Speaker 1: The world seems more politically polarized than ever. Ethical funds
Speaker 1: in major markets recorded record outflows earlier this year. Amid
Speaker 1: rhetoric about woke capitalism, rapidly rising defense spending has some
Speaker 1: reconsidering companies that were once too hot to touch. At
Speaker 1: the same time, some are taking an even longer view
Speaker 1: and doubling down on sustainability, calling out asset managers that
Speaker 1: don't vote with environmental concerns in mind. So, if funds
Speaker 1: are being forced to choose, how might your money be
Speaker 1: taking sides too? This week, we're talking with a fund
Speaker 1: manager taking the high road with key We say the
Speaker 1: contributions and managed assets before we hear more of that.
Speaker 1: Some important information you should always consider when investing.
Speaker 2: Investing involves the risk you might lose the money you
Speaker 2: start with. We recommend talking to a licensed financial advisor.
Speaker 2: We also recommend reading product disclosure documents before deciding to invest.
Speaker 2: Everything you're about to see and here is current at the.
Speaker 3: Time of recording.
Speaker 4: Welcome John Berry.
Speaker 3: Thank you, great to be here.
Speaker 4: Yeah, great to have you here.
Speaker 1: Look, the world seems very divided right now. Is money
Speaker 1: taking sides as well?
Speaker 3: Yeah? Look, you're right, we're in a really complex polarized
Speaker 3: world at the moment. And I think historically people saw
Speaker 3: money just as an investing is just money is a
Speaker 3: store of value, money is a medium of exchange. But
Speaker 3: now people are coming to realize, actually, how you invest
Speaker 3: your money as well will real world impacts and it
Speaker 3: really matters for the choices you make and where you
Speaker 3: invest or where you don't invest.
Speaker 1: Right, quick reminder, what is EESG ESG?
Speaker 3: ESG is an acronym that stands for environmental, social and governance,
Speaker 3: and so we can take these factors into account with
Speaker 3: how we invest. Historically, it's sort of conventional thinking around
Speaker 3: ESG is, how is it going to impact the future
Speaker 3: cash flows of a company company has governed well or
Speaker 3: governed poorly? What does that mean for the future value
Speaker 3: of the company. What does it mean for future cash flow?
Speaker 3: Am I going to make more money out of the company?
Speaker 3: Am I going to manage risk by taking ESG into account?
Speaker 3: And that's kind of different to ethical investing. Ethel Investing says, yes,
Speaker 3: that's true, you've got to take this into account to
Speaker 3: manage risk and make more money. But ethical investing is
Speaker 3: also let's put a values overlay on it, and what
Speaker 3: are values we want to take into account with investing
Speaker 3: around environmental issues or social issues, regardless of the cash
Speaker 3: flow impact on a company.
Speaker 1: Right, So, when mornings Star reported last year that there
Speaker 1: was a net drop in ESG funds, that there have
Speaker 1: been a client and just the number of funds operating
Speaker 1: out there from I think six hundred and forty six
Speaker 1: to five hundred and eighty seven. Does that suggest that
Speaker 1: there's some natural attrition going on, that these funds are
Speaker 1: just simply expiring or changing their shape or whatever, or
Speaker 1: that there's been some kind of political climate change around
Speaker 1: how appealing they are.
Speaker 3: Yeah, I think there's a few things going on there.
Speaker 3: One is around labeling, particularly in Europe, where some managers
Speaker 3: may have been using the sustainable label and perhaps when
Speaker 3: so sustainable so they were under the rules in the
Speaker 3: EU have relabeled them. So a lot of the disappeared
Speaker 3: because of the labeling issue. In part, Yes, there are
Speaker 3: very complex geopolitical factors at play in and that is
Speaker 3: influencing investment thinking. But the key thing I think is
Speaker 3: which also comes out of morning Star data, is New
Speaker 3: Zealand is unique in that every quarter for the last
Speaker 3: three years we've had positive inflows and sustainable funds. That's
Speaker 3: quite unique in the world. Even Europe is happening. It
Speaker 3: ab outflows one quarter, but there is. You know, this
Speaker 3: is more than a fad, It is actually a real thing.
Speaker 3: This moved towards sustainable investing or ethical investing.
Speaker 4: Are we late to the party? Are we mad?
Speaker 1: Are we just doing it in our own ways? What's
Speaker 1: the explanation for that?
