Matt Whineray Leading New Zealand Super Fund (Capital Allocators, EP.108)

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<music>. Hello I'm Ted Psyches and this is capital allocators. This show is an open exploration of the people and process behind capital allocation through conversations with leaders in the money game we learn how had these holders of the keys to the kingdom allocate their time and their capital you can keep up to date by visiting. Capitol allocators podcasts. Dot Com by guest on today's show is Matt winner the CEO of New Zealand superannuation fund or superfund one the highest performing most innovative and well regarded large scale investment allocators in the world the New Zealand government created the superfund in two thousand and one to help defray the costs of retirees in the country and the decades to come Matt joined the organization in two thousand eight and became its CEO in two thousand eighteen eighteen were today he oversees forty two billion Kiwi dollar's our conversation starts with Matt's background and the creation and objectives of the superfund we then walk through the Super Fund's investment philosophy which has guided by four competitive advantages or endowments as he calls them and nine investment beliefs us from there we dive into the implementation of the strategy covering the risk allocation process reference portfolio or benchmark using liquid assets just long term risk budget and medium-term tactical targets across the five risk baskets. We discussed the difference between these risk allocations and traditional additional asset class structure the hybrid structure employing both internal and external managers internal strategic tilting program. The structure of the team is his current perspectives on asset classes he s G scaling activities to support upcoming inflows and culture before we get going you can sign up at capital allocators PODCASTS DOT com to receive three different sources of information using the buttons on the homepage or the email list tab. You can receive an email from me once a month with the best things I've read and listen to over the month while on that page you you can also sign up to receive our blog of industry news lastly hop on the premium tab and subscribe to get access to the library of transcripts grips of podcasts shows feel free to forward the emails receive two friends to help spread the word. Please enjoy my conversation with Matt Matt. Thanks so much for joining me on natural teeth greg well. Let's just start with your background and how you got to this lofty seat in the first place so I sat at life originally as a lawyer I was at at University Lauren comments coming out of that I would is a lawyer for a few years but I always wanted to go and work in New York and so at sage it was handed his lawyer had got study in the the US. I had a good night who was an investment banking. I knew that team well and when he went to New York <unk> cicely his job here Credit Suisse in New Zealand and then a couple of years later got myself New York. We're GONNA basic banking for that's between he and your bank here in in Hong Kong and Nin Gakuen Diabet- role super found on the private market sides that was in two thousand seven and and that would be an interesting time to switch from the south side to the buy side and was looking for something different made eye Drian <unk> then then I ended up superfund originally in the private control and then subsequently and the GM and business all the IRO in when I dream when off the Reserve Bank. I was like enough to get great. Why don't we circle back a little bit to the creation of the superfund around the legislation was passed in two thousand one and in a set period <unk> money's invested were September two thousand three and it came about because the government at the time could see that we were. GonNa have this increase in the cost of the universal the patient in New Zealand because New Zealand like many other developed countries had an aging population you head off retirees whikiss tech size and they could say that the cost was going to increase in the Minister Finance Time His name Michael Callan Nassau column promoted the creation of a fund on which would save money put away along the way and invested ending use lighter onto slew the cost of that university <unk> is not on a total prefund. This is a way of just losing it at so. What's I opposite light up in smooth the whole cost APP so that structure there was no oh capital in that then and let's just circle forward to two thousand three sixteen years. How much is there today that forty two billion today it started with nine nine money and in the why the legislation would is we would get some money every two weeks we get a check from the government two weeks and that would add up to roughly two billion million dollars a year and so we start getting that money in two thousand and three thousand basting it <unk> <unk> two thousand nine where contributions cat off way received contributions named fraud lean until you before last weight contributions got started again. We just invested the money that we have so now. We've got roughly forty. Take Him and so let's frame out the rest of the other side of this the investment equation which is the purpose the serves wind you expect to start seeing money coming hang out so what <unk> formula under legislation which is aiming to smooth out the cost of national superannuation over at forty a year periods makes a bunch of assumptions around what allergens will be what GDP growth <unk> and then it produces a cachefly model that sees the government needs to contribute to acid a sitting right ending at some point we will stat contributing to the government and so at the moment that modal showers some withdrawals from the founder in the Mid Twenties Thirties about it said function of the Wii models waking that Osama drew zine but really the big withdrawals stat in the mid twenty fifties but even after a the big withdrawal stat that found is still forecast to continue to Greis really into the century so a long horizon with absolutely no liquidity needs for a long time. That's right really keep out announcement approach so we take that as the problem. How do you approach it so we start by saying. Let's let's look at the mandates of what the mandate sees is. We need to maximize tune with an undue risk. We need to use practical volume management and we need to not created they did a New Zealand's. <unk> will community so those are the three pats them and I say okay. What is it about ass what's special about asking we cool eight down down and out his nyquil is advantages but what's the night to us in the things that we think Allen documents I along horizons talk about that liquidity price fall so we're not gonNA have