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Speaker 1: Jordah and welcome to Shed Lunch brought to you by Chase's.

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Speaker 1: I'm Helen Madison, and today we look at what it's

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Speaker 1: like to invest in times of conflict. The Israeli Iran

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Speaker 1: US ceasefire is fragile at best, but it's been a

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Speaker 1: new wrecking time for investors to find out what all

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Speaker 1: this means. I'll be joined by Nicholas Bagnell, who is

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Speaker 1: the founder of the global equities fund t Ahu Mairangi,

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Speaker 1: and our own Chezi's Matt McPherson, who is the head

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Speaker 1: of Kbsaber. But before we get started, here's some important information.

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Speaker 2: Investing and involves a risk you might lose the money

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Speaker 2: you start with. We recommend talking to a licensed financial advisor.

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Speaker 2: We also recommend reading product disclosure documents before deciding to invest.

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Speaker 2: Everything you're about to see and here is current at

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Speaker 2: the time of recording.

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Speaker 1: Welcome Nicholas, and welcome Matt.

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Speaker 3: Thank you som the US.

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Speaker 1: Markets seem to have taken in their stride if you

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Speaker 1: like the conflict that we've been seeing that's been playing

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Speaker 1: out in the last fortnight or so. Nichourse, I wanted

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Speaker 1: to start with you and to see what you thought

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Speaker 1: about this business of riding back into positive territory when

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Speaker 1: it is a time of conflict.

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Speaker 3: Yeah, I guess at one level, I am cautious about

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Speaker 3: the level of equity markets, but I don't know that

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Speaker 3: the conflict necessarily has wide negative implications for the share market.

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Speaker 3: It's there are very few Western companies that have much

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Speaker 3: revenue from Iran or even from the Middle Eastern in total,

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Speaker 3: which is different to say, the Ukraine Russian conflict, where

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Speaker 3: you had quite a few Western companies that might have

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Speaker 3: had two or three or four percent of their revenue

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Speaker 3: coming from Russia before that conflict broke out, and that

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Speaker 3: essentially disappeared for them. So that the main main implication

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Speaker 3: for companies that are operating in Europe and Asia and

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Speaker 3: North America is what it does to the oil price.

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Speaker 1: Yes, oil has gone down up, and it seems like

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Speaker 1: any gains that have retreated that didn't seem to happen

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Speaker 1: from my memory with the Ukraine Russia situation so quickly.

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Speaker 1: What is happening with the oil price? Is it? What

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Speaker 1: are the reasons why it might have fallen again?

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Speaker 3: I'm no expert on it, but I think it's because

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Speaker 3: Iran's done nothing as of yet to block the Straits

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Speaker 3: of Humas, which takes oil in and out of the

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Speaker 3: Persian Gulf, which I think is about twenty percent of

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Speaker 3: the world's oil production moves through there, and that was

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Speaker 3: the major concern that saw the oil price moving up

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Speaker 3: as this conflicts was starting. I mean, it is still

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Speaker 3: affecting oil supply because I gather that a lot of

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Speaker 3: shipping companies aren't particularly keen to send to send ships

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Speaker 3: into the Persian Gulf. But you know, the world has

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Speaker 3: been well supplied with a will in the last few months.

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Speaker 3: Even when the oil price spiked up, it's i think

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Speaker 3: still lower than it was a few months ago, so

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Speaker 3: it's not at a level that's causing stress for many companies.

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Speaker 1: As you say, we're not quite sure where this will

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Speaker 1: all go. I mean, the big question is where or

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Speaker 1: what Russia may or may not do, And it may

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Speaker 1: not be immediate, it may be a bit further down

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Speaker 1: the track, and there has some commentators have suggested that

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Speaker 1: they would want to kind of flex their muscle again

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Speaker 1: in the Middle East, and that they might even help

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Speaker 1: in some way to get Iran's nuclear capability back in

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Speaker 1: some form. What's your view on the Russian situation.

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Speaker 3: I don't think the Russians want to be involved.

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Speaker 2: Again.

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Speaker 3: It looks to me like Putin is all about Russian

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Speaker 3: self interest. He's not a man of principle and the

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Speaker 3: you know, they were mates with Basha in Syria, but

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Speaker 3: they didn't intervene when that regime falled, so fell. So

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Speaker 3: I'm sure they'll use it to point to hypocrisy between

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Speaker 3: the US and Israel breaching international law. While you know,

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Speaker 3: they were condemned when they did it with Ukraine, but

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Speaker 3: they are fully occupied with Ukraine. They're struggling there. I

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Speaker 3: don't think they want to divert any military resources to Iran.