Speaker 3: I think it's in my mind it's because New Zealanders
Speaker 3: are really starting to understand and here deeply about environmental
Speaker 3: and social issues. So when you look at what New
Speaker 3: Zealanders want or don't want in their investing, the research
Speaker 3: done by Mindful Money says that more than eighty percent
Speaker 3: of Newsealanders don't want environmental degradation, don't want human rights abuses, weapons,
Speaker 3: or factory farming, for example, a whole collection of issues.
Speaker 3: More than eighty percent of New Zealanders don't want them,
Speaker 3: and they're investing. And that number has been very high
Speaker 3: for for the last few years. So I think New Zealanders.
Speaker 3: New Zealanders care quite deeply about how the money is invested.
Speaker 1: If we took a bit about Pathfinder, and for those
Speaker 1: that haven't heard of it, don't know it, what exactly
Speaker 1: are you and how do you stand out from the
Speaker 1: rest of the crowd.
Speaker 3: So, Pathfinder, we're a fund manager, we have a key saver,
Speaker 3: we have managed funds, and our mission as a business
Speaker 3: is to generate individual wealth and collective well being by
Speaker 3: investing ethically. So we believe in this idea of ruality.
Speaker 3: This is not philanthropy, ethical investing. We had to make
Speaker 3: money for our investors. We believe you can do it
Speaker 3: in a way that not only avoids harm but also
Speaker 3: as positive benefits of the world. And I suppose that's
Speaker 3: probably you know, we've been doing this for over a decade,
Speaker 3: and that probably is what differentiates us from other managers,
Speaker 3: is that deep belief in purpose and trying to bring
Speaker 3: that investment process into life.
Speaker 1: If you look at your phone, a TV screen, anything
Speaker 1: like that, at the moment, the pictures we're seeing are
Speaker 1: pretty horrific. We're seeing what feels like nightly reports on
Speaker 1: conflicts from two extremely volatile regions in the world, and
Speaker 1: the feeling that goodness, it's all just getting.
Speaker 4: Worse and worse.
Speaker 1: How on earth does a fund manager like yourselves a
Speaker 1: pathwind to try and navigate that?
Speaker 3: Yeah, look, You're right, it is tough, and for many
Speaker 3: people there's a sensitive spare and a loss of hope
Speaker 3: and seeing the conflict is very personal seeing it. And
Speaker 3: for us we don't focus on a particular conflict and
Speaker 3: the to sides of the conflict and the politics of
Speaker 3: the conflict. We just focus on the use of weapons,
Speaker 3: and we want to avoid weapons. And you mentioned Gaza
Speaker 3: and Ukraine. You know, there's also Democratic Republic of Congo,
Speaker 3: there's Saddan, there's Momar. Weapons are being used all around
Speaker 3: the globe and tragically, it's not a new thing. If
Speaker 3: we look at the last thousand years of human history,
Speaker 3: there haven't been very long periods of peace in the
Speaker 3: world in this conflict. At the moment, the challenge is
Speaker 3: technology is getting cheaper and more novel and its use
Speaker 3: as a weapon. It's more accessible, and so as a
Speaker 3: fund manager, we need to think deeply about avoiding weapons
Speaker 3: and not being part of the economy of war.
Speaker 1: But it's getting harder to do that surely. And at
Speaker 1: the same time some are saying, well, you need to
Speaker 1: balance this argument, you know, obviously between responsible portfolios and
Speaker 1: delivering strong returns, but also the importance of defense and
Speaker 1: the challenge is posed by the ways that you defend yourself.
Speaker 3: Yeah, yeah, so the challenges you don't get to choose
Speaker 3: of the weapons used for defense, and for that reason,
Speaker 3: we'd rather not invest in weapons companies that make weapons
Speaker 3: if they can be used for offense or defense. And
Speaker 3: what I'd say around the returns is, yes, weapons companies
Speaker 3: have had strong returns in the last twelve months. Weapons
Speaker 3: companies in the S and P five hundred, they are
Speaker 3: part of the industrial sector. They make up two percent
Speaker 3: of the market, so it's a roundly small part of
Speaker 3: the market, and an investor is happy having weapons probably
Speaker 3: also has fossil fuels in their portfolio. Fossil fuels are
Speaker 3: almost three percent of the S and B five hundred.
Speaker 3: Fossil fuels have done terribly in the last twelve months.
Speaker 3: So yes, weapons have done well in the last twelve months.