the government bring to mind saying we need a bit withdrawal so we know what liquidity profile looks like operational national independence rarely found him into NSL inside a subway related to the ground that gives us some advantages in some places. We spent a bit of time saying dies right on down once and then we say what are basically had we think markets would is. We've got a state of investment beliefs. I think there are there are nine. These things like like asset allocation that cap things like main revision governance the importance of governance release around manage a skill but lakes around lifecycles cycles around the importance of these Jay that type of thing is in basement blades really important because they had to ultimately independently of strategies the state of Endowments. We have a set of beliefs and they reside. I this is how we do it. In the beginning we started with a strategic asset allocation from two thousand eighteen. We switched switch to a <unk> construction. Price will use a reference follow and so we arrive we wanna poke folio which is something that we can get a low cost cost passive basis that represents genuine risk benchmark for and that is a decision for the board and we're just going through the prices this year review that in five years and we come up and that is the view of the woods risk tolerance. I am at the would wanNA take time but really importantly the album. Is that reference Hollywood mate mandate US racing's talked about that's the starting point sets an expression of the boards risk tolerance. The building gives jobs ass a bit of active risks the ability to buy from that Reference Polio but the actual volley in the actual portfolio is is the difference between those two as management team or accountable for that so we've pretty much covered everything so we just have damage and beliefs it reference portfolio. Why don't we you walk through a little bit more granular detail start with these what you're calling endowments and how you think about each one so loved rosins. What is a along horizon? May and this is this is quite interesting published a bunch of white papers which addy output of of the debates that we have internally and we published one on what it means to be a long term investor because when you ask people that you'd be sent me straight to I'll means I can invasive productivity well. I mean it sort of on this low <unk>. What does it really mean. Ultimately it made you need a force to sell something along. Horizon allows you to hold oh things through cycles and allows you to stand by as long as it's combined with the liquidity liquidity profile allows you to do that so you candidate signs and you can help things for a long time but you don't have to hold things for a long time so that long horizon is important because that depends pens some of Addison's around the label risk that we tight and in some of the strategies that we use like strategic token which which race on belief in Maine revision and if you've got a revision things not not made rivet for a long time and actually you might be wrong about what the maintenance so. You've got to be able to hold these positions for a while so long horizon arises really important one for us. It's the combination of the long horizon in the now liquidity profile that allows you to embrace in the more attractive because we you bring liquid. Essiet said that bring just out of risks in I bring out the quantity riskin you can't you can't rebalance liquid liquid assets. You know that type of things that I might be attractive but not who say it training so that's why they don't exist in the in the reference poof all the different portfolios disappear disappear <unk> expression dies took interact long horizon in the non-equity and become really important to a few of the strategies edges that also benefit operational independence is probably the most fundamental all of them inside. That's related to APP. Invasive lakes that good governance is a critical patio investment performance and operational and peanuts. I ask seperation from the crown out board and management managements ship is invasive decisions as really probably denies fundamental belief way say his struggle as we had operational independence has been uncompromised somehow and other people making that investment decisions for them and then finding the sovereign status when they will it means that sometimes we are really interesting canopy the people it also means that in some jurisdictions we get sovereign immunity in terms of tax audits a slight advantage that accrues to the crown servant status as a smaller one but it does many it is important when it comes to pat during because we have a restriction in a <unk> that we can't control any easy so we can't. I nine hundred business. We have to have partners in so that sovereign status but it is important to the pattering because people look at us <unk> out of the New Zealand crown that makes trade him. Sometimes people might think that makes us unattractive but it is a benefit so we have been taking the around the horizon and liquidity Saturday quite a lot of time to biting. What does that actually mean so because when we come to a strategies as strategies hefty raced on on what we WANNA do strategies is exploited is endowments and make sure that consistent with his basement beliefs inside. It's really important to have a decent <unk> by about what it actually means is. It's really interesting when you face that when Ivan about f you gotTa Conference in use I what do you think it needs to be longer Isan. You got hit a lot. It really different. Some people think some action massive mets arrests. Something that takes a means you can be completely illiquid really different perspectives on the sun so I know we're going to overlap relax with these. You said there were nine investment beliefs. Why don't you just list them out and then maybe we'll pick out a few to talk more depth about that is that governance good governance is is important in that relates to that operation opinions is diamond at SNL cash is the key in basements <unk> the outcomes that Jim and Bob what your estimates there's a belief that an invasive that has a long horizon. Can Outperform unavailable the shore horizon along to period. There's a belief that essay eight classrooms up hotly predictable in revert to a main now is a lot on that right side what had predict them in the main is is an important quarter belief that manages. Hitler's Ria said the ability to consistently Beta Beach Mac. It's really hard to identify in advance. Sometimes it's often had to identify after the fake the fact that someone's going to bench mad because I go to 'cause lackey. Good is good. Lucky is not necessarily repeatable. There's an basis places is that as some markets