Speaker 1: An active manager will look at bad news and say, hmm,
Speaker 1: does that bad news fundamentally change the strategic price of
Speaker 1: this company. What we've seen is Tariff's being introduced, Tariff's
Speaker 1: not being understood, a huge amount of noise in the US,
Speaker 1: and the market now readjusting and saying, you know, it's
Speaker 1: not quite as positive as we thought it was going
Speaker 1: to be. Well, it's stalking, but probably what I'd call
Speaker 1: is good research, good research, quality insights, understanding where you
Speaker 1: believe the company should fundamentally be valued versus where it's
Speaker 1: valued today.
Speaker 2: Curakoto, Welcome to Shared Lunch. I'm Garth Bray. Active investing,
Speaker 2: picking what to buy, sell or hold. It can be
Speaker 2: an experience or rewarding journey, but not for the faint hearted.
Speaker 2: At the same time, it's easier than ever to opt
Speaker 2: in to exchange traded funds ETFs and adopt a more
Speaker 2: passive strategy. So we're talking to investment strategists and experts
Speaker 2: about those two approaches, active and passive. And today we're
Speaker 2: joined by the CEO of Pie Funds, Anna Marie Lockyer.
Speaker 2: We'll be talking in an upcoming episode to a passive specialist,
Speaker 2: and it's important to think of these as two halves
Speaker 2: of the same game. But before we get into all
Speaker 2: of that, here some important information you should always consider
Speaker 2: when investing.
Speaker 3: Investing involves the risk you might lose the money you
Speaker 3: start with. We recommend talking to a licensed financial advisor.
Speaker 3: We also recommend reading product disclosure documents before deciding to invest.
Speaker 3: Everything you're about to see and here is current at
Speaker 3: the time of recording.
Speaker 2: Welcome, Hi, Welcome to shared lunch.
Speaker 1: Thank you for having me Gar.
Speaker 2: Look, when we talk about active investing, is it literally
Speaker 2: just the art of picking winners?
Speaker 1: I mean, active investing is a strategy. We're an investor
Speaker 1: or a company like Pie Funds. An active investment manager
Speaker 1: will make deliberate decisions to buy, sell, or hold a stock.
Speaker 1: They'll make those decisions in an attempt to outperform the
Speaker 1: market or a specific benchmark, and they may do that
Speaker 1: based on research, market trends, valuations, or experience. Passive investing,
Speaker 1: on the other hand, is in contrast, the goal really
Speaker 1: is just to match the market returns, like tracking an
Speaker 1: index that might be the NZX fifty, that might be
Speaker 1: the S and P five hundred. Investors there will typically
Speaker 1: just use ETFs or index funds which have a lower
Speaker 1: fee to aim to match market performance. I was I
Speaker 1: overheard a call actually this morning with our investment experts
Speaker 1: who said the DAX, which is the German index of
Speaker 1: their top companies, had had a fifteen percent increase over
Speaker 1: the last year. Fifty eight percent of that fifteen percent
Speaker 1: increase came from one stock. So if an investor is
Speaker 1: sitting in a passive fund, they are going to get
Speaker 1: the fifteen percent increase. If an investors sitting in an
Speaker 1: active fund and their active manager has researched the companies
Speaker 1: within that index and chosen SAP, which had contributed fifty
Speaker 1: eight percent, they would overweight SAP, for example.
Speaker 2: And that's where you get the difference.
Speaker 1: And that is where active managers truly aim to add
Speaker 1: performance over the long term.
Speaker 2: Is that hard to explain to some clients, I suppose
Speaker 2: because they might be a little bit nervous and thinking, oh, gosh,
Speaker 2: it's a lot of volatility. Can I trust these people
Speaker 2: to write it out for me?
Speaker 1: Yeah, I think. I mean, a passive investor will get volatility.
