The Rules of Investing

If there is any one investment product that has experienced a true boom over the last 10 years, it is exchange-traded funds (ETFs) and exchange-traded products (ETPs) more broadly.  The number of listed products has increased by 17.5 times in Australia during the last decade alone. More than 300 products are now listed across the ASX and CBOE exchanges and two million Australians have at least one ETF in their portfolio. And, as if you need more proof of the growth of ETPs, 2024 marked the first time that inflows outpaced those going into unlisted managed funds.  So if we've seen this growth over the last decade, what could the next 10 years hold? In this episode of The Rules of Investing, we put this and other questions to Tamara Haban-Beer Stats, Director and ETF/Index Investments Specialist at BlackRock Australia. BlackRock is the world's largest asset manager and its ETF arm iShares runs 49 ETPs in the Australian market. In this episode, Tamara also discusses the key mega forces that BlackRock believes could drive markets over the long run, where they are overweight in portfolios and the asset classes they believe could see the biggest growth within ETPs over the coming years. Note: This episode was recorded on Tuesday 19 March 2024. Timestamps 0:00 - Intro 2:21 - BlackRock's outlook for the next 12 months 4:06 - What the new investing regime means for ETF investors 6:17 - The five "mega forces" of investing  9:13 - Currency impacts on ETF returns 10:27 - Will the Australian Dollar rebound in late 2024? 13:45 - Should investors consider hedged ETFs? 14:55 - Opportunities in Japan and the US 16:47 - Why the AI boom won't be early 2000 all over again 18:02 - The explosion of interest and uptake in ETFs 21:31 - The asset class that could gain the lion's share of growth in the future 23:17 - Other interesting innovations in the global ETF market 25:06 - Which products are seeing the most inflows and outflows in 2024? 27:31 - The Rules of Investing's regular questions (with an ETF twist)

Warryn Robertson, portfolio manager and analyst at Lazard Asset management, understands the nuances of infrastructure assets like few others in the market. His approach is to find monopoly assets with inflation protected revenues, high margins and reasonable leverage then buy them at attractive prices.  Of the 400 listed infrastructure stocks globally only 160 have passed the four filters and typically Lazard’s Global Listed Infrastructure Fund will own just 25 to 30 of those companies. Given the attractive nature of infrastructure assets it is unsurprising that sovereign wealth funds and private equity firms are also circling these assets. Robertson estimates that of the 160 stocks that meet his criteria 25 have been taken private and delisted.  The situation in Australia is even more challenging, of the 14 infrastructure and utility stocks on the ASX valued at more than $1 billion just four meet Warren’s criteria as being ‘preferred infrastructure’. The good news is that Robertson is a firm believer and concentrating your capital into your best ideas. In this episode of the Rules of Investing, Warryn Robertson reviews the recent performance of that asset class through an inflationary environment, explains why US utilities look vulnerable and shares what he believes are the best opportunities in infrastructure.  Robertson also reveals what he regards as the top infrastructure stock on the ASX and an infrastructure company with an absolutely stunning earnings outlook.

"Living Legend", "One of a kind", and "Diamond in the Rough are not terms usually bandied about when describing economists! But these are just a few of the hundreds of messages of support and appreciation that flooded a recent social media post recognising the 40-year tenure Dr Shane Oliver to AMP. Shane has dedicated his years to educating Australians on all matters of the economy. His style tends to be glass half full, and you'll rarely hear him pushing doomsday forecasts. He also possesses an uncanny ability to make complex matters easy to understand and is usually armed with some cracking charts to drive home his points. In this episode of the Rules of Investing, Shane explains why central banks are close to pulling off Mission Impossible and avoiding recession. He believes interest rates have peaked and will drift lower as inflation returns to the RBA's target range. The episode also touches on a range of issues, including population growth, housing affordability and Australia's exposure to the Chinese economy.   