conducive to manages being able to generate active <unk> tunes and there are some features of those markets that make them more conducive <unk> information or more liquid inefficiency is a belief that Esi classes have <unk> as more institutional basis <unk> classic. Pepsi exists for Tunes Decline of time to possibly zero lace the net because the face and they lasted it is one which is that embraces named to him regard to each defect is because that material to long-term itunes so a few years ago we had ruled beliefs on this and we made some of these are just fixed because beliefs <hes> links are not facts that things that we believe that a supported by empirical research data the main revision belief as some Leif. It's not an absolute fact whereas often you'll see in people's beliefs cost. Mana will nice just effect right. I mean if you have least cost from <unk>. You've you have been recognized. Not a belief that effect so we went through <unk> at least you sorta a brightness download but so that we can be really clear about the ones that we racing these strategies audible cool is so we return them to the beginning of the strategy of how to implement on these endowments and beliefs and you mentioned the reference portfolio. You mentioned having a very long time horizon reference portfolio. You're saying is low cost easy to implement. What is that look like? In terms of the underlying assets so low cost easy implement Pacifism Maine's. It's liquid listed <unk> that means for US globally equities global fixed than CAM and in New Zealand equities and the global equities we split into developing knock it so we had three vets of equally risk in the developed knock iniquities as Global Equities Zealand equities in the global fixed income and what's the mix of equity and Fixed Income Eighty twenty so it's pretty Grassi folly long Saturday is sixty five developed knock inequalities team five New Zealand equities at adds up to eighty twenty percent. Why would you have as much as twenty percent fixed income when you have such a long duration liability because we have a bunch of explicit liabilities against us. I I think that what that does is it provides a bit of a buffet that allows us to rebalance the portfolio a provide some diversification benefit so it is not obviously as volatile as for example one hundred percent equity when we talk with the Board of Reference Batali last time we didn't shy them different in Mexico dies which included ninety eight could eight hundred seen equity and really ultimately it comes down to a desire for the institution to be able to survive through the long term. You WanNa be Alba Dangelo but so we WANNA have expanded to that equity. There's premium because we think it's the big driver time but the fixed income provides us some discussion as well as some because the provisions regarding the boards is I land on the reference probably end the what the board is wanting to know as has an actual forming business at <unk> because that's the decisions the management of making in order to try and improve it and for live five. We've added value. I think Aleve impulsive venue I the last fifteen we've added nearly one and a half a year which is into the New Zealand takes so that's been good but that's by looking at reference book fire when we go into the prices the amendment when we think about <unk> south then you start thinking about what are the alternative risk profiles that you could take and have died have gone and of course was if you guys bullets. Look at this what hundred simple probably would have done spirit weird way. He's strongly whatever you a rash of. Nobody is going to be is GONNA so. Let's dive into this operating model of how you have gone about competing against your reference portfolio folio and beating it over time like mice unseasonal visas as you. We Love acronyms. Leave US batting many of them so we call at the tall which is the target operating model and that was a bad wait. We did a number of years ago which <unk> clear about the principles on which way will do things internally away. We will use out of people to provide services for for us what the operating model seizes. We want to have simple prizes. We want to have more control of the allocation says the risk allocation Asian that is opposed to the individual basement decisions about the brisk allocation. We WanNa have a few manage relationships. Jump with we become a component to that is managing week it time so we created this reference volume two thousand eighteen and it was quite a big change as I should because we made from a strategic asset allocation to reference book by the as yet seen <unk> without Zeke the product and the people who are looking after his team's now I can attack the title Paula Townsend <unk> got to got to win you guys Richard <unk>. It's titled National Listed <unk> and then you've got to build an actual portfolio inside we head to build something in the middle to help us be systematic in that at the risks as we said okay we have the operating model which helps us make decisions about who's doing it but really we've got a decision before that. which is we are? We must confident that we can improve on the reference book volume and so we said Mike I we talked me this committee why capitalize and we talked at least <unk> confident we can say not take the drivers of the agency. We can challenge at risk allocation to that over time so they are outside. Let's look at all of the things that we could put on news. <unk> artists live setlements days out strategic children program which is analogous <unk> waiting to have some confidence ranking of those things. We've gotta hit some on why of <unk> incite united we want straight lots of forestry one <unk>. We won't sit in lots of Loxton went on. We created a thing that we call the risk allocation prices which sees I wanted the expected risk adjusted confidence adjusted returns from a different things and then we can start allocating risk to them inside that was the sort of the genus of at risk budgeting prices site the rest budgeting prices sees are got a bunch of opportunities communities would put them into these five different baskets is what we call them and it will allocate some risks through time to these things ending the tames of the entice with getting on getting that exposure what we were finding the exit point that's the process by which she got from reference to actual because you've got to have some structure for the way you're GonNa play active beats and what are those five baskets that you mentioned so what we do would go batch of opportunities this opportunity some some of the missile-like asset classes but slightly different pets slightly granular and then we aggregate them into the five baskets by saying what other sort of a similar ah type