Speaker 1: An active investor may get more or less volatility, depending
Speaker 1: on how the composition of the portfolio is playing out. Again,
Speaker 1: if we're thinking about kipsaver investors and the need to
Speaker 1: accept volatility, it is really important they think about the
Speaker 1: long term. Recently, there was a little bit of volatility
Speaker 1: in the market and that would have been experienced by
Speaker 1: both passive and active investors, and one of our clients
Speaker 1: change the profile of their fun choice from a growth
Speaker 1: fund to a conservative fund. You know, over long term,
Speaker 1: growth funds obviously give far greater returns. We call them
Speaker 1: up the next day to have a chat to them
Speaker 1: to say, you know, are you comfortable with that, You're
Speaker 1: still quite young, are you comfortable to move to have
Speaker 1: less exposure to growth assets today? And have you made
Speaker 1: an informed decision? The response was, I had a couple
Speaker 1: of wines, I panicked, and therefore I probably didn't make
Speaker 1: the right decision. So thanks for sharing the information with me. Actually,
Speaker 1: the right thing for me today is to stay in
Speaker 1: a growth type asset.
Speaker 2: So that sounds like a lot better than a hangover.
Speaker 1: Yeah, that's for sure, as far greater outcomes over long time,
Speaker 1: long term that's.
Speaker 2: For long hanger, right, I guess. So looking at how
Speaker 2: Pythons does that, you talk about outperforming markets by investing
Speaker 2: in growth companies where do you start with identify some
Speaker 2: of those growth picks.
Speaker 1: I guess Pythons started back in two thousand and seven
Speaker 1: where Mike Taylor actually as an eighteen year old started
Speaker 1: making money from South by investing in growth companies and decided,
Speaker 1: actually he'll share some of those skills with clients, so
Speaker 1: he formed Pie Funds, and Pie Funds is all about
Speaker 1: active investment, Understanding companies, understanding what makes companies tick, understanding
Speaker 1: who's running companies, to make picks where we're going to
Speaker 1: add performance.
Speaker 2: So if you are thinking about a company where you
Speaker 2: are looking at that situation of trying to add performance
Speaker 2: or make an investment decision, how do you identify which
Speaker 2: ones to go with?
Speaker 1: I love sitting with our Australian investment team. They are
Speaker 1: on the ground in Sydney. They are talking to companies
Speaker 1: every single day. They're reading reports of companies every single day.
Speaker 1: They know what's happening in those companies and they have
Speaker 1: the air to the ground. They have the phone or
Speaker 1: the front door of the CFO, the CEO of organizations
Speaker 1: to try I understand what's happening in a company, who's
Speaker 1: running that company, what management buying, isn't that company and
Speaker 1: therefore starting to make decisions about how strong that company is,
Speaker 1: where it's heading, and how it might be priced into
Speaker 1: the future versus how it's priced today.
Speaker 2: So you're talking about knowing the people. So that's a
Speaker 2: little bit of talking to them and a little bit
Speaker 2: of stalking, right, a little bit of looking at the results. Sorry,
Speaker 2: probably not the way that you would phrase it, but
Speaker 2: you actually how much of that is just one to
Speaker 2: one gaining information about that company.
Speaker 1: Look, I think when you're playing for growth companies and
Speaker 1: you're playing for small cap companies and you're trying to
Speaker 1: add value over and above the index, you really need
Speaker 1: to be connected to those companies. So call it stalking,
Speaker 1: But probably what i'd call is good research, good research,
Speaker 1: quality insights, understanding where you believe the company should fundamentally
Speaker 1: be valued versus where it's valued today, and that will
Speaker 1: help you make a decision as to whether you should
Speaker 1: be buying, whether you should be selling, or whether you
Speaker 1: should be holding.
Speaker 2: I guess you and a lot of other active fund managers, though,
Speaker 2: are going to be chasing all of those same tips.
Speaker 2: Is there a particular inside route that you take?
Speaker 1: Look, I think the beauty of the team in Sydney.
Speaker 1: Is they're on the ground with those companies, they can
Speaker 1: knock on the door. They're in there in the time zone.
Speaker 1: And also with the team in the UK, they're in
Speaker 1: there in the time zone, so they know what's happening
Speaker 1: in real time with those companies. Look, there's a big
Speaker 1: universe out there. At PI Funds, we play to add
Speaker 1: value in the smaller universes, in smaller caps, and that's
Speaker 1: what's really important to be over and close to those companies.
Speaker 2: Sure, I guess because a lot of those companies don't
Speaker 2: necessarily get massive exposure in media, for example, or they're
Speaker 2: not closely covered by analyst notes and the kinds of
Speaker 2: paperwork that might be flowing around information that other investors
Speaker 2: might get access to.
