[i3] Institutional Investment Podcast [i3] Institutional Investment Podcast

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

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

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