Speaker 3: You've probably also got fossil fuels in the portfolio that haven't.
Speaker 3: They do kind of balance each other out. But you know,
Speaker 3: for us, we can't mitigate the fact when we don't
Speaker 3: have weapons companies, we've missed out on that return from
Speaker 3: the weapons companies. But that is our choice as an
Speaker 3: ethical investor, is not to have thosempanies in there.
Speaker 1: How then do you price or look at a company
Speaker 1: that's got mixed imperatives, A company like Boeing, for example,
Speaker 1: that has an entire defense component to its earnings and
Speaker 1: yet also handles a lot of civilian aviation, provides humanitarian support.
Speaker 1: I suppose if you look at the kind of the
Speaker 1: uses that some of the technologies put to, I mean,
Speaker 1: there'll be lots of other examples that you could probably
Speaker 1: potentially open a rocket lab or you know, even companies
Speaker 1: like Ventia or Downers that are supplying they're contracting to
Speaker 1: defense services to provide you know, base support, but at
Speaker 1: the same time they're also possibly taking care of your.
Speaker 4: Local public park. Where do you try to do you
Speaker 4: try and draw the line there?
Speaker 3: It's complex and so on the controversial weapons side, land mines,
Speaker 3: cluster munitions, zero tolerance, one of the best that all
Speaker 3: conventional military weapons. The challenge there is you're not just
Speaker 3: talking about a Lockheed Martin that designs and as symbols ware.
Speaker 3: You're actually talking about hundreds of not thousands, of companies
Speaker 3: and behind them that provide individual components that go into
Speaker 3: the weapon. It's what we say, is any company that
Speaker 3: generates more than five percent of revenue from selling into
Speaker 3: weapon systems, we won't invest in. So that if they're
Speaker 3: part of the componentry of building a weapon. Then on
Speaker 3: top of that, you've got companies that provide services to
Speaker 3: military as well. So we found we were invested in
Speaker 3: a company that trained pilots not only for civilian purposes,
Speaker 3: but train military pilots, not a weapon, but they're getting
Speaker 3: revenue from military. We wouldn't invest in a military plane.
Speaker 3: Why would we invest in the company that trains build
Speaker 3: a flight. So we set a limit of fifty percent there,
Speaker 3: and we said, okay, if they're providing services to military,
Speaker 3: if the core business is built around that, so more
Speaker 3: than fifty percent revenue, we won't invest. So it's sort
Speaker 3: of a scale of what the company is doing and
Speaker 3: how much revenue they're running from that activity.
Speaker 1: Is a lot of that freely available for the information
Speaker 1: to make those decisions.
Speaker 3: Obviously enormous amounts of data. So we actually subscribe to
Speaker 3: data from a couple of offshore providers that will draw
Speaker 3: down into listed companies and where does the revenue come from?
Speaker 3: And so yes, I mean you can find articles on
Speaker 3: companies all over the place. But you know, you can't
Speaker 3: individually search each company. You need aggregated data, and.
Speaker 1: I guess sort of really drilling, and particularly I suppose
Speaker 1: I'm just thinking, because we're still talking about the defense sector,
Speaker 1: a lot of that is inherently protected. It's kept confidential
Speaker 1: for various reasons. It's quite opaque to try and get
Speaker 1: your head around. So I imagine that that's another potential
Speaker 1: has it if you're considering investing in it, even if
Speaker 1: you think it's worthwhile, right that it's very difficult to
Speaker 1: get a clear picture sometimes of what that company is doing,
Speaker 1: who its customers are, what its prospects are.
Speaker 3: Yeah, that's true of a lot of companies that are
Speaker 3: if you think of global corporates, they've got operations all
Speaker 3: over the place, they have different business divisions, you know,
Speaker 3: things like weapons or animal testing. They're often not really
Speaker 3: forthcoming on explaining it and making and making it the
Speaker 3: information really really available. So we're relying on specialist data
Speaker 3: sources to help us with that.
Speaker 1: Okay, it sounds like quite a journey that you have
Speaker 1: to go on to really get it right and make
Speaker 1: sure that whatever is in your portfolio meets those meets
Speaker 1: that labeling you.