Speaker 1: Yeah, look, I think I mean a number of research
Speaker 1: things that our teams would be looking at absolutely broken oes,
Speaker 1: research notes, relationships, word on the street. But that in
Speaker 1: itself is not enough. Then they will create my models.
Speaker 1: Then they will work on models and ask questions and
Speaker 1: also ask those questions direct of the companies to try
Speaker 1: and get a feel for actually is it fundamentally priced
Speaker 1: different today to where we'll believe in the future, or
Speaker 1: actually now is the time to sell because actually we've
Speaker 1: seen it reach where we think it's profits are going
Speaker 1: to get to, and let's take the gains for our investors.
Speaker 2: I guess if we're thinking about right now and the
Speaker 2: sort of extraordinary volatility we've seen just in the last
Speaker 2: couple of weeks, not just stuff coming in from the
Speaker 2: political spectrum, but just with sort of results from some
Speaker 2: of those enormous market leaders in the US, is this
Speaker 2: a point where the active approach is really starting to
Speaker 2: take some risks, where you've got some opportunities but also
Speaker 2: some big risks to consider. Yeah.
Speaker 1: Look, I think risk management's really important around active management obviously,
Speaker 1: But I've just jumped off call with our Aussie investment
Speaker 1: team and they've just finished the Australian reporting season. And
Speaker 1: in the Australian reporting season, of course all companies front
Speaker 1: up with their result. They do it over a sort
Speaker 1: of three to four week period of time, and there
Speaker 1: has been the most extreme volatility within the reporting results,
Speaker 1: with a lot of them reporting really really good results
Speaker 1: at the beginning and a big sell off and then
Speaker 1: prices falling quite steeply and then increasing again and adjusting.
Speaker 1: You know, they've seen obviously that revenues have stayed with
Speaker 1: minimal growth, but margins are increasing through really really strong
Speaker 1: cost management. So then they're starting to think, well, what
Speaker 1: does that mean for us? Where are the winners and
Speaker 1: losers going to be? Where do we take the profits?
Speaker 1: Because this volatility is just up and down at the
Speaker 1: moment in the reporting season, and they've made some big
Speaker 1: calls on some big companies at the right time to
Speaker 1: take those profits. I mean, in terms of volatility around
Speaker 1: the world. End of last year, I think everyone thought, great,
Speaker 1: Trump's in and Trump's going to drive a lot of
Speaker 1: value for US businesses, and the markets all started reading
Speaker 1: into that thinking, you know what, great, We're on an
Speaker 1: upward trajectory in the US. Obviously, over the last two months,
Speaker 1: what we've seen is Tariff's being introduced, Tariff's not being understood,
Speaker 1: a huge amount of noise in the US in terms
Speaker 1: of Trump's policies coming through, and the market now readjusting
Speaker 1: and saying, you know, it's not quite as positive as
Speaker 1: we thought it was going to be. So, you know,
Speaker 1: it's a really really hard time for a passive fund
Speaker 1: to be trying to understand what's out there, Which is
Speaker 1: the beauty of having active managers really looking understanding the
Speaker 1: markets and making calls based on real time information. Yeah.
Speaker 2: If I think about some of those contemporary issues, one
Speaker 2: that's sort of blown up as this whole idea around
Speaker 2: companies following or not following or abandoning DEI policies and
Speaker 2: that kind of thing. That's kind of a topical issue
Speaker 2: at the moment. We're seeing a lot of push and
Speaker 2: pull from corporates inside the US at the moment. Apple's
Speaker 2: been in a bit of a showdown with the White
Speaker 2: House around that, I think, And we've also think seen
Speaker 2: quite a lot of those ESG funds perhaps closing or
Speaker 2: some of them some of them shutting down. And I
Speaker 2: mean I've got politicians here that are accusing our major
Speaker 2: banks of being woke. When you, as a fund manager
Speaker 2: are looking at that, I mean, do you think investors
Speaker 2: are less likely now to consider a company which doesn't
Speaker 2: have that kind of policy or that they're they're there
Speaker 2: that doesn't take their ESG commitments seriously or is there
Speaker 2: still that appetite Like.