Brendan O’Dea, Chief Investment Officer at Soul Patts, previously led Milton Corporation and holds extensive experience in equity investing. He discusses the growth trajectory of Soul Patts after its merger, highlighting their focus on building a robust portfolio with blue chip stocks and private assets. O’Dea shares insights on current investment strategies amidst market volatility, the resilience of businesses during interest rate hikes, and opportunities in renewable energy and decarbonization. His disciplined approach emphasizes long-term growth and consistent shareholder returns.

The structural forces that saw growth investing rise to the top after the GFC remain. Covid created a blip, but the world is returning to slow growth, low inflation and lower interest rates. That's the perspective of Jason Orthman, the Deputy Chief Investment Officer of Brisbane-based Hyperion Asset Management.  Orthman says that neither you, me, nor our grandchildren are likely to experience an environment like 2022, where rapid interest rate hikes rocked long-duration assets such as government bonds and growth equities.  "2022 was an incredibly unusual period. We've looked at markets over the last 250 years, and you haven't seen interest rates at the long end move quickly to that level over 250 years of data. We believe it's a one-in-250-year event," says Orthman. Structural forces, including ageing populations and the rise of automation, will continue to create a disinflationary and low-growth world in the decades to come. This backdrop means that those rare companies that can grow at rates well ahead of GDP can provide investors with exceptional returns.  Orthman and the Hyperion team have a disciplined approach to finding these rare gems, starting with twelve structural growth trends, such as productivity, the shift towards artificial intelligence (AI), and banking and payments. These parts of the economy are likely to grow and present fertile ground for finding future blue-chip companies.  In this episode of the Rules of Investing, Ortham speaks with Livewire's James Marlay about Hyperion's approach to growth investing, the wild ride of 2022 and the long-term opportunities the firm has identified.  Orthman also shares what he describes as 'one of the most important investments' the firm has ever made, what investors are missing about the Tesla story and two companies he believes are poised for significant revenue growth over the next decade.

Each year, Barron's releases a list of Australia's Top 100 Financial Advisers. Pitcher Partners' Charlie Viola and Lipman and Burgon Partners' Paul Burgon have featured high on this list over the years, and both ranked in the top 10 in 2023. As part of Livewire's Outlook Series for 2024, Livewire's James Marlay hosted an in-depth panel discussion exploring how these two investing gurus are allocating capital on behalf of their clients in 2024. Whilst there is no 'one size fits all' when it comes to investing, there are nuggets of insight from this session that can help all investors. Click here to access the charts discussed in this episode and a summary of the discussion  Timecodes 0:00 - Introducing the experts 0:49 - Charlie Viola’s top three factors influencing asset allocation in 2024 3:20 - Paul Burgon’s top three factors influencing asset allocation in 2024 6:15 - Asset classes where Paul and Charlie are overweight or underweight 9:53 - Why Private Markets will play a bigger role in portfolios in 2024 and beyond 12:40 - Charlie Viola’s Asset Allocation framework for 2024 16:33 - Paul’s Strategic and Tactical Asset Allocation frameworks for 2024 22:26 - How these advisers are innovating in 2024 25:50 - Four investing traps to avoid in 2024

Two years ago, on a trip to Perth, Yarra Capita’s Dion Hershan was pitched the case for lithium stocks by his Uber driver. Hershan says it was a cliche moment and a classic example of a ‘ringing the bell’ sign. On the flip side, there are moments when deciding to invest causes your stomach to churn and your hands to quiver. “Some of the best ideas I’ve had in my career were when my stomach churned and my hands trembled when I put the trade on. That’s often a good lead indicator.” Recent investments in fallen angel ResMed (ASX: RMD) and an overweight position in the beaten down REITs sector are two examples Hershan provides of how Yarra is taking long-term counter-consensus thinking. This counter-consensus thinking also applies to the companies Hershan and his team are cautious about, which include large parts of the ASX20, including resources and banks. Hershan says that while these companies may not fall out of the top 20, their best days are likely behind them. In this episode of the Rules of Investing, Hershan talks about the lessons from working inside the most successful global hedge fund, why he is cautious about the outlook for blue chips and the companies he thinks represent the best long-term opportunities for the slow grind that lies ahead.   Timestamps 0:00 - Introduction 3:06 - How Dion caught the investing bug 4:40 - Lessons from working at Citadel 8:35 - Why macro matters for Australian equity investors 11:08 - The raging debate taking place at Yarra Capital 14:30 - How much pain will consumers feel in 2024 17:29 - Why you should be complacent about blue chip stocks 22:05 - The best opportunities Yarra is finding on the ASX 24:57 - A fallen angel that Yarra thinks can rebound 26:52 - The thesis for being overweight REITs 36:00 - What investors are getting wrong in markets today 37:15 - Lessons from an early win 38:32 - Two stocks Dion would be happy to back if the market shut for 5 years Related Articles   https://www.livewiremarkets.com/wires/five-themes-on-our-shopping-list    https://www.livewiremarkets.com/wires/avoiding-the-blue-chips-heading-for-small-cap-status