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Speaker 1: What about our biggest trading partner, China.

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Speaker 3: They were happy to buy oil from Iran when the

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Speaker 3: rest of the world was boycotting them. But I don't

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Speaker 3: think that they have any interest in getting involved. So, yeah, we.

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Speaker 1: Shall see times ahead. I'll bring you in here speaking

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Speaker 1: of conflict and times of conflict. We have launched today.

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Speaker 1: She'sy's the self select for the key we Saver scheme

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Speaker 1: that we run. And some would say, gosh, why would

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Speaker 1: you be doing that when we've had a week like

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Speaker 1: we have, So yeah, keen to get your thoughts on there.

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Speaker 4: Yeah, we launched about fifty five companies and ETFs from

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Speaker 4: the US markets this morning. And I'm not going to

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Speaker 4: say we weren't paying attention to what was going on,

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Speaker 4: but I guess, you know, this US trading feature has

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Speaker 4: been our most commonly requested feature from customers. We've been

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Speaker 4: on this for several quarters. Our plans to bring this

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Speaker 4: to life are phased over weeks. We have a lot

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Speaker 4: of delivery and testing and things that we go through.

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Speaker 4: So I guess we just took our own advice, which

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Speaker 4: is don't try and time the market, and so when

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Speaker 4: we were ready, you know, we rolled out. That happened

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Speaker 4: to be today. But yeah, nervous over the weekend about

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Speaker 4: what was happening for our scheme. I guess also just

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Speaker 4: nervous about what it could mean, you know, for the world,

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Speaker 4: and or that people were in terrible situations as well

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Speaker 4: in that part of the world.

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Speaker 1: Yeah, we must remember that too. So far, Chesse investors

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Speaker 1: seemed to have not taken the fear too seriously with

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Speaker 1: the conflict. There haven't been not of selling or panic

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Speaker 1: or anything like that. Do you think there will be

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Speaker 1: a bit more caution with something like this, though given

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Speaker 1: the situation, who quite knows where it's going to end.

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Speaker 4: Yeah, I think so. I mean twenty twenty five has

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Speaker 4: been pretty choppy, and we had Liberation Day in April,

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Speaker 4: which was around the time that we launched another US

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Speaker 4: themed fund. And I guess what we see more and

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Speaker 4: more is a really mature who are kind of approach

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Speaker 4: from investors around volatility. There has been a number of

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Speaker 4: significant events we you know, I think people learned a

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Speaker 4: lot from COVID about acting on emotion, certainly with respect

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Speaker 4: to changing their their KIV saver kind of their funds.

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Speaker 4: And I think people, you know, you can be upset,

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Speaker 4: you can be you can be concerned. But I think

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Speaker 4: what people get, and I speak to a lot of

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Speaker 4: customers about this, is they get that that the worst

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Speaker 4: thing they can do is actually act in haste and

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Speaker 4: try and you know, switch their settings off the base

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Speaker 4: of sort of sentiment and things like that. So back

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Speaker 4: to the basics. You know, understand your investment horizon, your

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Speaker 4: your ability to be able to deal with volatility, and

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Speaker 4: then you know, let time.

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Speaker 1: Work for you. Nicholas, You've been investing professionally for more

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Speaker 1: than thirty five years. You've seen conflicts come and go.

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Speaker 1: I'm conscious to see, and a lot of that was

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Speaker 1: actually with ACC, wasn't it. I mean probably the majority

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Speaker 1: of that time was with ACC. And you you're picking

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Speaker 1: stocks for wholesale and retail investors. I'm keen to see

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Speaker 1: what your views are on how to protect the assets

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Speaker 1: of investors, particularly in times of conflict. I mean you

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Speaker 1: will have seen a few, would you say to that.

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Speaker 3: Yeah, we follow a sort of a lower risk approach,

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Speaker 3: So we emphasize investing in load to average risk companies

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Speaker 3: and avoiding volatile companies where we don't have good visibility

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Speaker 3: about future earnings. And that that does mean that we

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Speaker 3: you know that the fund that we manage it tends

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Speaker 3: to fall a lot less during market decline. So you know,

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Speaker 3: certain types of companies, cyclical companies, the ones that are

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Speaker 3: trading on high valueations, are more vulnerable in times of uncertainty.