Speaker 1: I think ESG has moved on a long way for
Speaker 1: any company, and certainly as an active manager, we look
Speaker 1: at ESG, we have a responsible investment policy, which means
Speaker 1: for every company that we invest in, there have to
Speaker 1: be certain criteria to be considered to ensure that it
Speaker 1: meets our policy. Look, if I turn back the clock,
Speaker 1: maybe say ten years ESG was something on the side.
Speaker 1: SG now in today's world is actually priced into valuations
Speaker 1: of organizations, and therefore ESG whilst you say they might
Speaker 1: be closing down, actually ESG is actually considered in the
Speaker 1: fundamental now of both stock picking valuations and therefore are
Speaker 1: priced into the models.
Speaker 2: So it's very mainstream in that it's.
Speaker 1: Becoming far more mainstream.
Speaker 2: Absolutely, And on the DEI stuff, that's a little too
Speaker 2: early to tell.
Speaker 1: Look, I think DEI is a moving feast, isn't it.
Speaker 1: I think there is absolute evidence that DEI does support
Speaker 1: great outcomes for businesses and there will be continuing I mean,
Speaker 1: despite Trump's call on it. I think corporates will continue
Speaker 1: to see the benefits. As you know, if I looked
Speaker 1: ten years ago at ESG, that was separate. DEI will
Speaker 1: be mainstream.
Speaker 2: If you are looking at other themes as an investment manager,
Speaker 2: what are you looking around and spotting there?
Speaker 1: I guess a few things that we would look at
Speaker 1: as an active investment manager would be undervalued stocks or
Speaker 1: in fact overvalued stocks in terms of the decision to sell.
Speaker 1: But let's take an undervalued stock. For example, there might
Speaker 1: be a really well run company that has some temporary
Speaker 1: bad news that's going to affect the share price. A
Speaker 1: passive fund will take that bad news and it'll just
Speaker 1: hit the index. An active manager will look at that
Speaker 1: bad news and say, hmm, does that bad news fundamentally
Speaker 1: change the strategic price of this company and its outlook?
Speaker 1: Take for example, in Nvidia sold off a couple of
Speaker 1: weeks ago on the deep seek news twenty percent. I
Speaker 1: think drop on the day.
Speaker 2: Yeah, massive, like a trillion dollar loss, but.
Speaker 1: Absolutely however fundamentally quite a strong company. So a number
Speaker 1: of active managers at that point might have gone, you
Speaker 1: know what, we might be continuing to hold, or we
Speaker 1: might acquire a little bit over this period of time
Speaker 1: as we see how that deep seek news plays out.
Speaker 2: Whereas a passive manager is just going to track whatever
Speaker 2: is going on our adjustments accordingly, I guess.
Speaker 1: I kind of I kind of align a passive manager
Speaker 1: to a community football team. Everyone's going to go and
Speaker 1: they're going to have a go. They're going to have
Speaker 1: a play. Some will be great, some won't be so good,
Speaker 1: you know, As opposed to an active manager, which is
Speaker 1: more like a Premier league team, they'll be looking at
Speaker 1: the conditions, they'll be looking at the players, they'll be
Speaker 1: looking at the opposition. Then they'll be pulling a team
Speaker 1: together and making sure they've got the best team on
Speaker 1: the day for those conditions.
Speaker 2: Premier league teams tend to come with pretty high prices
Speaker 2: on the players, you know, and big ticket prices too.
Speaker 2: So the fees part of all of this is something
Speaker 2: that people often raise and say, hey, look, you're paying
Speaker 2: a lot. Obviously it costs a lot to do all
Speaker 2: of these run, all these models, do this research, have
Speaker 2: these skilled professionals taking a look. So how do you
Speaker 2: make that argument? How do you say, hey, look, it's
Speaker 2: money well spent because that is going to come off
Speaker 2: whatever returns that you're achieving in.
Speaker 1: Yeah, I think first and foremost what I'd say to
Speaker 1: any investor, be it a KEYP saver investor or a
Speaker 1: shares investor, you shouldn't be looking at fees. You should
Speaker 1: be looking at returns after fees. At the end of
Speaker 1: the day, investment process is trying to grow your retirement
Speaker 1: nest egg or your savings nest egg and therefore it'll
Speaker 1: be the outcome of a number of things, performance, fees,
Speaker 1: et cetera. So look at what you are getting after
Speaker 1: fees as opposed to focusing on the fees. Yes, active
Speaker 1: investing does attract higher fees, and that, like you say,
Speaker 1: is due to research, analysis, frequent trading and the like.