of all genders so we've got the basket is cooled structural and that needs to be diversification so that's up things in it like timber farming life settlements <hes> on affect is out effect is part of things that are driven by structural impacts on the markets. That's the one response it we. I think we'll have some exposure through time or why did I sign so that's the structural basket <unk> MAC pricing. We've gotTA realise basket. We've got a roadmap basket. We've got an APP credit and funding basket and now his head different opportunities in that relate to that site relax statistics like infrastructure unreal site that broad markets basket hits things light strategic tilting pregnant miceli things like global macro ended up grade in finding is where we do into credit mandates. We'll save distress trade that we have a capital of the creative relied finding related auditees and then finally out last basket is Michael Essay selection so that's one way essentially the <unk> opportunities has managed to go in that thing. We've got to make ways in New Zealand active emerging market it could as some private would a so what we've done is we check out as baskets and we allocate arrested. H allies baskets end within the baskets to the opportunities and the inside of the teams investment things okay. We want a better risk in founding gun. Find some excited alleged that we wanted to rescue and fire straight. You Got Funds <unk>. We want some major. Habitat is what we want some blood <unk> on ice and the next thing construction the profile Sundays at is unrest cash price list which has old thanking what's act confidence in the relative merits of these different opportunities and in his is the second decision which is how are we going to get and that's where the tagged operating model comes into waited at S. els do we hit someone else do it so extra take children biggest just chunking <unk> we did at SNL. We started saying that we can we can structure the relationship manager. Mike Network out of things like strokes discredit US Canyon by because we're not going to be a Heh expertise in house but sometimes we will pass out something we'll do extend. How dynamic are the changes in the risk allocation across these five groups so we have this concept of budget and target an actual actual side. The budget is the long run contrary cycle that we site. We want ahead <unk> full merger arbitrage for example four. Rachel <unk> baskets we have pain in the team is drawn from people across the investment group in folic inflation grape <unk> teams and I are the ones who are the subject matter experts <unk> opportunities. They get to get up frequently every so often. Maybe <unk> sometimes monthly sometimes quarterly insight what's happened. Linden tunes of the attractiveness of this has dropped more tractable list attractive as timber more tractable whatever it happens to be in the various teams in Mike pigmentation about a target so that's right now how much rescuing onto the net and in the actual as much. We've actually got him at so the basement. Team's job ought to get the actual costs to taggers. Kane said the target does move around the budget doesn't budget. We should be looking at every few years because that can. It'd be changing much. I mean what she relative confidence. In global macro basis disgraced <unk> that shouldn't change back on a monster man spices. Some of these things will move more and that's where we're changing at target and the actual <unk> is responding to that so some of them slime moving structural strobe <unk> expect China from types big. Some of them like rollback its pricing. That's GONNA move around but <unk> guy. That's not GonNa Change. This is the construction changing New Zealand <unk> slightly <unk> ground and then when you add add up the current portfolio. Let's say using the framework you're using with risk allocation of budgets and then if you compare that to the older way of doing it with strategic asset allocation assets and maybe have like a absolute return bucket for the things that you might have in structural now. How different are those two portfolios. We moved uneasy guide to the reference to the teen and since then Maine's is that we can be a bit more dynamic with opportunity sorry so we don't have to try and jam one of the Eisai categories in these I at last we had things like timber infrastructure attraction property and we hit this thing out of the private markets which was like just a rousing <unk> counterattacking on this one is a more granular approach approach doesn't require. God changed the whole. Sia Construct to add an opportunity opportunity can be added on the on the recommendations the business community in the privilege of the C. I. Weakening Allocate risk to it the board has given us the overall umbrella of Hemet active wrestling ahead but the the job of allocating net across opportunities sets management and so I would say why is going to be a little bit from where you started with that we we have moved away so what we wanted to get away from the SCWHAB wants. This is is GonNa have POPs in structure with these you think it's attractive at five timber with these and gets traded at the time we wanted that to be a little bit dynamic in a little bit more responsive and not just put it on just because <unk> cool to do that and then also you're able to match the attribute accountability wait for decisions because any say I wou- you can actually be at Fox infrastructure. So why not the not the because management his job is not to be there because that really lot acid that much all because they just can't did you reference <unk> when we edit. US It's the portfolio we sell a champion that reference folly funded and we can measure the demonstrate <unk> by this chance we actually might it's really Cleo is a fair amount of implementation touched on things like strategic tilting. There's a blend of what you're choosing to do internally really and what you're choosing to outsourced external managers. What questions are you asking to determine whether you're going to try to bring the resources in house or hire externally. We sat with a few questions like can we get satisfactory. Alignment Connect- probably is one of the biggest drivers not so much a cost just one because y you can get some improvements. I think the biggest driver of Addison's is basically down in the bottom of the Suffolk. It's got to be very very hard for us to build teams in the US or in Europe and replicate what we might get from <unk> costs on his Lisa that a lot of it is lineman or we can't get some sort of critical risk control that we might want will the ability to move. It's a good example tilting entirely managed through derivatives ebbs benefits from the liquidity management at Apple Father <unk> Ron's and the