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Speaker 3: So rather than relying on on making timely decisions when

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Speaker 3: conflict breaks out, we at all times tend to hold

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Speaker 3: companies with a relatively certain future that won't be too

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Speaker 3: affected by you know, a spike in the oil price

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Speaker 3: or something like that. I mean, you can you can

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Speaker 3: still get caught out when when Russia invaded Ukraine. We

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Speaker 3: had some companies that did have a little bit of

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Speaker 3: earnings from Russia and that hurt us in a very

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Speaker 3: small way. But it's so it's partly about diversification, but

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Speaker 3: it's it's also about not investing too heavily in companies

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Speaker 3: that heavily dependent on economic conditions and over the long run,

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Speaker 3: even though investors have done well from taking risk when

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Speaker 3: they move from bonds into equities, within the equity market,

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Speaker 3: there's been no better return from the highest risk companies

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Speaker 3: than they are from the lowest risk. So there's no

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Speaker 3: reward for risk within the equity market. There is from

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Speaker 3: moving from fixed interest into equities. So we prefer to

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Speaker 3: invest in low risk companies within the equity market because.

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Speaker 1: You still think you can get the returns or history

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Speaker 1: has shown and you can get the returns as opposed

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Speaker 1: to sticking with the high risk which jumps into and

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Speaker 1: has FAUMO and all of that. Yeah, okay, And that said, though,

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Speaker 1: you need to be able to research those companies. For

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Speaker 1: the poor old retail investor who's kind of looking around

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Speaker 1: and seeing what their friends are doing and everybody else,

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Speaker 1: that might be a bit more difficult, mightn't it.

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Speaker 3: Yeah, though generally I would say it's easier to research

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Speaker 3: less risky companies than it is ones at the more

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Speaker 3: volatile end, because if you're buying a Tesla or an Nvidia,

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Speaker 3: you're you're really guessing about what they will look like

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Speaker 3: in a future that looks vastly different from today. If

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Speaker 3: you're buying a regulated utility or a company that's selling

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Speaker 3: something like laundry powder, you know that that market's not

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Speaker 3: going to be that much different in a decade time

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Speaker 3: than it is now. And if market shares shift, they

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Speaker 3: shift slowly. So yeah, we as a general rule, we

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Speaker 3: find companies where you can be relatively certain about the future,

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Speaker 3: also the least risky ones.

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Speaker 1: Right, Okay, Matt. If we look at the self select

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Speaker 1: key we saver launch that we've got, that's that's as

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Speaker 1: you said before, fifty plus stocks. Are there any defense

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Speaker 1: related stocks.

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Speaker 4: In that Yeah, I wouldn't say there are any that

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Speaker 4: are specialist defense companies in that list. There are a

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Speaker 4: number of companies that are classified as defense of aerospace

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Speaker 4: set within say, within the index, within the s P

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Speaker 4: five hundred, the companies like Boeing and Lockheed Martin and

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Speaker 4: names like that, they are categorized. Those are not companies

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Speaker 4: we offer individually, but they are components of several of

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Speaker 4: the major indices.

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Speaker 1: So through ETFs, I could be investing in those, is

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Speaker 1: what you're saying, that's correct.

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Speaker 4: And then there are other companies that have defense contracts.

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Speaker 4: So companies Pounteers are pretty well known company that has

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Speaker 4: defense contracts, even though it's not segmented as being a

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Speaker 4: defense or aerospace company itself.

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Speaker 1: I suppose it's defining what defenses, isn't it. Whether whether

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Speaker 1: we're talking manufacturer weapons, But there's many, many aspects. It's

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Speaker 1: quite a general term.

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Speaker 4: Yeah, it's a challenging area, I guess because you know,

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Speaker 4: companies probably like coke and pepsi and things probably supply

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Speaker 4: to the defense force and so, but I wouldn't say

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Speaker 4: that the defense orientated.

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Speaker 1: Companies interesting, isn't it? Yeah, Nicholas. If we look at

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Speaker 1: the US dollar, that always has a bearing, particularly given

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Speaker 1: it sort of like the global currency, if you like.

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Speaker 1: I do know though that it went up and it

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Speaker 1: went down a little bit like the old price. I

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Speaker 1: suppose it does seem to be though that its popularity

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Speaker 1: is less than perhaps during other conflicts I mean, we've

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Speaker 1: seen a lot of sovereign funds, some central banks considering

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Speaker 1: their reserves being and other things besides the greenback. I'm

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Speaker 1: just keen for your perspective on the US dollar and

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Speaker 1: whether we think that has a bearing on So you're

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Speaker 1: investing in the US, I think forty seven percent of

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Speaker 1: the funders in the US. Yeah, So how does currency

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Speaker 1: correlate with investing offshore? Particularly the US currency?

