In episode 101 of the [i3] Podcast, we speak with Damon Callaghan and Sam Byrnes of asset management firm ECP. ECP was established by Dr. Manny Pohl of Hyperion Asset Management fame and in this episode we talk about the opportunities and challenges of artificial intelligence when investing in Australian equities. Enjoy the show!

01:00 How we got started in investing

04:00 Sam: My dad was CEO of Bega Cheese and that got me both interested in business and also made clear that I didn't want to work in a factory

06:00 Who is ECP? 09:30 Artificial Intelligence and the Australian stock market

13:00 Parallel processing and the ability for GPU's to work in tandem

15:00 Where do you see the best use cases in Australian companies?

17:00 Hub24 is a good example of AI being used well

22:00 Is AI disruptive, or does it merely cement the dominance of the large incumbents?

23:30 Xero vs MYOB

29:30 Can you defraud a chatbot?

30:00 Corporate use of AI will be a lot slower than what the hyperscalers would like

37:00 Consultants will be the biggest winners from this

37:30 Ethical considerations in implementing AI. Adobe and copyright

45:00 The future of AI is hyper personalisation

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It is our 100th episode of the [i3] Podcast and we are celebrating this with an in-depth discussion on innovation in private equity, especially mid-life transactions, with David Morse, Managing Director and Global Co-Head of Private Equity Co-Investments at Neuberger Berman. Enjoy the show!

Overview of Podcast with David Morse of Neuberger Berman

01:00 Starting in mid-market lending, but liking what the guys on the other side of the table did more

03:30 Deal flow in Private Equity has been low and portfolio companies are for more than 6 years, an eternity in PE

06:00 Prior to 2022, you had the "rocket fuel of private equity", cheap debt and distributions exceeded capital calls. But you get to the third quarter of 2022 and all of those sources of liquidity have dried up

09:00 What we saw was that seller expectation was still quite high, but buyer expectations had come down dramatically, because the cost of capital had gone up

12:30 Today, PE transactions are not leveraged buyouts anymore, it is a very equity heavy transaction

16:30 Mid life transactions are co-investments into the private equity space. They focus on companies that have been owned for a few years, but are still performing well and needs capital to continue its value creation plan

19:00 When you are a GP, there are really only three sources of capital: private debt, secondaries (continuation funds) and co-investments (including mid life deals)

22:00 The problem in PE is not the returns, it is the distribution. And that is why there is an opportunity for private debt, secondaries and co-investments

25:00 Should we re-lever assets?

31:00 Distribution levels are at their lowest since 2010 and so LPs say: 'I cannot commit to your next fund until I see some cash back'. If you ask me who is going to blink first, seller expectation vs buyer expectation, then I'm going to say seller expectation first.

33:00 Investment banks told us that their backlog of signed M&A agreements was higher in Q1 of 2024 compared to Q1 2021, the record exit year of all time.

35:30 The deal flow that has collapsed is one private equity firm selling to another private equity firm

37:30 In terms of the deal being done, we've seen a shift towards up market

38:30 We subscribe to not just interest rates 'higher for longer', but 'higher forever'

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In episode 99 of the [i3] Podcast, we speak with Julian McManus, who is a Portfolio Manager on the Global Alpha Equity Team at Janus Henderson Investors. We spoke about global equities, the role of the Magnificent 7, Japanese equities and hybrid cars. Enjoy the show!

Overview of Podcast with Julian McManus, Janus Henderson Investors

02:00 Getting into Japanese equities fresh out of law school

04:00 We still invest in Japan

07:00 Abe's reforms and book value quant trades

08:00 The Japanese government has woken up to the urgence to create national champions in strategically important industries

09:50 Japan is going to be one of the most important semiconductor manufacturing hubs globally outside of Taiwan

11:00 Toyota and the demand for hybrids

14:00 There is still a notion among some investors that you invest in US stocks and international is where you go on vacation

15:30 Tech companies outside of Magnificent 7, why haven't they increased alongside?

16:30 Many investors have trouble paying more than 25 times, one year forward earnings for any European stock

19:00 Yes, there is geopolitical risk in TSMC, but TSMC is not living in a vacuum

20:00 We are of the position that China will never be able to invade Taiwan

22:00 Because we have a large position in (defence company) BAE Systems, that allows us to have a large position in TSMC as well.

23:00 We own three of the Magnificent 7

25:00 We believed for a very long time that Apple and Tesla were overvalued and avoided those

28:30 The uncomfortable question about AI is: Are you going to reinvest the productivity gains or let them flow down to the bottom line?

30:00 On the dangers of overdiversification

36:00 Rates are typically something we don't want to take a bet on

37:00 Defence spending will need to catch up in Europe

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In episode 98 of the [i3] Podcast, we are speaking with Will Liang, who is an executive director at MA Financial Group, but is also well-known for his time with Macquarie Group, where he worked for more than a decade, including as Head of Technology for Macquarie Capital Australia and New Zealand. We discuss the application of AI in financial services and wealth management, ChatGPT and how to deal with AI hallucinations.