counterparty risk that we rip zine is found as halt also the thing is that you can be for a long time underwater because you waiting for the Magassa Main Review Nighthawk slow slow move further away from what is tomatoes and so that one thought is really hard to get along with external manages also what we saying. We've manages a running that is taught partners. Sometimes that have been proven in other clients that program stopped lease a new while under tight title risk of <unk> your home to do it in this allows us to control it and we are responsible for way manage it and feels like a hippie advice debate when it comes to other things like for example merger arbitrage will also a life settlement so that's the expertise extremely that we you want to build internally. It gives you more flexibility. If you're using those externals show you're gonNA pay for that but in a contract like house eh through time we might be in nicely might not be in the is. It's very hot if you build a team internally to say actually we just wanted to be on this journey. Can you got <unk> tooling guy. Well what am I doing. It's really around alignment ability to manage risk in wide. It is critical to us a bit of of cost and also I just been cleared about. Who's got the expertise. Can we actually get east. He's here in New Zealand. This is what we made and that strategic tilting effort what different an asset classes or in that mean reverting strategy. That's got global equities global bonds currency at got some credits sovereign credit. We've just recently introduced but have risked end commodity so we we status until is as well site the big lie blakely Mac. It's the global markets currency markets. Are these all liquid things that we can we can use on the Futures O. T. R. S. is on and can try and that team will try pretty much every day and going down to the security level so you could do mean reversion across markets. You could do it. Tell to value and growth you could get into sectors. You get into securities within sectors. I how far down are you going. The genus was it started with basically totally visit with a view on gladly bombs in view you on the Kiwi versus. The basket of county doesn't two things and then I tom <unk> significantly increase the rate of site now now. We've got global equity markets doc in sleight. Japan Canada use your UK emerging markets. We've got the same bomb markets. We got about four different credit markets tickets <unk> Japan. US Europe. We've got all night to currency <unk>. We haven't gone down the like to seek the individual securities ladies because we're more confident at the hall of Market Label of being oversight what we think the long run equilibrium prices of values and then competed to the current price when you get to individual sake as an individual securities were just much much less confident than that so you can't increase breaks but I think you reduce confidence inside. We probably died improve the performance of that by doing that this case the head rates of non hopefully uncultivated positions but without destroying the confidence by just getting to a point where we have view and what metrics are you using to determine airman equilibrium in markets that move away from equilibrium. Yes thing builds. DCA models for all of these MAC. It's we have long run views on on the big drivers gripe inflation real interest rates and that's which came from our internal economic saints as well as gathering data externally and they would form views on what a long-run equilibrium values <hes> we use the rights and the impact on the currency as well well we use the native Mac pricing because what would not trying to do is is focused with things again over the next couple of days what we're trying to say is some sort raise the difference from the long run equilibrium venue and if we think it's a little bit louder than the guys data that will Boston or will do that incrementally measly in the NFL has to go and sell it long run economic drivers. Try ahead of economic identities that you don't have these divergent models models ultimately consistent with each other and how do you think about sizing the strategic tilting effort as a percentage of the whole we have a view on what we think that I've will will information ratio is what we can make an in between visits the restaurant we take then we have individual views on the different maggots confident we asked the days of the sizing thing going on within tilting about how much allocate to equities bonds currencies this job as whatever for strategic toting itself take is the biggest chunk of active rest budget and that comes from really consistent with Appalachia now down months and US having a lot of confidence an an ability to execute that which is sort of developed <unk> Tom so we look at what we speak to. Michael Net confident and ever suggested returned salutes <unk> <unk> confidence visit eyrie thing that we'd allocate restaurant in decades the biggest chunk of <unk> where'd he end up the budget <unk> Bat two and a half seen a risk the family within a tight away in budget of a fool obscene but ghost us things dining out because <unk> Carl it. It has definitely bikes check. The rest of the other internal effort you mentioned was the completion strategies outages. How does that fit into the puzzle. The portfolio completion saying as a lot of other owners is cool treasury function inside that team the whole of the market trading old out derivative trading if it's aging <unk> transitions will rebalancing Sunday job as to as the basically the actual volume I compare with will we want to be from a recipe of any rigged ons to get back to that are using liquid ones as well allies <unk> strategic tilting triads as well as terrific aging as well as try the New Zealand is that we might try into tonight's really important contain we created that after the GMC all vessels and we didn't have views of must anytime liquidity risk wait a minute. There's a big program to create some critical functions which allows US visibility in control of reliquary management and they will say the same as a team that is doing all the market facing activity. We talk a little bit about the external manager relationships. You did mention you'd like to have fewer of them and deeper relationships and aligned. How do you go about and has the team team. Go about picking those managers that few Zepa came from God right back to win your knees. I sign okay. We've got <unk>. They WanNa have a whole bunch of different manages to give some sort of ruled exposure to a will we say Kay <unk> to allocate to something having if we think that is really something about that market or that out at manager that gives us great confidence that we're going to beat the reference tool father in doing that. We'd necessarily