Speaker 3: Yeah, and we're not saying we're perfect all the time
Speaker 3: and the other challenges. The world is changing at a
Speaker 3: really fast paced and the question of what is a
Speaker 3: weapon is actually quite a hard one to answer because
Speaker 3: traditionally you just think of a weapon as a tank
Speaker 3: and or a jet fighter or a gun, but now
Speaker 3: it's also AI and data centers and data processing are
Speaker 3: being weaponized. You know, is that a weapon? And you know,
Speaker 3: so the boundaries are getting much more complicated.
Speaker 1: I guess if you're looking at some of the more
Speaker 1: kind of hope graphic companies like Palenteer, I don't know
Speaker 1: if I'm going to get in a lot of grief
Speaker 1: here with the people naming names, but there are companies
Speaker 1: that obviously have defense applications that are in the intellect
Speaker 1: in the IT space, you know, but also have tremendous
Speaker 1: cybersecurity applications that're they're there to protect people in lots
Speaker 1: of different ways. How do you make a decision about
Speaker 1: that kind of thing, that simple five.
Speaker 3: Percent sound of the five percent revenue threshold. And then
Speaker 3: you've got other companies as well that may produce something
Speaker 3: for civilian purposes and that gets repurposed or weaponized and
Speaker 3: you know, good example is Caterpillar bulldozers. The Norwegian Sovereign
Speaker 3: Wealth Fund, the largest sovereign wealth funder the world are
Speaker 3: ustollar two billion, two trillion, sorry, two trillion dollar fund.
Speaker 3: Massive fund divested from Caterpillar a week ago on the
Speaker 3: basis that their equipment was being used in Gaza for
Speaker 3: demolition effect being weaponized and the company was not doing
Speaker 3: enough to stop that. You know, pathfinder, We actually divested
Speaker 3: Caterpillar in November twenty twenty three, but large investors like
Speaker 3: in norwayia going down that pathway as well.
Speaker 1: I guess if we look at a different kind of
Speaker 1: conflict in the political climate, literally around climate, you're seeing
Speaker 1: a lot of talk about countries looking at the Paris
Speaker 1: Accord and whether they want to renegotiate.
Speaker 4: That or out of it.
Speaker 1: The US has I think maybe Eritrea and Yemen and
Speaker 1: a couple of others have too. New Zealand's discussing this now.
Speaker 1: I don't know how seriously it's being raised in the
Speaker 1: political debate. What sort of uncertainty does that create?
Speaker 3: Yeah, you're right, it has been floated recently. Should New
Speaker 3: Zealand renegotiate to withdraw? You know what I've seen is
Speaker 3: and again we need certainty of the rules on what
Speaker 3: is applying it into the future so businesses can plan
Speaker 3: can plan around that. I've seen farmers advocates and our
Speaker 3: Prime minister say we'd be mad to pull out of Paris.
Speaker 3: And the reason for that are on economic grounds is
Speaker 3: there would be retaliation against New Zealand. It has baked
Speaker 3: into our trade agreements with the European Union. There would
Speaker 3: be problems for US selling product in the European Union
Speaker 3: if we pulled out. It makes no economic sense to
Speaker 3: do that, let alone putting aside the climate argument. Just
Speaker 3: on economic grounds, it would not be good for New Zealand.
Speaker 1: But again, you've seen a lot of this kind of
Speaker 1: sovereign risk effect I suppose. I mean here they're talking
Speaker 1: about it with regards to whether or not some of
Speaker 1: those big power generating companies that are on a renewables
Speaker 1: path but also are still using a bit of coal
Speaker 1: may or may not be broken up. You look in
Speaker 1: the States, all kinds of measures to support green technology
Speaker 1: and solar and so on were sort of pushed aside.
Speaker 1: And that one big, beautiful built act makes it really
Speaker 1: complicated to make a decision about what is actually a
Speaker 1: safe investment, even if you're trying to invest sustainably, responsibly, ethically,
Speaker 1: however you want to put it.
Speaker 3: Yeah, look on that front of you, right, the one
Speaker 3: big beautiful act. You know, it was hard on renewables companies,
Speaker 3: the renewable sector, but the reality is the world is
Speaker 3: transitioning to a lower carbon future. And so you know,
Speaker 3: we can't turn off fossil fuels today and expect civilization
Speaker 3: to function. But we have to recognize we are transitioning,
Speaker 3: and we have to realicate cap all to renewables in
Speaker 3: lower carbon future, and those companies are going to thrive
Speaker 3: long term. That's where the money's going to be made.