Overview of Podcast with Will Liang

02:30 When I was young I contemplated becoming a professional Go player

05:00 2016 was a life shattering moment for me; Lee Sedol was defeated by AlphaGo

07:00 I think generative AI will be a net positive for society

08:30 The impact of AI on industries will not be equally distributed

15:00 Brainstorming with ChatGPT or Claude

16:00 AI might help us communicate better

19:00 AI hallucinations are actually a fixable problem

22:30 Myths and misconceptions in AI

27:00 Most of the time when ChatGPT doesn't work is because we are prompting it in the wrong way

28:30 Thinking Fast & Slow; AI is not good at thinking slow

29:00 Losing our jobs to AI? It is important to distinguish between the automation of tasks versus the automation of jobs

35:00 When implementing AI, look at where your data is and try to bring your application closer to the data

39:00 Don't trust any third party large language model, instead deploy an open source model into your own cloud environment

43:00 You ask ChatGPT 10 times the same question and it will give you nine different answers. That is a problem.

45:00 Deep fake is a real problem

50:00 Future trends: AI agents

53:00 Generative AI will be more of a game changer for private markets than public markets

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In this episode of the [i3] Podcast, we speak with Felicity Walsh, Managing Director and Head of Australia & New Zealand for Franklin Templeton about leadership, fostering a great work culture, mentorship and lab coats. Enjoy the show!

Overview of Podcast with Felicity Walsh, Franklin Templeton

01:00 Hanging up the chemistry lab coat and safety specs, and joining Watson Wyatt

05:00 Defined benefit post GFC and getting into client acquisition work

07:00 Differences between UK and Australian pension systems

10:00 When I came to Australia there was no depth in the inflation-linked bond market

13:00 Joining K2, not as different from an asset consultant as you might think it was

17:00 Making my own glossary of hedge fund terminology

19:00 In the early days of K2, there was a clear separation from Franklin Templeton. We even had our own fridge

22:00 On leadership style: "I'm very keen on a flat structure, which is not always how fund management firms operate".

24:00 In a small team, you need to keep the job varied and interesting

29:00 Culture is incredibly important when you work for a global company

33:00 On the importance of keeping distractions away from your team

35:30 There are certain people whose counsel I seek from time to time, but they are not people who I initially thought were going to be mentors

40:00 Removing the distinction between retail and institutional teams

44:00 Focusing on community this year

46:00 Integrating the acquisition of Putnam investments

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In episode 96 of the [i3] Podcast, we speak with Maria Elena Drew, Director of Research – Responsible Investing, at T. Rowe Price about the challenges and opportunities of transforming investments into net zero portfolios. How does it affect your objectives and engagement with companies? Enjoy the show!

Overview of Podcast with Maria Elena Drew, T. Rowe Price

01:00 When I was at school, I didn't think this was a career path that was out there. At university I studied economics and geology.

04:00 As a young analyst I covered Enron and they had a very bullying approach to investors

06:00 I realised ESG was not about telling you what you can and can't invest in, but to use information on governance and environment to get better investment ideas

07:00 I started to ask at least one ESG-related question in company meetings and without fail the answer was helpful to me

10:45 The ability to determine whether there is alpha generation from ESG is really difficult

15:00 What is your true net zero objective? Do you want to have no exposure to high emitting companies? Or do you want to help companies with their transition to net zero? Those are two very different portfolios

19:00 Track progress along the way: setting net zero status targets

20:45 We think the net zero status is a smart way of going about it, because it is forward-looking

23:30 If your objective is really just greenhouse gas emissions, then you really just incentives your manager to do sector selection

28:00 Divestment ultimately sits with the client direction

29:00 An exclusion list makes more sense for passive investors, than for active investors

31:00 If you don't have a decarbonisation [plan], then you are making a very strong bet that all of this regulation is not going to come through

33:00 What if institutional investors leave it up to companies to sort this out? What risks do they face?

36:00 Do you allow companies to rely on carbon credits/offsets to achieve their net zero target?

40:30 Pushing companies to go too fast can be counterproductive

Maria Elena Drew also spoke at the [i3] Equities Forum 2024 in the Yarra Valley, Victoria, on 20 February 2024

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John Bowman is President of the Chartered Alternative Investment Analyst (CAIA) Association. In this episode we look back at the growth of the alternative investment industry, in particular private equity, discuss ESG and take a look at the upcoming paper on the total portfolio approach Overview of podcast with John Bowman, CAIA 02:00 I got involved in international equity investing through a few Boston wealth managers at SSGA. 6:45 I'm integrated by the power of capital allocation to solve some of the world's problems 08:00 At the CFA Institute, I often found myself on the same stage as the CAIA executives 10:00 The term 'alternatives' is a term that CAIA wants to make extinct 16:00 On the growth of alternatives: We've got this ecosystem now where companies can stay private for longer or even permanently now, that investors can take advantage of 17:00 The first generation of private equity relied a lot on leverage, but that is not the case anymore. Investors won't stand for financial engineering 23:00 Public governance models in the US tend to be pretty hands on…, even meddling if I might say 24:00 CAIA papers: 'Portfolio of the Future', 2022 (https://caia.org/portfolio-for-the-future) and 'The Next Decade of Alternative Investments', 2020 (https://caia.org/next-decade) 24:30 Most practitioners under 40, who analysis investments, have only operated in an environment where there was zero cost of capital, non-existent inflation and double digit capital market returns. But this environment was not normal 26:30 The best kept secret in investing 29:00 Knowledge management and operational alpha 32:30 AI is likely to be the next supercycle, but… 37:00 I don't think we can outsource our fiduciary responsibilities to the machine just yet 40:00 Do we need to disentangle ESG and look closer at the underlying factors and how they affect clients, because you can't average out ESG factors? 42:00 Upcoming paper on the total portfolio approach with input from CPPIB, Future Fund, GIC and New Zealand Super 46:00 Launch on 19 March 47:00 TPA changes the role of portfolio managers