become I bet will concentrate. We want to allocate war but also what we WANNA do because <unk> confidence got more confidence. If we can change that risk allocation said a few data wanted. I want to try and make these flexible mandates inside what that means is. You gotTA manage like buying a new site unlike a European district may night unless I found inside I will <unk>. Actually we'd like it to be but we'll flexible so we can allocate capital to it. According to view of the attractiveness of that opportunity time inside you can't do that -TUNI- out with a fifty million dollar eight what we found actually Iran about two hundred you stop to have the ability to craftsmen that we will will sit in this up so that you can draw it down. <hes> periodically will reassess the attractiveness of the market and if we if we really like it we can allocate more. We didn't like it. We can just rolled off at where it's more intensive to manage savior of them and you WanNa because it is decided you're getting a feedback loop is to attractiveness. That's something that we went on but but also what we want to get out of that manages a bit what I pay more input into that we use for just getting people's not turn out data and she filter through those manager relationships tend to find that larger managers are more conducive to being able to help you the way you're looking to yeah teams debate like that better from a manages to speak of to be able to manage the allocation carseats that you've got guys for for a few. If you've got a bunch of different may nights you've gotta find for example and you fought in acid. You'd think back to the found one US <UNK> <unk> al-Qaeda infrastructure. I think Maine's <unk> girls can generous thinking that probably pushes you woke up the sauce you mentioned that you want these managers to be able to help you with the flexibility the and shifts in asset allocation and strategies. How much do you come to those judgments on your own. And how much of those inevitably informed by the very managers injures. You're giving the money too often I at least partially in full battle side you get quite a bit of information by the activity because generally speaking if a manager is is slow from allocation state of intuitive <unk> not saying of opportunities. That's pretty useful information for us. 'cause that's is is well extreme <unk> say often probably if you really looked at each site is reasonable correlation between the price at which manages a allocating risks and ask you along attractiveness as you because I let in it's not saying opportunities in the other indicators appropriate to us that we think attractive either do you run the risk ask that the managers is a group sort of form a consensus and as a result you're tilting towards a market consensus of as you want a mean reverting kind of contrarian approach possibly but that's we're having a bunch of them. In particular a bunch of thinking sort of different wise is quite useful because is in you know tightly driven by a single information source of battles you can talk to them and what's really useful from some manages as notwithstanding was standing that I might not be in a particular ethical as they have got sort of frameworks instructions for thinking about have I view the retracting aside that can be really helpful Asthana onto the immediate area for us for thinking about it and the way we try to deal with Atas basket teams and got a bunch of different people in them side that it's not just the person who is dealing with the manager at the access point people who is doing the <unk> payments doing it so you get a bit of protection against Katcha. If you like through that prices what does the structure of your team look like across the investment side of the organization. Yes we've got two victims involved <unk> stain. Gilmore's shaking basement offset in hey look after the investment group and within this group there four teams sponsor basement tame your as a team cool extendable basements in Patna ships and that's <hes> external manager team <unk> Pat. There is a direct investment team and is an asset allocation so we've got what team to call them is exit point teams exit point teams other external basements patch ships team in the team at inside outside of statements growth is cool <unk> completion group so that's heated up by not fennell who was the GM of <unk> Latian and that has within the completion team that trading in another tank will provide on basements which generally running out into credit mandates and a strategy we will direct Albatross attra- strategy which is the type of dislocations Mac. It's so four teams understatement took things on the Mac and the hall rock represents out invasive function at how many people are in each of those teams side is about fifty and the group is a bad teen. I thank in the <unk> ripple fire completion so maybe we're sort of the fifty five sixty somewhere around the circle back to to the beliefs you talk about and really bring him into the present market so one is the notion of markets that are conducive to active management and the ability to generate alpha where you seeing those markets today. We don't on that may need to be on some. We think that museum so the New Zealand actively equity market as an interesting one in the seats they the median. Ian Manager has been would generate Alpha <unk> eggs Easter tunes <unk> time wise that <unk> route speech manages <unk> because they something about the benchmark or is this something out the structure of the market so we think that the New Zealand market is one of the is is it conducive <unk> as a result of that we have actually relatively few listed market active manages <unk> callum pretty much one hand. We've got to manage a New Zealand that run bakeries. We've got one global markets active manager and we don't have any developed markets active managers. We don't have any fixed income market. Active managers is listed spices and that's really because we look at is when we say <unk> lots of really smart people trading with Asia <unk> that is assistant production of <unk> tune altriset with the new government. We think that model declining over time and we think what's happening in the New Zealand is that the market is might array thailand-based national institutional basis. Some international strategic sites in New Zealand <unk> in the rows of proportions of the is generally taking the New Zealand ubiquity manages manage to try off is out the groups and get out more as you gotta use Maggie. Is that a a lot of managers in the in on average. How market is paying phase but not riding out for US yeah? This may be tied to this belief about understanding. There's a life cycle of asset classes as you look at the markets today. Where do you think we are in a variety