00:00Give us your take on how, you know, what lens are you looking at the geopolitical uncertainty through?
00:06I think one of the first things that these sorts of environments teach us is the basics of investing,
00:12you know, how important it is to have a diversified portfolio and to have thought about resilience ahead of time.
00:18Because once you're in these sorts of moments, there's not a lot you can do about it in the moment.
00:23What you're relying on is that you've built a great portfolio,
00:26that you understood the exposures that you've got in that portfolio and that you've thought through how resilient it is.
00:33In the moment, of course, we are, like everyone else, watching the news and waiting for hopefully an end to
00:41the war
00:41and things will start to sort of settle down.
00:43But it really is all about the preparation of your portfolio before you find yourself in these situations where value
00:49is preserved and grown.
00:51And are you comfortable that that prep has paid off?
00:54I mean, are you worried about, for example, higher inflation and how that feeds through to your debt portfolio?
00:59Absolutely.
01:00So I think inflation is an issue that investors should be a little more worried about,
01:06not just because of the spike that we've had in energy prices.
01:10I think that's obviously an immediate wake-up call for it.
01:14But there's a lot of other sort of structural pressures on inflation that I think are a bit of a
01:19concern.
01:20We've been hearing at this conference here about the enormous amount of capital that's getting drawn into things like AI
01:27and the energy transition and other things.
01:29And that is an inflationary pulse in itself which will go on for decades.
01:33So much money being drawn in people need to build these things and we've got to find the resources to
01:39do all that.
01:40And this is at a time when this concept of fiscal dominance is in the world.
01:45So we have governments running fiscal deficits.
01:48There's a generally populist leaning.
01:51There's a desire to want to spend perhaps a bit of pressure on central banks not to raise rates too
01:57much.
01:58All of these things create an environment which was already there.
02:02And now, of course, we've got this sort of energy price spike on top of that.
02:07So I think inflation is certainly something that investors should be concerned about.
02:12Again, they needed to have protected their portfolio before the unexpected inflation arises.
02:18So I think this is when we find out whether investors have been thinking these things through.
02:23For our part, we're very fortunate.
02:25A lot of our exposure is in the infrastructure space, which is a fabulous asset class for dealing with these
02:32sorts of things,
02:33long-term contracts and generally inflation protection characteristics.
02:37But these are the things that investors certainly should be thinking about.
02:40Your point about fiscal largesse and the trend that we've been on for a while now.
02:44How do you feel about, I guess, inefficiency of capital deployments?
02:52Sure. I mean, I think a lot of what the governments are doing isn't necessarily inefficient.
02:57A lot of what they've got to do is support things like the energy transition.
03:02They've got to support defence.
03:05These are, I don't think you've described those as inefficient allocations of capital.
03:10They are enormous allocations of capital that governments have got to find the money for.
03:15And, of course, rising health care costs in society and those sorts of things still need to be dealt with.
03:21So I think it is important that governments find a way to get these capital investors.
03:27I think they need help.
03:28This is actually an opportunity, in our view, for private sector to kind of get involved and help solve some
03:36of these problems
03:36that the government can't afford, its defence bill, its health care bill and its energy transition bill all at the
03:42same time.
03:44So governments are going to be thinking through what assets should they own?
03:48Do they need to own?
03:49What assets actually can private sector help out with?
03:52And how do they interact with the private sector on that?
03:54And I think that's a really interesting opportunity.
03:56How do you feel about private credit?
04:00Private credit, there's a very strong level of sentiment, as you'd know.
04:04I'm sure you've reported on a lot.
04:06I think the sentiment is running ahead of what's on the ground.
04:09I think there's no doubt been an enormous shift of capital into the space.
04:15So there's a big demand for credit investments that's occurred.
04:19Whenever you get a big step change in supply and demand, there are going to be some issues that come
04:25with that.
04:26But I think we've seen some people perhaps in the wrong vehicles and realising that actually they don't have the
04:32liquidity that they thought they had.
04:35Is this a retail problem?
04:37I don't think it's a retail problem.
04:39No, I think it's the emergence of an asset class into retail.
04:44I don't think we've seen enough yet to describe that as a problem.
04:46I think it is just a, look, people need to understand what the asset class is, what it entails, what
04:53risks you're taking on.
04:55I think we're in the emergence of that asset class into the retail pocket.
04:59Some issues, sure, but I don't think it's a major.
05:04I don't think the sentiment quite reflects what's going on on the ground.
05:07You've talked about the appeal of infrastructure.
05:08What's the appetite at the moment like from institutional for infrastructure?
05:13Enormous, I would say.
05:15So the rest of the world, I guess, is sort of cottoning on to what the Australian super funds discovered
05:2010, 20 years ago,
05:22which is that infrastructure is in many, many ways the perfect asset class for long-term investors who are trying
05:27to build real wealth over time.
05:30Very long contracts.
05:32The essential services, going back to my comments about resilience earlier, if you're delivering essential services, people still want the
05:40water to run when they turn the tap on.
05:41They still want electricity flow.
05:43They still need a road to drive on.
05:44They're still likely to fly on a holiday a couple of times a year.
05:48So the use of these essential services creates that resilience.
05:52So long-term cash flow is generally protected against inflation and resilient through these kind of unexpected shocks.
06:00It makes it an excellent asset class, I think, for retirement savings and long-term investors generally.
06:05Is it just developed markets or would you be looking at EMs where obviously a lot of that infrastructure demand
06:09is where it's at?
06:10Yeah, there is a huge need in developing markets for sure.
06:14The risk level is obviously a lot higher there because you've got to be able to discount that cash flow
06:19in 20 years' time and have some level of certainty.
06:21So things like rule of law and stability, social stability, are important.
06:26So it's harder, but it can be done.
06:29It probably requires a bit of an official support to sort of help with some of that risk allocation.
06:37But from an investor perspective, there's something like a $3 or $4 trillion infrastructure deficit in the U.S.
06:44So investors have got an enormous choice, an enormous opportunity ahead in developed markets, but certainly in developing there is
06:54a great need to.
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