Speaker 1: On the other hand, passive investing doesn't because you know,
Speaker 1: they're just simply tracking it index do.
Speaker 2: We think we make it easy and as there are
Speaker 2: a pretty settled format now for being able to compare
Speaker 2: returns net of fees and so on, so that I
Speaker 2: guess so that investors actually are looking out there or
Speaker 2: people that are looking at a key, we save a
Speaker 2: plan and they can literally compare across to see where
Speaker 2: it's likely to get them.
Speaker 1: Yeah, it's funny because I mean sorted a number of
Speaker 1: other providers morning Star provide returns after fees, and they
Speaker 1: are absolutely available. A lot of platforms will still, you know,
Speaker 1: show here's your return, here's your fees, and of course
Speaker 1: an individual goes straight to fees and they shouldn't be.
Speaker 1: But yeah, I think look as as our investors continue
Speaker 1: to I guess consider the final outcome and the impact
Speaker 1: of that final outcome, then they will more and more
Speaker 1: look at returns after fees.
Speaker 2: Do you look at I know there are some pretty
Speaker 2: substantial studies produced by Speva. The index versus active reports
Speaker 2: is one that sort of seems to consistently say, hey, look,
Speaker 2: on average, most active funds struggle to beat the market.
Speaker 2: And they would point that up as sort of an
Speaker 2: example of saying, hey, this is something you need to
Speaker 2: consider with investing. These other indexes as well that would
Speaker 2: look around and pick particular funds, some of them yours,
Speaker 2: and particular moments where you're doing better. How do you
Speaker 2: explain all of that information? How do you deal with
Speaker 2: all of that?
Speaker 1: I had a quick look this morning at the latest
Speaker 1: KYP Saver morning Star results, and over the last one,
Speaker 1: five and ten years, active managers have been top of
Speaker 1: the pops in each of those categories, you.
Speaker 2: Know, in terms of ahead of the returns above above
Speaker 2: the rutuns passive absolutely.
Speaker 1: So if you kind of think of it in such
Speaker 1: a way that you know passive is going to track
Speaker 1: down the middle, active managers are going to sit on
Speaker 1: either side. There will be periods of course where they
Speaker 1: gain and above the benchmark and periods where they're behind
Speaker 1: the benchmark. But over the long term, active managers have
Speaker 1: added more than the benchmark.
Speaker 2: So what do you think it's particularly in the last
Speaker 2: couple of years that that's been the case.
Speaker 1: I mean, I think long term. Are you talking about
Speaker 1: speavers results here? I mean it's been you know, quite
Speaker 1: a volatile period over the last couple of years in
Speaker 1: terms of markets and some there will be a lot
Speaker 1: of active providers that are obviously winning in those markets
Speaker 1: in some that aren't.
Speaker 2: If you're thinking about the sort of time lines that
Speaker 2: they're talking about there one year, three year, five, When
Speaker 2: you're looking at making investments, what's long term?
Speaker 1: Look, I mean, that's a really good question. When do
Speaker 1: you need the money? What are you going to be
Speaker 1: using the money for? I mean, as a twenty five
Speaker 1: year old who's saving for their retirement, you know that,
Speaker 1: and they'll probably take a little bit of a dip
Speaker 1: at some point in time when they're buying their first house.
Speaker 1: But the long term's forty five to call it sixty
Speaker 1: five years now with increasing mortality rates, so that is
Speaker 1: pretty long term.
Speaker 2: You know.
Speaker 1: More generally, I think long term investing across all of
Speaker 1: the funds in New Zealand, you would say anything sort
Speaker 1: of over seven to ten years is a long term?
Speaker 2: Is that a long enough term? I'm thinking we've got
Speaker 2: some very long term problems. Does it just get too
Speaker 2: complicated to sort of push things out beyond that or
Speaker 2: is it that need of money?