Speaker 3: There is investment going into fossil fuels globally. You know,
Speaker 3: I would question the sanity of a lot of that
Speaker 3: investment given on a ten twenty year horizon. A lot
Speaker 3: of those assets may have no value as we decarbonize,
Speaker 3: They may not be as useful as they are now.
Speaker 3: They may have a short time horizon.
Speaker 1: So is that the sort of a time horizon that
Speaker 1: pathfinder uses ten twenty years?
Speaker 3: Well with our setting our vision for the future. So
Speaker 3: our vision is to fund the transformation to a better world.
Speaker 3: We were thinking one hundred years future when we describe
Speaker 3: the world, and one hundred years we want and what that
Speaker 3: means for distribution of wealth, what it means for ecosystems.
Speaker 3: How fast that transition had happened. Well, it needs to
Speaker 3: happen faster, run and slower to keep within the boundaries
Speaker 3: that the planet can cope with. But you know, it's
Speaker 3: not going to happen within years. It's going to be
Speaker 3: within decades.
Speaker 1: There's also been some researcher I think recently around people's
Speaker 1: appetite for this kind of thing. Something like forty nine
Speaker 1: percent of investors that mindful money we're talking to saying, hey, look,
Speaker 1: we would consider a switch to ethical in five years.
Speaker 4: What does that even mean?
Speaker 1: I mean, like, surely if you think something is worthwhile,
Speaker 1: you're going to get into it now.
Speaker 4: And if you're saying in.
Speaker 1: Five years that's like we should catch up for a coffee,
Speaker 1: It's like it's not going to happen. How real is
Speaker 1: that appetite?
Speaker 3: You think? So with that was actually within the next
Speaker 3: five years, So not in you know, in five years time,
Speaker 3: but within the next five years. And I think that
Speaker 3: just reflects you know, people are time poor at the moment,
Speaker 3: they realize they need to do a lot of research
Speaker 3: to weigh up the options, and they know it's it's
Speaker 3: complex and nuance and at the moment when it comes
Speaker 3: to money in mortgages, household budgets probably take priority over
Speaker 3: thinking about am I going to move my KBI savers?
Speaker 3: Another part of for example, it's something on their radar,
Speaker 3: but it may not be an immediate priority. So I
Speaker 3: think part of it is about time. Part of it
Speaker 3: is not knowing where to get the right research and
Speaker 3: trusting the research because it's quite a big decision to
Speaker 3: make to move in line with your values. And I
Speaker 3: just encourage people to go to the website which did
Speaker 3: the research, which is mindful money dot nz independent. They
Speaker 3: do all the thinking for you in terms of the
Speaker 3: transparency of beholdings, what may be in a keep savior
Speaker 3: that's good or bad, and providing returns and feed information
Speaker 3: as well. So they've done the thinking and provided the
Speaker 3: data there. I just encouraged people to visit that website
Speaker 3: to accelerate the five years to something closer to now.
Speaker 1: You mentioned trust's an important thing, and you mentioned labeling
Speaker 1: that's an important thing too. I just wanted to mention
Speaker 1: you had a few words with the regulator of the
Speaker 1: FMA last year around an issue that they'd picked up. Yeah,
Speaker 1: and I comparaphrase it or you can talk, but basically
Speaker 1: they'd said, how yours was a completely ethical product, and
Speaker 1: then there was a bit of a reference to a
Speaker 1: couple of particular companies that were in the portfolio that
Speaker 1: had engaged in limited animal testing. Yeah, and also there
Speaker 1: was an exception or carve out for Contact because although
Speaker 1: it was thermal coal, you felt it was on a track,
Speaker 1: but you hadn't kind of made that super clear.