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Speaker 3: What's I mean? It is an essential part of your

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Speaker 3: portfolio everists. I mean generally, if you're investing in companies

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Speaker 3: that that operate globally, there's there's a there tends to

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Speaker 3: be a partial offset between local currency, share price movements

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Speaker 3: and currency movements. So if you're buying you know, the

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Speaker 3: likes of Microsoft or Apple that is selling around the world,

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Speaker 3: if the US dollar goes down, then the value of

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Speaker 3: their non US revenues goes up, so you get a

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Speaker 3: partial offset. The I mean, I I don't have any

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Speaker 3: strong views on the US dollar and certainly how it

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Speaker 3: should be affected by the outbreak of the conflict that

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Speaker 3: has tended at the very much at the margin to

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Speaker 3: be a sort of a bit of a flight to

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Speaker 3: safety sometimes and and and during you know, currencies like

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Speaker 3: the end have tended to be more have have had

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Speaker 3: a stronger tendency to outform during market weakness, but they

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Speaker 3: don't necessarily when it's to do with strong oil prices

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Speaker 3: because they are neting boards over well. But I mean,

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Speaker 3: the US economy has a lot of issues with big

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Speaker 3: fiscal and trade death sits and and and certainly the

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Speaker 3: what Trump is talking about doing in terms of the

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Speaker 3: sort of revenge taxes could turn a lot of people

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Speaker 3: off investing. And you know what is already that the

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Speaker 3: world's most expensive share markets, so you know there are

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Speaker 3: risks to holding that much exposure to the US dollar.

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Speaker 4: I guess what we see talking to customers is the

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Speaker 4: big brands coming out of the states that are global

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Speaker 4: that people buy from often the ones that people also

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Speaker 4: want to own part of. And I guess that's why

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Speaker 4: we have so many people asking us, you know, when

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Speaker 4: we're going to include some US companies in our KIP saver.

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Speaker 4: People feel quite strongly about some of these brands, and

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Speaker 4: they've been lifelong customers of them, So I think it's

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Speaker 4: probably comes at it for US as more of a

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Speaker 4: consumer kind of lead demand rather than the pure technicalities

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Speaker 4: of investing.

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Speaker 3: I think.

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Speaker 1: Nicholas just thinking about New Zealand and whether or not

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Speaker 1: this conflict and with an investor lens, whether that has

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Speaker 1: any bearing for people here or our economy. Inflation, for example,

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Speaker 1: there has been talked with that if oil prices do

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Speaker 1: rise again, it'll be inflationary. Just ye, ken on your perspective.

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Speaker 3: Certainly, if oil prices rose a lot further than we've

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Speaker 3: seen so far, they could have a bearing on inflation.

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Speaker 3: And the New Zealand dollar is also can have a

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Speaker 3: bigger influence. It's New Zealand dollars off obviously off, it's

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Speaker 3: it's it's lows, which is deflationary.

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Speaker 1: But that's right, yeah, Matt. In terms of the keep

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Speaker 1: we Saber funds, if oil prices were to rise and

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Speaker 1: it was inflationary, what would there be an effect there?

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Speaker 1: Can you explain what perhaps could?

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Speaker 4: I mean? The classic scenario is that if oil prices

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Speaker 4: go up, businesses costs go up, they passed them on

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Speaker 4: to consumers, which is inflationary, and then central banks around

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Speaker 4: the world will want to step in and try and

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Speaker 4: curb that by increasing interest rates. And you know, increased

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Speaker 4: borrowing costs is generally not good for businesses, and so yeah,

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Speaker 4: oil prices increasing, I think translates to a headwind for

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Speaker 4: business like globally. Now that's kind of the theory. I

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Speaker 4: don't know what's going to happen in this situation where

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Speaker 4: you know, but but yeah, I mean, rising oil prices

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Speaker 4: translates to a lot of pain for a lot of

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Speaker 4: people right throughout the system.

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Speaker 1: I think maybe a question for you, Nicholas, I mean

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Speaker 1: rising oil prices, as oil as powerful as it used

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Speaker 1: to be, as we decarbonize, isn't it eventually a sunset industry?

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Speaker 3: It is, And certainly oil consumption as a proportional GDP

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Speaker 3: has come down over time, so it's less important than

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Speaker 3: once was. And certainly I mean in terms of dollars,

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Speaker 3: when when you're talking about whether it's six or seventy dollars,

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Speaker 3: that's that is less significant for companies and and for

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Speaker 3: inflation than when you were talking about one twenty or

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Speaker 3: one forty. It's sort of so yeah, it's certainly what

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Speaker 3: we've seen so far in the conflict is not really

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Speaker 3: moving the need all that much. And as I said before,

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Speaker 3: you know, I think if you look back at the

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Speaker 3: start of the year, we probably had oil prices but

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Speaker 3: higher than they are today.