Speaker 1: And well, I think this is where fun choice comes in,
Speaker 1: you know, because anything where you're investing, anything where you're
Speaker 1: investing for a period over ten years, you'll probably be
Speaker 1: looking at a growth fund or a high growth fund
Speaker 1: because that's where you will get greater returns over the
Speaker 1: long term. And I think, you know, looking at any
Speaker 1: shorter is really are you coming to retirement in the
Speaker 1: next five years? Do you need the funds for family,
Speaker 1: for property? And that's where you might dial down your
Speaker 1: risk a little bit and have that certainty.
Speaker 2: I guess if we're looking at the activity that you
Speaker 2: do as an active fund manager, you're kind of testing
Speaker 2: the market, aren't you. You're kind of discovering prices so
Speaker 2: to some extent, then are the passive funds kind of
Speaker 2: taking a bit of a free ride on you.
Speaker 1: Well, I think the passive funds aren't really doing too much.
Speaker 1: I mean, the passive funds, in my eyes, are like
Speaker 1: a train getting from A to B on a train track.
Speaker 1: You know. The active funds are probably more like having
Speaker 1: a GPS in there and they're kind of going, oh,
Speaker 1: my goodness, there's a bit of traffic here, or there's
Speaker 1: a bit of weather here, and therefore we're going to
Speaker 1: have to take this route to get there quicker or faster.
Speaker 1: Whereas the train you kind of just actually that noise
Speaker 1: in the market you're probably not making decisions on because
Speaker 1: you are just buying the index and you're taking the
Speaker 1: ups and downs with the index. I think one of
Speaker 1: the bigger risks that those are impassive funds need to
Speaker 1: consider obviously, is that you know, in periods of underperformance,
Speaker 1: you will just take the underperformance, whereas an active manager
Speaker 1: will be working hard to consider where the opportunities are
Speaker 1: to beat the index in terms of that underperformance. They
Speaker 1: might be doing that maybe because you know, they've recognized
Speaker 1: the market trend. For example, one market trend you know
Speaker 1: that I kind of look back in our portfolios is
Speaker 1: around Spotify. At the beginning of COVID, you know, we
Speaker 1: were looking at what Spotify might do where they're going
Speaker 1: to play a place in streaming? Where are they going
Speaker 1: to play a place in podcasts? And that's been a
Speaker 1: fabulous investment for our portfolios. You know, through through research,
Speaker 1: through insights, through foresights, I guess on what might happen
Speaker 1: at an industry level. The other thing that an active
Speaker 1: investor might do, you know this point around downturns, is
Speaker 1: they might look at futures in terms of exposure to
Speaker 1: sort of high risk sectors and they can apply, for example,
Speaker 1: short the market via selling futures, where of course passive
Speaker 1: and benchmark lead funds won't be able to do that.
Speaker 2: Right. That's obviously a slightly more risky kind of derivative
Speaker 2: that you're dealing with there, But that's the kind of
Speaker 2: latitude that you'd have.
Speaker 1: Absolutely yep, that you know how much cash you might
Speaker 1: hold in periods of uncertainty, so that you can deploy
Speaker 1: that cash quite quickly when you think there's really good
Speaker 1: buyers to have that are going to add value to portfolios.
Speaker 2: So haw's the cash count looking at the moment at pipe,
Speaker 2: I think, look, I think you've got a good war chest.
Speaker 1: No, I think I mean, I think we're probably sitting
Speaker 1: at about ten to twenty percent in cash, and that's
Speaker 1: available obviously for liquidity, but also to deploy where those
Speaker 1: opportunities come up.
Speaker 2: Like, it must be hard to filter that noise out
Speaker 2: of the market that you would talking about there, because
Speaker 2: there just seems to be so much going on.
Speaker 1: It's funny. I was reading something the other day around
Speaker 1: the noise in the market has never been greater. You know,
Speaker 1: take America for example. In the past, decisions would be
Speaker 1: made in the White House. They would then be well
Speaker 1: thought about and pushed out publicly. But today decisions are
Speaker 1: being discussed in real time like theater. Effectively, you're watching
Speaker 1: you're watching what's happening out there. But it is really
Speaker 1: important to get back down to the fundamentals of a
Speaker 1: company that you're investing in, the fundamentals of a region,
Speaker 1: or the fundamentals of a sector in terms of where
Speaker 1: we might play and shuffle investments around in those spaces,
Speaker 1: and the noise has to be filtered otherwise you kind
Speaker 1: of drown.