Speaker 3: Is that what was the problem? Yeah? Look, please then
Speaker 3: thank you for raising that. If you think about investing,
Speaker 3: there's sort of three sides to what we do. There's
Speaker 3: the policy of how we invest in our ethical approach,
Speaker 3: there's our portfolio of what we're actually invested in. And
Speaker 3: the third limb is how we talk about it and
Speaker 3: how we tell people about it. And we let ourselves
Speaker 3: down with how we talked about it and tell people
Speaker 3: about it. And the example you gave was Contact. Our
Speaker 3: investment policy says we won't invest in fossiphuel expiration production
Speaker 3: or companies that burn coal to produce electricity. We made
Speaker 3: an exemption for contact energy on the basis that it
Speaker 3: generates power through burning fossil fuels. However, they have a
Speaker 3: pathway to net zero and its credible pathway. They're regarded
Speaker 3: as a leader in the world around decalbanization. In our
Speaker 3: advertising we explain we don't invest in possibil companies. We
Speaker 3: should have said either mentioned the contact a little less
Speaker 3: as a little astracts and mentioned contact, or we should
Speaker 3: have just said FOSSi fuel extraction and production. But we
Speaker 3: had that exception for FOSSi fuel. Similarly, with animal testing,
Speaker 3: we ran some advertizing it said we don't invest in
Speaker 3: companies that test on animals. We have granted a small
Speaker 3: number of exceptions, and often there in what we call
Speaker 3: the transformational bucket, which is a company that's producing synthetic skin,
Speaker 3: but unfortunately, to prove so this is going to do
Speaker 3: away with the use of animal products in the future,
Speaker 3: but to prove the product works, I need to test
Speaker 3: it on animals. So we've granted them an exception on
Speaker 3: the basis that their product is transformational and we'll change
Speaker 3: that category and the use of animal products.
Speaker 1: So that's a long horizon approach rather than just sort
Speaker 1: of looking at the immediate movements.
Speaker 3: Yeah, and like you said, we should have mentioned that
Speaker 3: at the strengthen talked about that in our advertising.
Speaker 1: As an ethical fund manager to suspect that your investors
Speaker 1: aren't just looking for return. They want you to vocalize
Speaker 1: that and the kind of votes that you make or
Speaker 1: the kind of communications you have with the company, and.
Speaker 3: The way we talk to companies, the way we invest
Speaker 3: And that's a challenge from the perspective of there is
Speaker 3: no perfect company. So every company you invest in has
Speaker 3: both got attributes and bad attributes, and you need to
Speaker 3: make trade offs between the two. And I'll give you
Speaker 3: an example of Tesla. So Tesla we invested in years
Speaker 3: ago because we love the mission of Elon Musk to
Speaker 3: essentially drive decarbonization not just the car you have in
Speaker 3: the garage, but of transport. And so he was leading
Speaker 3: in the transport in the decombanization, electrification space.
Speaker 1: And apouting batteries in just about every driveway. Right, So
Speaker 1: that's a whole other thing that's happening too.
Speaker 3: Yeah, So there's that powerful drive. But you look at
Speaker 3: the company from an ESG perspective, like governance, pretty bad
Speaker 3: governance right, that's one person who's controlling the show, and
Speaker 3: it's always going to lead trouble in large companies. Environmental
Speaker 3: and social issues around supply chain, for example, and where
Speaker 3: you get the rear earth and minerals from. We sort
Speaker 3: of weighed that the mission, you know, outweighed the the
Speaker 3: ESG harms. But more recently we've said, actually, other car
Speaker 3: companies are now catching up to Tessa and have followed
Speaker 3: that leadership. We don't need to invest in the company
Speaker 3: with the concerns we have around So where she sold
Speaker 3: it earlier this year, you.
Speaker 4: Have sold all your testa Yeah, wow, yeah, what are
Speaker 4: you buying?
Speaker 3: What are we buying? Oh, look we've got you know,
Speaker 3: there's there's plenty of tech companies, you know mag seven,
Speaker 3: there's fantastic opportunities there. But Tesla is no longer in
Speaker 3: the portfolio.
Speaker 4: Wow, big moment.
Speaker 1: If I can turn just back locally again, We've sort
Speaker 1: of got an interesting political climate, I would say, where
Speaker 1: you've got a lot of phrases thrown around about red
Speaker 1: and green tape, and I think one of the parties
Speaker 1: has had to crack up woke lending the idea that
Speaker 1: banks have got both climate related disclosures, but also maybe
Speaker 1: lending preferentially on broadly green or renewable topics, and that
Speaker 1: might be costing others who don't want to necessarily undertake
Speaker 1: that kind of lending. All of that sort of stuff.
Speaker 1: Does that send What sort of a message do you
Speaker 1: think that sends to potential investors that are looking at
Speaker 1: New Zealand and from you know, from your point of
Speaker 1: view as a fund manager, do do you have anything
Speaker 1: to say about that?
Speaker 3: The political environment is complicated and polarized globally and we're
Speaker 3: seeing parts of that in New New Zealand as well.
Speaker 3: You know, what are international investors think of New Zealand.