The penny has dropped and thanks to a three-letter word from the Federal Reserve's recent interest rate decision ("any"), small caps both in the US and in Australia have started to rocket out of a long slumber. For most of the last 18 months, small cap performance at an index level has been smashed thanks to the soaring cost of capital. But now that markets have called central banks' bluff, we're entering what Ben Griffiths of Eley Griffiths Group calls a "pause rally" - the kind of rally that has a lot of cash looking for a new home. "I'm not for a second suggesting that the lunatics are out of the asylum but there has been some stability and sentiment is such that you can sketch out a constructive path for equities. There's a buoyant time ahead for us," Griffiths said. Another worthwhile indicator of the return of risk is the IPO market - and as Griffiths knows all too well, the phone calls have dried up considerably. And while the phone is not ringing off the hook yet, he does see some signs that listing activity is itching for a rebound. "There were a number of IPOs that were slated for transacting and listing before Christmas that have now been pushed into March. These will be extra well sought after in March - or certainly pre-June 2024," he said.  In this, our second last episode of The Rules of Investing for 2023, James Marlay sits down with Griffiths for an extended conversation about the smaller end of the market. Hear about some of the companies that stood out from the recent AGM season, how Griffiths is investing in light of a "higher for longer" rate environment, and why he's dipping his toes into a well-known company that fell from darling to dog. Timecodes: 0:00 - Intro 1:15 - Three macro signals Ben pays attention to - and what these are saying about the markets 4:45 - Is risk back and is the "pause rally" underway? 8:44 - Was October 30th 2023 the day the market declared the war on inflation over? 10:16 - What are you hearing about the appetite for more ASX IPOs? 14:00 - What are the drivers of the divergence between large cap and small cap performance - and when will it turn? 18:00 - The ASX companies which stood out from the November AGM season - Breville Group (ASX: BRG), Boral (ASX: BLD), Ridley Corporation (ASX: RIC) 19:16 - Portfolio construction and stock picks for a "higher for longer" interest rate environment - Monadelphous (ASX: MND), ARB Corporation (ASX: ARB), Capricorn Metals (ASX: CMM), Genesis Minerals (ASX: GMD), Karoon Energy (ASX: KAR) 21:53 - Stocks where margins may have not bottomed out yet - Auckland International Airport (ASX: AIA) and Worley (ASX: WOR) 22:20 - Portfolio construction for the new Eley Griffiths Group mid-cap fund: Audinate (ASX: AD8), Temple and Webster (ASX: TPW), Codan (ASX: CDA) 23:06 - A closer look at Boral and the impact of new CEO Vik Bansal 26:05 - A closer look at one unloved area of the market: REITs 27:52 - Consumer finance stocks have been the subject of investor "angst": Judo Bank (ASX: JDO), Latitude Financial (ASX: LFS), Pepper Money (ASX: PPM), Liberty Financial (ASX: LFG) 29:12 - What would it take for you to turn more positive on these smashed sectors? 31:48 - Why Eley Griffiths Group is launching a new mid-cap fund now 34:34 - Some of the mid-cap fund's early core holdings: CAR Group (ASX: CAR), GQG Partners (ASX: GQG), Genesis Minerals, Boral, Auckland International Airport, Worley 35:37 - The Rules of Investing's three regular questions