Speaker 2: Yeah, I guess if we're thinking about that big picture,
Speaker 2: I'm thinking about something that you said before about one
Speaker 2: of the risks with indexes just just tracking down and
Speaker 2: following down there I mean, is there that risk that
Speaker 2: passive investing winds up inflating the value of some of
Speaker 2: those market leaders. And I'm thinking about the end said,
Speaker 2: not just the instex perhaps where you've got a company
Speaker 2: like Fisher and Pikel Healthcare that's a huge part of
Speaker 2: the market. But it's the same picture really in the
Speaker 2: United States and the S and P where you've got
Speaker 2: seven companies effectively dominating, and we're dominating, we're dominating.
Speaker 1: Not so much dominating at the moment. Yeah, Look, it
Speaker 1: is really interesting in terms of the rise of passive
Speaker 1: investing and the increase of flows going into passive vesting,
Speaker 1: which I think you know is now up to about
Speaker 1: half of all investable money around the world's going to passive.
Speaker 1: So of course that will pump up prices up within
Speaker 1: within the index and given the demand for following the index.
Speaker 1: And again I guess I kind of again, look an
Speaker 1: example of where we might look at and we can
Speaker 1: bring it back home to New Zealand. Two, you know
Speaker 1: a couple of funds in New Zealand that you might
Speaker 1: look at and kind of go, if you've got two
Speaker 1: retirement two retirement type businesses that you're looking like a
Speaker 1: ryman's in a sumset, sitting in an index, and you're
Speaker 1: kind of going, which one are you going to go for?
Speaker 1: The index might get both. An active manager will look
Speaker 1: at and make a call on one of them, and
Speaker 1: one of them now is sort of playing at five
Speaker 1: percent above and one is playing one percent above in
Speaker 1: terms of returns over the last year. You know, it's
Speaker 1: an active management. You know, we made the right choice.
Speaker 1: We went for the one that's got five percent above,
Speaker 1: you know. But that is part of the challenge of passive.
Speaker 1: You're going to get a one and a five, which
Speaker 1: is going to give you a lower average.
Speaker 2: What might be the risks, you think, to sum it up,
Speaker 2: that are worth considering before you take a solely passive
Speaker 2: investing approach rather than combining or looking at active.
Speaker 1: Yeah, look, I think there's probably three. I mean, passive
Speaker 1: assumes that markets are always efficient and that's not the case,
Speaker 1: you know. So one would be no risk management. A
Speaker 1: passive fund won't adjust your exposure if a sector or
Speaker 1: a company becomes overvalued or risky. Number two is there's
Speaker 1: missed opportunities. Passive funds can't capitalize on the miss pricing
Speaker 1: or emerging trends before they're widely recognized. And that's what
Speaker 1: our experts are there to do for our investors. Understand companies,
Speaker 1: understand markets, understand miss pricing, make those investments, understand when
Speaker 1: to take profits. And I think, look, if a passive
Speaker 1: fun tracks an index that's heavily weighted towards underperforming companies,
Speaker 1: the investors of course may experience, you know, undervalued returns
Speaker 1: for them. So look one percent, I think one percent
Speaker 1: increase in performance for a key we saver investor at
Speaker 1: the age of twenty five will contribute two hundred thousand
Speaker 1: dollars to their retirement nest egg when they're sixty five
Speaker 1: years old. You know, that's a big difference in terms
Speaker 1: of return. So if you can outperform the industry, if
Speaker 1: you can outperform benchmarks over the long term by one percent,
Speaker 1: you're adding two hundred thousand dollars to your retirement saving
Speaker 1: nest egg. And that retirement saving nest egg is for
Speaker 1: you to pay yourself pocket money when no one else
Speaker 1: is paying you.
Speaker 2: It's a great place to leave it. I think, thanks
Speaker 2: very much, Jenna Cool, thank you Gas, and thank you
Speaker 2: whether you're listening on Apple or Spotify, or iHeart or
Speaker 2: watching on YouTube. Make sure you lock in so you
Speaker 2: get that next episode that gives you the passive perspective
Speaker 2: to balance what we've heard about active investing today and
Speaker 2: all those other great insights you'll get from the shared
Speaker 2: lunch episodes. Quid with two. That's us for now,