of different asset classes in their life cycle. I think that's a far <unk>. Prominence usual speak maybe ten fifteen years status the team is data added up <unk> timber in the head all tried where all the temporaries from the integrated part companies Janis to emphasise who had lower cost of capital in nowadays just a lot fewer legs so I would look at far afraid inside. I think is spending that that has moved through the cycle. I think of the ones I think Eli Settlements Probably <unk> Los Eight events as sure that timeframe trying bat lot of Keto allocated to end the big tried was large insurance companies selling his books too by these private manages inches <unk> books kind of Don Rights <unk> SORTA <unk>. We are the ones where it's sort of a little bit. I think founding agriculture is still earlier in the stock one thing that because it's just had <unk> whereas you might be able to buy but in Dullah <hes> <hes> forest you can't Bob Dole Fan you come to New Zealand dairy farms <unk> Tina million dollars talk between one dollars so I think that one still sold as barriers to <unk> institution basis you think about others like productivity just feels a lot more more allocation to that and which might have been much more efficient for unlisted companies in the two to three to four hundred million dollar orange a few years ago jeff feels like it's much more intimated now a competitive bids for everything feels like the Xi's for the next five the priest as well so that's the thing is for us to be <unk> allocating. Today's thanks this I will wear is the real source of Xi's <unk>. What is as the manager skill saying is that leverage is lack. <unk> inefficiencies <unk> manages our refined things we have to raise reasonably awesome that sounds about what the schools there to actually is. I know that in addition to starting with the reference portfolio in creating these risk allocations and budgets and unbalancing what's internal and external and all these different levers of return you also think of themes and pursue themes in the portfolio so talk a little bit about out how you develop the themes and how you implement them in the portfolio things that had I would say and actually in the last years we hidden doubt nearly as much would way. We started with things we we think there are some things which <unk> long run changes happening in things like resource scarcity in things like. Ridge Max is hustling and you find with things as that we using them to say okay. Let's try and help teams with finding the most sort of fruitful areas of opportunity where spices which we thank heaven Thailand learned from it and the four Aso conducive to ask finding opportunities were get paid more for the <unk>. Band Titan would imply and what if phone a little bit is that you can all nice back any investment you like into what saying you've defined because they added dangers. You Sit L. Put on prices and some other thing I would take it so we haven't really does themes that much of light probably the biggest one that we've now picked capital investment strategies around climate change. It's a very long run. Change in markets had come out of the same activities you like but the emphasis on things James has declined but because I think in practice it's quite had to to really implement <unk> go and you look at <unk> manages around by the railroads on fantastic. I know spend much time on. Es G efforts and when you walk through a little bit of the History Street and then certainly there's been a more recent one with the tragedies that happen locally in the impact from social media so Jay Wright San onto to bring chops the integration pace in pace and integration is about understanding what the GM of risk allocations right from the stats <unk> while the Orion vacations particularly <unk> factor that into that risque location prices they in thinking about we're what happens at the access point and making those decisions where you're choosing the weird basting directly over using your manager what of the Hour I'm guessing so that integration is really important it at the ship sank is about voting an engagement and just being inactive. Aina and Ryan is so that we think about the two big bits of knowledge that comes out of really integration <unk> which is exclusions and it's a really smooth pat of LBJ <unk> attention because removing all you've excluded this company wide or you haven't excluded this company in the Norwegians Habes Ebbs. You must be able Kinda stopped but actually the exclusions arousal basil out of what we do in East on that ownership saw two things we've got inactive version program we will add enhance last year we vital. Abou- globally and we also have an active in guys program way do elect directly with companies to mystically and we use a BMI to help us on that libel engagements by the mice the number one that you mentioned was the House that a tragedy cross-stitch way together with another group of a New Zealand crayon invasive we got to get laid engagement with the social media companies about the will aimed at preventing the live streaming of objectionable content in subsequent distribution inside that the program that sounded <unk> we have I think at last count like. It wanted visas from around the world by <unk> slot more from <unk>. The basically is based is between managing <unk> trillion dollars <unk>. Thank Group of basis concerned about this issue with inside sided with Alexa Faisal. Go on twitter. I am specifically at preventing not distributions loss ramming those things and how has that played out in in the engagement so far this early DIS engagement. We're in touch with the local in stays what we've been doing through. This few months is getting that group of Vistas GonNa be involved defining that Isis fully engagement in really doing the work from <unk> what potential solutions might base and that we are. GonNa go. Opposition set to sit down heavy discussions. The Knicks highs will be getting that intellectual. What are your priorities for the coming year. As you look at get things you're working on and how you're GONNA continue to try to evolve this model so the government announces that I didn't maybe year and so in this new budget it the government announced a new mandate full the guidance to manage and that is a mandate for the development of domestic venture capital the <unk> beach capra dramatic end this quite chunk of work at the Miami going on. Let's define what the mandate is. GonNa look like it's helped with the drafting of the legislation. Let's deal with the agency. That's going to manage that for us. which is a Crayon needs? The New Zealand Beach Visa Van end define the tunes that are in his way across the organization to figure out how to do that because to date. We've got the guardians which is asset