Andrew Fisher is the Head of Investment Strategy at the Australian Retirement Trust (ART), a $260 billion pension fund in Australia. In this episode of the [i3] Podcast, we reflected on the merger with QSuper and the implications the larger scale of the fund has on the investment strategy. Enjoy the show! Overview of Podcast with Andrew Fisher, 2024 01:00 Merging two funds with different investment philosophies 04:00 YFYS performance had already started to impact QSuper's investment management's style 06:00 QSuper's capital markets capabilities is top notch 08:30 You can look at the two funds and say how different they are, but you can also say how complementary they are 13:00 Ever considered using a reference portfolio? 14:30 I'm not sure whether a merger like this really ever is finalised 17:00 Any learning from the QSuper merger that you can apply in future mergers? 19:00 We consistently get surprised by our growth. We are essentially doubling every five years 23:00 You would expect traditional private market assets and infrastructure to have the best pass through of inflation costs, but it was actually the alternative private markets assets that turned out most resilient 25:00 Office and Retail Real Estate 30:00 The one thing people don't speak enough about is how resilient equities have been during this whole inflationary period 32:30 I don't think the job is done, but I think central banks have done a really good job 34:00 What we are trying to do with our decarbonisation strategy is to mitigate the risk from the trend towards low carbon without taking too much investment risk

In episode 93 of the [i3] Podcast, we speak with Michael Bonte-Friedheim, the Founding Partner and Group CEO of NextEnergy Capital, a firm that specialises in investing in solar energy plants. We talk about the role of subsidies, the growth of the sector and the fact that ESG in solar isn't just about renewable energy Overview of Podcast with Michael Bonte-Friedheim 01:00 The genesis of NextEnergy Capital 04:00 Solar is our choice of technology 05:00 The technology of solar hasn't changed a lot, but the efficiency and the cost of components has changed dramatically. So much so that in most countries, solar energy does not require subsidies 10:00 What makes one solar plant more attractive from an investment perspective than another? 12:00 ESG issues in solar: integration of solar plant in landscape and community 16:00 On floating solar plants: water evaporation and birds 20:00 The impact of the Inflation Reduction Act 21:00 Solar in China 23:30 More and more institutional investors are breaking down what is in that infrastructure and real asset bucket 28:00 Solar Plus 30:00 Solar is expected to double in size over the next few years 31:00 Biodiversity – what happens to soil if you leave it alone for 40 years? 35:30 The NextEnergy Foundation receives five per cent of our group's profits

Mike Comparato is Managing Director and Head of Real Estate at Benefit Street Partners, a credit-focused alternative asset management firm owned by Franklin Templeton. In this episode, we cover Mike's views on the turmoil that the commercial real estate market is facing and the impending debt maturity wall that could set off a hurricane. Overview of Podcast with Benefit Street Partners' Mike Comparato 01:00 Our family has been in the real estate sector since 1946 04:00 There is a storm out there [in the CRE sector] and there is no question of its severity. It is just a question of when it is going to hit 05:00 Commercial real estate is a very credit and debt intensive asset class 05:30 The 'debt maturity wall' and its market impact 06:30 People are just not lending to hold liquidity 08:30 If you just waited in the past 40 years, thing just got better 09:45 "There is a lot of damage that is coming" 14:00 We are making equity-like returns in credit products. It is not often that you get to say that. 14:30 Multi-family real estate credit 16:30 The regional banks were the top credit providers for construction loans in the US 17:00 The banking space is in a much worse place than people think it is. It is very simple: if banks aren't lending, then that means things are bad at the bank 19:30 The COVID-19 pandemic changed the demand for office forever. We are talking about a change that might not be recoverable 21:30 No one is making loans on office buildings right now. 23:00 Who knows how many young professional jobs, such as paralegals, will be replaced by AI 25:30 The data centre space is something that we have always avoided, because I'm always scared that we are going to wake up and someone has discovered a new technology that makes data centres completely obsolete. Whenever you have something in real estate that has a very specific use, it is very scary if it doesn't have some kind of alternative use. 27:00 The retail apocalypse never happened. But why? 32:00 The number I would have to put on writing a loan for an office building would be so high that it basically means the asset is worthless