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Speaker 1: So yeah, yeah, that's right. Yeah, Matt, just getting back

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Speaker 1: to something that you said before about investors and getting

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Speaker 1: more use to volatility. What about if you don't have

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Speaker 1: a lot of time, or that you're thinking you might

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Speaker 1: like to get a deposit for a house. What can

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Speaker 1: people be thinking about? What can investors be considering given

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Speaker 1: that there could be more volatility? Or it's about writing

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Speaker 1: it out.

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Speaker 4: Yeah, I think I'll just repeat like a really well

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Speaker 4: tried in line here, which is, understand your investment horizon.

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Speaker 4: If you are looking at investing in equities, have a

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Speaker 4: ten year horizon. If you need your money back in

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Speaker 4: less time than that, then think about are a more

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Speaker 4: conservative allocation?

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Speaker 1: Mm hmm, as in you're thinking, yeah, look at it.

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Speaker 4: All depends on that time. I mean, you know, within

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Speaker 4: a couple of years, you'd be looking at a conservative

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Speaker 4: be certainly looking hard at conservative funds, you know, two

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Speaker 4: to five balanced funds. We've seen a lot of people

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Speaker 4: over time end up in situations where they were trying

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Speaker 4: to take their money out at exactly the wrong time,

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Speaker 4: and with hindsight, those people that they should have understood

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Speaker 4: your investment horizon.

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Speaker 1: Now I want to ask you both before we finish,

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Speaker 1: what should investors be thinking about when there is conflict

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Speaker 1: in the world, given that a lot of our investors,

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Speaker 1: particularly are invested offshore.

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Speaker 3: Nicholas, I mean, I would caution against making changes to

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Speaker 3: your portfolio because of the outbreak of conflict. And you know,

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Speaker 3: good investment is about choosing a portfolio. We shouldn't have

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Speaker 3: to change it where you don't suddenly realize you've got

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Speaker 3: a risk when conflict breaks out. So yeah, I would.

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Speaker 3: I mean, sometimes market reactions or lack of reaction can

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Speaker 3: create an opportunity, but there's there's no It's going to

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Speaker 3: be different each time. So you shouldn't think that there's

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Speaker 3: some simple rule that you should buy something or sell

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Speaker 3: something when conflict breaks out. You know, we're all always

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Speaker 3: looking at companies trying to fore cars what future cash

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Speaker 3: flows we think they can deliver to shareholders and see

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Speaker 3: is that a good return and is it better than

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Speaker 3: we can earn elsewhere, So we can repeating that in

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Speaker 3: analysis whether we've got conflict or not. But it's not. Yeah,

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Speaker 3: there's no simple rule that you should buy A and

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Speaker 3: sell B when conflict breaks out.

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Speaker 1: Matt, what's your perspective because I mean, a lot of

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Speaker 1: key we saver investors probably you know, listen to the

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Speaker 1: news or watch it and you know on social media,

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Speaker 1: and we have a lot more coming at us now

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Speaker 1: and it might be harder to resist fear or whatever

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Speaker 1: might be happening at the time. So, yeah, what's your perspective. Yeah?

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Speaker 4: Interesting. On the weekend I saw a number of professional

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Speaker 4: professionals and commentators advising people not to look at their

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Speaker 4: KIPI savers again, and like, it's good advice, don't get

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Speaker 4: me wrong, but it's also not the advice that those

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Speaker 4: professionals follow themselves, you know, And so you know, if

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Speaker 4: it's really good advice, then it should be for everyone.

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Speaker 4: I think just contrary to that, I think confident investors

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Speaker 4: are comfortable with volatility and portfolio is they realize that

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Speaker 4: that's an element of a healthy market and reflects that

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Speaker 4: they've got risk in their portfolio, which over the long term,

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Speaker 4: you know, risk equals well translates into into returns to

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Speaker 4: something which type of risk. Yeah, I seen, But I

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Speaker 4: guess the point is I'm not a believer in ignoring it.

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Speaker 4: I think I think to become confident, I don't think

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Speaker 4: you should always put your head in the sand. I

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Speaker 4: think the only way to get to get comfortable with

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Speaker 4: it is through some experience.

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Speaker 1: Thanks Nicholas and Matt, and thank you for joining us.

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Speaker 1: You can watch Shared Lunch on YouTube or follow us

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Speaker 1: on your favorite podcast s app leave us a rating

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Speaker 1: and tell us what you'd like to hear next. Ma

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Speaker 1: Towa