Speaker 3: Sure they're interested in New Zealand because we're safe, secure,
Speaker 3: politically stable, you know, legal system is robust, We're perceived
Speaker 3: as green. But the challenge on the flip side is
Speaker 3: we less than point two percent of global equity markets.
Speaker 3: And when you look at our listed companies, we've got
Speaker 3: a lot of infrastructure and power companies, but we're really
Speaker 3: lacking in high growth tech companies in our listed markets.
Speaker 3: So for international investors, you know, we're interesting, but we're
Speaker 3: kind of at the margins. Where I think they're interested
Speaker 3: is in the private market space. There's a lot going
Speaker 3: on in New Zealand with private companies, green technology space,
Speaker 3: SaaS companies, some really really interesting companies in New Zealand
Speaker 3: and they're attracting international attention in capital and is.
Speaker 1: That the kind of thing that Pathfinder is also exploring
Speaker 1: opportunities with, either from the funds management side or even
Speaker 1: from the k save side, because we're seeing a little
Speaker 1: bit more private private equity exploration thereby some of those
Speaker 1: Keyisaver funds an't.
Speaker 3: We Yeah, Look, I've been an advocate for over a
Speaker 3: decade for keypsaver investing into private assets before long before
Speaker 3: I had to KIVSAB. We'll ran path one a KEPSAB.
Speaker 3: I think it's great for Enzidink to create jobs and
Speaker 3: drive innovation and keep our talented people in the country.
Speaker 3: It's also great from an investment a portfolio perspective for
Speaker 3: KYP Saver investors long term to have access to the
Speaker 3: SASSE class. So yes, a Pathfinder, we're invested in great
Speaker 3: companies and New Zealand companies like Mint Innovation, which extracts
Speaker 3: metals from e waste, Loadstone which is producing solar energy
Speaker 3: for New Zealand. The cheapest energy source in New Zealand.
Speaker 3: You know there's a host social housing. We've invested in
Speaker 3: several social housing social housing projects, commercial return, but at
Speaker 3: the same time it's great social benefit.
Speaker 4: None of them are listing.
Speaker 1: None of them look like they have a will list,
Speaker 1: to be quite honest, I mean, is that a problem
Speaker 1: that we're not getting that kind of i PO level
Speaker 1: disclosure and exposure so that people can take a look,
Speaker 1: a very clear look at the market and a bit
Speaker 1: of liquidity in there as well.
Speaker 3: Yeah, and look, hopefully some of them will list and
Speaker 3: choose to list in New Zealand rather than listen in Australia.
Speaker 3: But from a keyvsaver because their private asseats and they're
Speaker 3: not liquid, they can only ever be a small part
Speaker 3: of a kiwisaver. So for us it's around five percent
Speaker 3: of our key savers in these private as seats. But
Speaker 3: because the because of the portability of keep sav everyone
Speaker 3: can transfer the KEYPSAB to another provider at any time
Speaker 3: it's appropriate for it to be. It's important, but it's
Speaker 3: a small part of the KIW saber.
Speaker 1: Would you like to see that twitched or changed it
Speaker 1: all slightly? Just a little bit that five percent is
Speaker 1: sorry that that's what that's.
Speaker 3: What we see it. That's what we see it. And
Speaker 3: because there is no guidance in New Zealand a round,
Speaker 3: so providers like us and separ other providers are really
Speaker 3: focused on the private seat space. We're sort of trying
Speaker 3: to work out what is the right right level. We've
Speaker 3: been quite conserve a bit of it, setting it at
Speaker 3: five percent.
Speaker 1: Yeah, I mean you mentioned that there's some data out
Speaker 1: on key we Saver as a scheme broadly across the
Speaker 1: across the board just today, one hundred and seventy five
Speaker 1: thousand transfers within schemes in the last year. That's probably
Speaker 1: the highest that's ever been. So people are switching, they
Speaker 1: are making more are definite choices about where they want
Speaker 1: to place their keep saver. Is that are you seeing
Speaker 1: let people go or people come?
Speaker 3: We're seeing people come. Yeah, absolutely, we're seeing people join pathfinders.
Speaker 3: So every month for us, were yet new people joining
Speaker 3: and on pleased to say our tune rate, which is
Speaker 3: people leaving, is way lower than the market average of
Speaker 3: a pathfinder.
