CFA Societies Australian Investment Conference 2023

Opening Keynote 

The conference commenced with a compelling keynote presentation by Prof. Edward Altman, who delved into the current credit cycle’s status and its implications on corporate distress and restructuring. Edward introduced five key indicators for assessing the phase of the credit cycle: 

• • Default rates, both present and projected (with a historic average of 3.3%). 
  • Recovery rates, represented by the weighted average price at default, averaging 22%. 
  • Investor Required Rates of Return (OAS) at 3.96%. 
  • High Yield Bond Distress Ratio, where 7% of high-yield bonds exceed 10% above the Risk-Free Rate. 
  • Liquidity, assessed through various indicators, including new high-yield bond issuances exceeding $200 billion annually. 

Following the keynote, Scott Tully of REST, Michelle Wigglesworth of Australian Ethical, and Tom Stano of Macquarie Group shared their book recommendations. These included:  

• • “The End of the World is Just the Beginning” by Peter Zeihan
  • “The Anti Social Network” by Ben Mezrich
  • “The Bond King” by Mary Childs

Chief Investment Officers Ian Patrick of ART and Alicia Gregory of Future Fund shared valuable insights on the topic of Navigating Transformation. Ian emphasised the challenges associated with merging two superannuation funds, highlighting the priority of developing a cohesive investment strategy. He described ART’s current state as resembling Noah’s Ark, noting the need to streamline operations for synergy.

Alicia spoke about the advantages and challenges of Future Fund’s total portfolio approach, citing a successful investment in data centres that spanned multiple sectors, such as technology, real estate, and infrastructure. She stressed the importance of hiring the right personnel and a conducive organisational culture in facilitating group decision-making, recognising the critical role of culture in the total portfolio approach.

Factors to Consider When Navigating Transformation:

• • Mergers present numerous complexities that must be carefully navigated.
  • One of these complexities involves dealing with talent, encompassing both individuals and their capabilities, especially given the current tight talent market.
  • There is a need for an ongoing cultural evolution to foster trust and cohesion within teams during mergers.
  • Integrating portfolios and partners is another critical aspect, as effectively driving integration is essential for achieving synergies.
  • It is important to be comfortable with discomfort since the nature of investments often involves operating in situations that are not inherently comfortable.

The afternoon sessions featured Kylie-Anne from Fortlake Asset Management, who discussed the futureproofing of investment portfolios through technology and the ethical implications of artificial intelligence. The audience also heard from Jo Townsend, former CEO of Funds SA, who engaged in a fireside chat discussing her inspirational career journey, emphasizing delegation, culture influence, and the continuous learning required in people management. 

When Jo was asked about what advice she would give to those who are trying to develop their career, she said “Take every opportunity you can get, join working groups, networking events, get involved in extracurricular activities”. 

The conference concluded with the Great Debate, hosted by Anthony Serban of Perpetual and featuring speakers Courtney Wilder of JANA, Jason Phillips of KKR & Co, Katie Petering of BlackRock, and Peter Barany of ART. They engaged in a lively on-stage debate, pitting public against private markets, offering insightful, thought-provoking, and entertaining discussions.

In addition to the wealth of content, the conference provided extensive networking opportunities, enabling investment professionals to connect, share ideas, and build valuable personal and business relationships. These connections are pivotal for career development and fostering collaboration within the investment management industry.