management company. I think we've found in guidance had mandate in one pufus net was fantastic with Nag on additional man night which we've been given because the government says competent basis that I've seen right you can do this while so now we're gonNA run midnights the new man nights SWU comparatively. It's gotTa be three three hundred million <unk> evidence. I you got blogs fatty but actually it's GonNa sit at up. That's a big one is getting that going. We've got within within the investment teams any more broadly with a nice support functions as well started last year. I cooled down along to target August night and that's because go to disease at tain. The government raced out of the contributions and the race style economy reigns wig gripe fast that will get a couple of billion dollars a year. which would we'll get some miserable chains on top of that instead of Grog Barlow asset so fast forward six years we could be I'd even in Dallas? What's the question which is what does that mean for investment strategies at the moment. What does it mean for support for inflation. Can we sky oh these nines. Thanks thanks Kyle will reign basement as a challenge Scott. somethings that strategic tilting easy to scale but something's on <unk>. Bang Bang working a lot on that and that's leading to a discussion with the board which is around investing in a strange way to we. WanNa Aries is in the next two to three years which will support at rice in management and allow us to continue to generate the egg <unk> joy in the past and then a cool was would that growth comes is the impact on the support functions on operations on it off financing <unk> session going on around at the moment the Abbot Edwige that we've been doing that. We've been active on for longtime as around culture will recently since we've run. A project seeks to clear about what that is our is unreasonable when is action which was quite a project where we go. We gave stories we dated one gives a story about a time. When you've been in practice wait for the organization we haven't been with the organization or you had some difficult decision to make and hey done that? We got this really great seat of stories stories a hundred twenty hundred twenty stories at one hundred eighty one hundred something like that and we were able to go through that and pull out the themes from those which which revealed Benny so you're not going to stop signing a what you that you've got some insider tells the story and other stories that really powerful we got right engagement with came out with a CD the bad news for the organization because ultimately we rely on being of tracks really good people into New Zealand which is a long way from the big blog with financial markets and and we've got to provide a really good proposition for people to come here and so they cultures fundamental in is an ongoing. Kat what I'm looking today. What are those values. Elliot's the venues out we stand strong and it goes a little bit to the way we use frameworks that isis approach at long horizon l. l. ability to withstand the swings packets <unk> principal bass we support each other which is just a humanistic <unk> betty with future focused which is really focusing on that long run and a guy in the swings in roundabouts of markets end team not heroes it was the final one so that focuses on the broad attainment in here as NFC walking down as we've created a seat of cat turns I would is because the cat tunes evocative and so also what cartoons does provide a little bit of trying to get these things made slightly different things take. Hey how are you will all right so that was caught piled continued development our culture that means less you yeah well. Let's turn to some closing questions nations. What's your favorite hobby your activity outside of work and family snowboarding data differently when you get. It's something I have done in the last years of Heli skiing in Alaska when you get lift at the top of a Ridge in in had got the guys away and it's silent and you've got this plate you untouched pitch in front of you is just fantastic at really is what's your biggest pet peeve as I was talking to my wife about it and she pointed at a my biggest. One is the absence of the keys from tonight. Ought ought to be as not being in a consistent place when you go looking for how about your biggest investment pet peeve. I think get probably comes down to when you receiving pitches people have kind of imagine itis around the Lake Volatility William <unk> you get this which is all these things that I can. Why is it will be a vacation of that. I'll say this if imagine a bat flying in the bet is quite <unk> replacement flaws into a pipe and then it flies at the other end of the <unk> in what these people people who think about this <unk> liquidates have is is actually flown straight line for money to the other because that's that Megyn. I think you really ready find out things that we try to sell them in a difficult market. This probably more like a slum what reading you almost never miss I. Am Wise Smarter for having read something from cliff. As in. I think he especially he's been the last year or so. As values hit a hat time convict <unk> hit a difficult time and he's written some really good staff that has been quite as he. That's quite useful for dinner with the board. I find the good ones which ah around had you assise strategies which dont before moving well. What's the price you guys are. What are you trying to achieve you trying to achieve resilience. You're not trying to achieve some level of disinterest in happy do that what teaching from your parents as most stayed they'd with you. Destroy Evidence tank last biscuit in the packet. Get rid of the Pagan be no neither the pay was it was just last one. What life lessons. Have you learned that you wish you knew a lot earlier in life. The first year two after you get out of UNI is really not that important in that died that you've got a Russian to whatever is the job that you managed to get. It's been some time I get. Some experience owed strongly recommend that to my kids than anyone else to just get out air in level because you'll you'll find ten. Twenty is down a track that actually with you've done. It doesn't make any difference in fact Martin hats. Will you be ended up because you've learned a bit more vase terrific well Matt. Thanks so much for taking the time really appreciate it. Thanks for listening to this episode. I hope you found a nugget or two to take takeaway and apply in your best thing and your life. If you'd like what you heard please tell a friend and maybe even writer review on Itunes. You'll help others discover the show and I thank thank you for it. Have a good one and see next.

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