Speaker 1: So the stats out I think key we sab funds
Speaker 1: as that would have been in March probably one hundred
Speaker 1: and twenty three billion invested, which is pretty sizeable, sort
Speaker 1: of a figure one point five six of that in
Speaker 1: what you would call socially responsible according to the definition
Speaker 1: that the FMA provided, that seems like quite a small number.
Speaker 1: We're talking about one percent of KEI WE SAB funds
Speaker 1: being in socially responsible funds. Do you see that picture
Speaker 1: when you look across the market.
Speaker 3: No, Look, I don't see that picture, and I question
Speaker 3: the categorization that's been used to come up with one
Speaker 3: point five percent. I believe the number is much much higher.
Speaker 1: Than one point five to six billion, I think. But anyway, yeah, yeah, yeah, okay,
Speaker 1: so that's that's that's a little over one percent. Then, look,
Speaker 1: I would say it's much higher than that. You know,
Speaker 1: a pathfinder.
Speaker 3: We're a smaller provider with about five hundred and fifty
Speaker 3: million in KII SABER, but the values driven sustainability driven
Speaker 3: key WE SABER choices of New Zealanders is much much
Speaker 3: higher up than that. I think it's borne out in
Speaker 3: the mydful money of research. We talked about twenty percent
Speaker 3: of kiwis, you know, in responding to the survey are
Speaker 3: saying they're invested in ethical law sustainable funds. That doesn't
Speaker 3: quite match up with the fma's categorization.
Speaker 1: Yeah, I'm according to them, there are three times as
Speaker 1: many four and a half four point six billion in cash, right,
Speaker 1: I mean it's easy to count cash, right, cash as cash. Yeah,
Speaker 1: but I guess your definition of what's a socially responsible
Speaker 1: fund you might be a bit trickier. And that takes
Speaker 1: us back to where we started, right.
Speaker 3: Yeah, Look, it's how do you label it and what's
Speaker 3: It's not just the labeling, it's actually the reality of
Speaker 3: what is in that fund and how has that fund invested?
Speaker 3: What are the values that are the values that are
Speaker 3: driving the investment process?
Speaker 1: Again, Ken we saver just in the last of a well,
Speaker 1: it's someddenly to become a political football. You've got one
Speaker 1: of the big parties saying, hey, we want to make
Speaker 1: it compulsory, we want to take it to ten percent.
Speaker 1: They're not quite clear on the details the costs. Is
Speaker 1: there a risk there if people tinkle with can we savor?
Speaker 1: That it kind of kills some of that ability to
Speaker 1: transform the economy, to lift people's savings and to provide
Speaker 1: that potential capital into those private assets that you're talking about.
Speaker 3: Yeah, I think consistency of the rules around key WE
Speaker 3: saver is really really important because people need confidence of
Speaker 3: what the rules are and understanding when they can access it,
Speaker 3: so you can open your qpsaber at sixty five. It's
Speaker 3: really important people have that certainty and know their contributions
Speaker 3: will be accessed and it will provide for them in retirement.
Speaker 3: The increase ten percent that one of the parties has
Speaker 3: floated in Australia it's twelve is the contribution from employers,
Speaker 3: which is why their balances are so high in Australia,
Speaker 3: which is why Australians are probably going to have a
Speaker 3: better retirement than New Zalanders. We need to lift the
Speaker 3: savings rate in New Zealand. We've got to be careful
Speaker 3: how we do that with this that people can afford
Speaker 3: to put much higher contributions into their quivsaber and equally
Speaker 3: it's a burden. You can't shift it all on to
Speaker 3: the employers. So the best way to do it is,
Speaker 3: in my mind, has actually come up with a ten
Speaker 3: year plan and say over the next ten years we're
Speaker 3: going to be increasing contributions. This is what it looks like,
Speaker 3: and step it out in a really gentle, really well planned,
Speaker 3: well signaled.
Speaker 4: Way and try and get everybody to sign up to
Speaker 4: agree to it along the way. Good luck with that.
Speaker 3: Well, I don't think people necessarily disagree with we need
Speaker 3: to save more for retirement. It's just where does a
Speaker 3: burden fall and over what time period? And that's what
Speaker 3: we need to be really clear about is the fairness
Speaker 3: of the sharing and spreading it over a long time period.
Speaker 1: It's a lot to think about. Thank you, John, and
Speaker 1: thank you all for your time, whether you will watching,
Speaker 1: all listening. We know that time is precious and we
Speaker 1: want to know what you thought about this, So let
Speaker 1: us know for us kumatu that shared lunch for now,