Culture is not something that immediately springs to mind when assessing a company and its prospects for the future. More often than not, we investors are scouring profit and loss statements, comparing financial ratios and (if we have the time and skill) constructing valuation models. However, good culture is critical in a business; it takes a long time to build and is hard to maintain. And yet, it can take as little as one rogue employee to upset the delicate balance and ruin it completely. This is something that Qiao Ma, portfolio manager for the Munro Global Growth Small and Mid-Cap Fund, is intimately aware of. As Ma revealed, if she determines that the culture is wrong when conducting her due diligence of a company, despite everything else looking good, she is walking away. No 'ifs'. No 'buts'. She's not investing in that company.  "When it’s the wrong culture, it’s 100% of the [investment] decision," she said.  Culture is the ultimate forward-looking indicator of where a company is going. It does not matter, the past glory it was able to achieve. If you have the wrong culture, you have no space." In this episode of The Rules of Investing, Livewire's Chris Conway learns more about Ma’s investment philosophy, how it has developed over the years, and her outlook for growth investing – particularly in the small and mid-cap space. Ma also shares a handful of stocks she likes right now and the types of opportunities she is hunting for over the next 12 months.    Timecodes:  0:00 - Intro 0:47 - How Qiao Ma's investment philosophy has developed over time  3:33 - Value versus growth  3:58 - On working at Lehman Brothers during the GFC  5:57 - The best lessons from investment legend Peter Cooper: The importance of culture  9:13 - How much culture should play into investment decision-making  10:59 - Qiao's most memorable stock picks from her career 12:49 - The biggest surprises in markets from the last two years  14:38 - The outlook on growth for the next 12-24 months  17:57 - The major risks the Munro team is spending the most time debating 23:43 - The catalyst for small and mid caps to rebound  24:25 - A stock that can fund its own growth: JD Sports (LON: JD)  28:02 - Why earnings durability is so important  29:18 - A high-conviction stock pick for the year ahead: On Holding (NYSE: ONON) 30:31 - The Rules of Investing's 3 common questions  ____________________________________________________________ Disclaimer:   The information provided by Munro Partners is general information only and is not intended to include, or constitute as, financial product advice. The views held by Munro Partners are current at the time of recording and are subject to change. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. This information has been prepared without taking account of the objectives, financial situation or needs of individuals. You should obtain independent advice from a licenced professional adviser before making any investment decision. Information about the Munro funds, including the product disclosure statements (PDS) for the Munro Funds is available at www.munropartners.com.au. Munro Partners is a corporate authorised representative of Munro Asset Management Limited, AFSL 480509.

From geopolitics to fiscal policy, commodities to equities, this week's featured guest on The Rules of Investing has some high-conviction views on a whole range of subjects.  For more than 40 years, Donald Amstad traded his way through the highs and lows of financial markets. After completing his undergraduate studies at Oxford University, Amstad began his career at Japanese trading house Nomura. He went on to hold roles at JPMorgan, JPMorgan Asset Management, and the Bank of America before spending the last 15 years of his career at Aberdeen Standard (now, abrdn).  And although he may be a fixed income specialist by trade, you would be wise to listen to Amstad's interviews on many other subjects.  Long-time readers and viewers of Livewire may have already seen some of Amstad's thoughts on the markets. In 2019, Amstad was a participant in Livewire's Expert Insights series. One of his videos has garnered more than 800,000 views since it was first uploaded - the most of any Livewire video ever.  In the four years since that video was recorded, so much has changed in the world. Among them are the COVID-19 pandemic, the rapidly changing geopolitical situation to the slow (and ongoing death) of quantitative easing. But even as the world has changed, Amstad's core views on some of the most pressing challenges of our time have not. In fact, they have strengthened. This week, Livewire's Hans Lee sat down with Amstad for a half-hour conversation on the big picture issues that are driving markets - and the issues that are not driving markets (yet). This is a conversation you cannot afford to miss.  Note: This interview was conducted on Tuesday 7 November 2023.