20:13.680 through that? 0:20:14.000 --> 0:20:19.680 There's no simple answer other than we're being really cautious. 0:20:22.000 --> 0:20:27.560 I don't think there's any really clear kind of economic 0:20:27.640 --> 0:20:29.480 winners in the long run from that, Like you love 0:20:29.600 --> 0:20:32.600 that if you go well, the US might lose in Germany, 0:20:32.600 --> 0:20:37.119 White win. But I think everyone has problems if you 0:20:37.240 --> 0:20:40.040 end up in that situation. So you just have to 0:20:40.080 --> 0:20:43.360 be cautious. So it means you want to keep borrowing 0:20:43.440 --> 0:20:45.720 levels low on your businesses, You want to understand any 0:20:45.760 --> 0:20:48.480 refinancing opportunities you want to that are coming. You want 0:20:48.480 --> 0:20:50.680 to be really kind of greedy and selfish about where 0:20:50.720 --> 0:20:54.040 you invest. So we're last year you might have accepted 0:20:54.040 --> 0:20:55.639 a return of X. Now it might be X plus 0:20:55.640 --> 0:20:59.680 two hundred or three hundred basis points, but it probably 0:20:59.720 --> 0:21:01.959 does had a really great environment from investing if you're 0:21:02.000 --> 0:21:06.080 doing it carefully. But yeah, definitely rest to the downside. 0:21:06.440 --> 0:21:09.359 Infrastructure is having a moment. What do you think is 0:21:09.359 --> 0:21:13.919 behind the global surch of interest from investors? Yeah, I 0:21:13.920 --> 0:21:15.639 mean you've always been in this infrastructure. 0:21:15.720 --> 0:21:18.000 Yeah, that's the weird thing, right. Like one of one 0:21:18.080 --> 0:21:21.960 of our favorite clients here in Australia said to me 0:21:22.000 --> 0:21:25.919 a few years ago about Morrison, it's like he's like 0:21:25.960 --> 0:21:28.000 me at Child of the nineties. He said, you know, 0:21:28.080 --> 0:21:30.280 it's like when there's that band you love all of 0:21:30.280 --> 0:21:33.000 a sudden everyone heard about and you're like, ah, they 0:21:33.119 --> 0:21:35.960 used to be my thing. Like that's how you feel 0:21:35.960 --> 0:21:37.879 a bit about infrastructure like it used to be this weird, 0:21:37.880 --> 0:21:39.680 obscure accid class that people don't even know it was 0:21:39.720 --> 0:21:43.320 an accid class and underground. Yeah, So I think there's 0:21:43.359 --> 0:21:47.280 a couple of things going on. One is everyone is 0:21:47.359 --> 0:21:51.720 realizing there's this massive investment required. So if the world's 0:21:51.720 --> 0:21:54.960 going to decarbonize, if the world's going to get much 0:21:55.040 --> 0:21:58.360 more efficient in terms of its kind of core physical 0:21:58.400 --> 0:22:02.439 infrastructure like roads, etc. A lot of capital has to 0:22:02.480 --> 0:22:07.359 go in. Also, the asset class is now expanding to 0:22:07.359 --> 0:22:09.720 cover things like data centers that hadn't been thought of before, 0:22:10.480 --> 0:22:13.119