00:00With the ongoing conflict in the Middle East, has that affected the way that you sort of run your portfolio?
00:05Has it meant any changes or thoughts about changes?
00:08Look, it's an understandable question, thank you.
00:10The reality is that we're going to be living in a world of uncertainty and a world of volatility that
00:17is here to stay.
00:18But that's always been the case.
00:20When you think back 25 years, go back to the year 2000, if you were an investor in the year
00:282000, what didn't you know about the next 25 years?
00:32You didn't know about the dot-com fast, you didn't know about Brexit, you didn't know about COVID, you didn't
00:42know about the global financial crisis, you didn't know about Trump tariffs, you didn't know about Ukraine-Russia war,
00:49or you didn't know about a lot of things.
00:51And so, you know, you have a choice as a long-term investor.
00:57If you need to think and act long-term, you can sit by the sideline waiting for the dust storm
01:03to settle, but it's never going to settle, ever.
01:07And so as a consequence, you should invest throughout that period, which is what we did.
01:12And so bringing it to your question today, yet another conflict, yet another source of uncertainty, yet another source of
01:19volatility, we need to continue to invest through that period.
01:24You're as cool as a cucumber.
01:25So tell me, is it defensively, is it opportunistically?
01:27How are you investing through this period, particularly pertaining to the possibility of a higher inflation and rate environment?
01:34It's diversified. That's the real answer, right?
01:38You need to look at all the opportunities that present before you in terms of deploying capital and take advantage
01:46of the opportunities where it makes sense and mitigate the risks as best you can.
01:51And the best way to do that is to diversify.
01:54Where does that diversification lie?
01:56We've been talking about crypto and that's caused quite a splash.
01:59Sure. Well, crypto, if we decide to go down that path and we haven't made that decision yet, the mechanism
02:06for doing so and the rationale for doing so includes that it acts as a diversifier to some of the
02:13other investments that we have in the fund.
02:17There are different ways to access crypto that meets our fiduciary and regulatory obligations.
02:24If we can't meet our fiduciary and regulatory obligations, then we will not be proceeding down that path.
02:31Pretty straightforward, right?
02:32And the easiest, lowest hanging fruit of accessing digital currencies in its generic form is through an exchange traded fund.
02:42So you can do it through an ETF, which provides you with some level of diversification.
02:46It provides you with mark-to-market pricing, there's a whole set of advantages, liquidity provisions.
02:56So we'll be looking at all of those characteristics.
02:58But unless we can get satisfaction that all of those have been addressed, including custody of assets,
03:05and we can get our regulator comfort, give them comfort that we have crossed and ticked all of those boxes,
03:15then we won't be proceeding.
03:17Is that a reflection of what the younger membership cohort want to see in terms of alternative asset classes?
03:24Yeah, look, I think there's no doubt that the overwhelming proportion of requests that we get for digital currencies, NFTs,
03:36there's a whole set of related investment opportunities, comes from younger demographics.
03:42But historically, Host Plus's member base has been the hospitality industry,
03:47which is a very young member demographic to begin with.
03:51The war is not by far the only risk-facing market.
03:56I wanted to get your views on private credit.
03:58We heard a bit this morning from BlackRock.
04:00We've also heard from Lloyd Blankfein saying that he sees a fire is there.
04:04What's your assessment of what's going on and the risk levels?
04:08So we've had exposure as a fund to private credit since 2010.
04:17And so all of a sudden, everyone acts as if this is a new asset class, and it is not.
04:23It could be new for retail investors.
04:35And so you'll find that if you are investing in private credit with bona fide institutional asset managers,
04:45then they would have mechanisms in place.
04:48They have credit assessment facilities, workout teams, a whole set of necessary infrastructure to access private credit in the right
05:02way.
05:02We know this is true because we've been doing it since 2010, and there's never been a problem.
05:09So does that mean your fund managers are maybe looking for bargains at this point on the secondary market?
05:13Well, that's their prerogative to do so.
05:15We allocate capital to our fund managers.
05:17We then don't restrict them as to where they source those opportunities from.
05:23And if they can find secondary markets or if they can find distressed sellers, et cetera, then all power to
05:30them.
05:32Would you be looking at reducing exposure to software, though?
05:37Again, we need to look at the word software and know and believe that different software companies are differently placed
05:48to access AI.
05:49I presume that's the nature of your question there.
05:52And so you have certain software companies that are laggards in the AI, in adoption of AI in part of
06:02their software.
06:02They will have a very hard path going forward.
06:05And then you've got some software companies like Canva that are, in essence, an AI company now that have been
06:12implementing AI tools.
06:15They've got nearly 30 AI tools implemented into their software, and they're ranked amongst OpenAI and Anthropic as the third
06:25-ranked design tool that has adopted AI.
06:31We expect that type of software company to thrive in these circumstances.
06:38As the super nest egg and the pile continues to grow, there's been lots of questions as to whether super
06:44funds in Australia are outgrowing the home market.
06:47Can you give us an indication of what that looks like in terms of flows to Australian assets or overseas
06:52at the moment for you guys?
06:53Sure.
06:54So there's two parts to my response.
06:58If we're talking about deploying money in the domestic, liquid, public markets, equity markets, that's approaching capacity.
07:11But if we're talking about real assets, infrastructure, real estate, nation-building assets, show us the projects, and we can
07:21fund them here, and we can fund them offshore as well.
07:24The reason we go offshore to invest, A, for diversification, B, gives us access to assets that we can't get
07:32in our home country.
07:33And let's remember that our beneficiaries, our members, are based in Australia.
07:39So at the end of the day, that capital that we invest offshore needs to come back home to end
07:46up in their retirement accounts.
07:48And so we should be encouraged, if you like, to look globally for the best opportunities to get the best
07:57return we can for our superambulation members.
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