YouSaid · the spoken record

Raphael Arndt

lines on the record: 110
first: 2025-09-01
most recent: 2025-09-01
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“I don't know all the answers and that other people quite often know better than me, or certainly they've got different views to me. So really how to listen to other people.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Get a lot of things to read, and some of the writings from our hedge funds and things like that are interesting. But really I read the work of our internal team because they synthesize all of that together into what's important. And I find that the most valuable. And if I have any spare time, what I try to do now is read about historic economic conditions. And I'm particularly interested actually in a period called the Gilded Age, followed by the Progressive Era in the US 1880 to 1920 when following the railway bubble and bust and financial crisis there was a huge rise in populism that led to Theodore Roosevelt getting elected and there's a lot to learn I think from understanding that period”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Pretty simple. I think they're sort of pretty straightforward people. Just work hard and be patient. Don't expect everything to come to you straight away and be prepared to take a risk if it comes along”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“An easy question for me to answer, but it has nothing to do with investing. I'm a real animation fan and I love theme parks and so for me it would be Walt Disney. He's a person who was an innovator who was prepared to take a lot of risk, who went broke more than once. He really bet everything on his vision, but also he used technology to communicate with the masses. So he was the first person in an existing movie studio to use television and he was roundly criticised for that. He built the first theme park and he really saw people who worked for him, for their talents and didn't really care what the rapper was, despite some of the rumours about him in my readings. He backed all sorts of people from all types of backgrounds. And so I would be fascinating to talk to him about that.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's probably a couple of things. One is just people who assume the future will be like the past. And I don't think that's a valid assumption. You know, there's a whole lot of things over the last 50 to 80 years, a huge leveraging cycle, a huge demographic boom post-war that have meant that certain things behaved the way they did that I just don't think are likely to continue. So I think we have to go back to first principles now. And someone who says, well, I've done it before and it worked, so therefore it will work again. I just get irritated by that approach. And linked to that, people who just don't understand why something works. Like if something's a great investment idea, there's got to be a reason. And if you don't know the reason, don't do it.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“About $10 million a year, and I'm chairing the investment committee there. So I feel like we're making a difference, and that's really important.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, leaving aside work and family, which obviously take up much of my time, I would say in the last few years I've really decided to try to put something back into the local community and I've gone on a couple of not-for-profit boards. One is the school where my kids go and somehow I've ended up as the treasurer there and we're doing some work around the sustainability of the capital budget and how we can get the school fees down and I think putting effort into educating kids and making sure that's sustainable in the long term is really important. I've also gone on the board of a community foundation called the Lord Mayor's Charitable Foundation here in Melbourne that's a 90 year old institution that looks at the problems in and around Melbourne which are currently things like homelessness, kids education, integrating aged people and migrants into society and raises an investor corpus and gives away”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think it's an appropriate question. We've done a lot of work internally on how to get diversity of thought into decision making and we've done a lot of work educating ourselves onto unconscious bias and I think the problem with the sports question is I would hazard to guess that more males than females are probably interested in sports although I'm not saying females aren't and that your listeners are probably thinking about at least a chunk of them are thinking about how can I get to be a CIO or a portfolio manager or some type of lead consultant and the point I'd like to make is you don't have to be a sports fan to get there you know all people are different some are sports fans some aren't”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think we're there in every part of the portfolio to a point, but there's always room for improvement. And I think as technology improves, I would aspire to look at those infrastructure or property assets and regress them against the broad factors, just like we do with the equity managers and the hedge fund managers and the more liquid space. And so how much of this return is due to discount road compression or changes in economic growth assumptions or inflation? How much is due to your actual skill? And the industry has a way to go to evolve to that model. But what's happening in infrastructure and property is the big funds rather than doing that, they're internalizing, as you pointed out. And that is creating pressure on the industry. And that will force change. And I think the same is true in equities and hedge funds, but in a slightly different way.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, as a result of the wonders of competition, we actually achieved what we wanted with both of those assets. We think we've got a more engaged manager who's working harder on creating value than a traditional infrastructure manager would for a core asset. And as it happens, the fee we're paying is substantially lower than what it might have been under the old arrangement. And I would encourage any of your listeners who happen to be in a role where they could do that, to think about whether their managers are actually adding value and to speak up and to make a difference.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“To the manager. We sit down every year and renegotiate those bonuses. And if we can't agree, then there are none is the approach. And so we also said we've bought these assets. We want to be able to terminate at any time we want. Although we recognised there was an initial cost in setting up the mandate, so we decided to pay them a sort of a demobilization fee on a schedule for the first three years.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then secondly, we want to know the people who will be working on these assets, how much time they'll be spending on it, and we'll pay you a cost plus. And so we're happy to pay you a profit, but we want to know what that is you can bid on that basis. So that was unusual in space. Secondly, we said we believe in alignment. We believe in incentivizing you to add value. But we've bought the assets. If the economy does well and the value of the asset increases, that's not your doing. It might even be that this particular business has lost market share, but still grown in value. And so we decided collaboratively to set one and three year operating goals, how much revenue per car park, whether the CapEx program was delivered on time and on budget, what's the spend rate per passenger in the retail business, and we would agree fixed dollar bonuses based on the share of the value created by achieving those metrics back.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Those assets? What do I do with those people? So we preferred to hire an external manager. So we went to the market and we said, we want you to bid to manage these assets. And we want airports really their, you know, they earn aeronautical revenue, but they're also shopping centres and they're sometimes property development plays as well if they've got a land bank. So we want you to bring your property people or a partner who's got that expertise alongside. And it was really interesting in Australia where there's a number of fund managers who have both infrastructure and property strategies. Those teams had never worked together, even though they already own some of these assets. So we sort of said don't turn up if you can't do that.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then acquiring some assets which left us with essentially two large airport exposures here in Australia, Melbourne and Perth Airport, which were approximately a billion dollars each value. Now in this case, Wed bought the asset and we understood them and we are going to make the decision about when we should sell them and if and why. And so we don't want to buy to hire a manager that can take the value away from those decisions. The board said to me, why don't you manage the assets? You bought them. You know how to do this. Used to be an infrastructure fund manager. And I could and I actually built a business case or a plan to say how would I do that. But I felt like hiring eight or so people that I thought we would need to do that well risked our culture because how do you incentivize them? Do you incentivise them on the whole of fun when they're just managing one asset? And what if I want to sell?”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“If the strategy is highly value added, if they're tuning around poor performing businesses, if they're growing businesses through add-ons and creating something and then exiting much more like a private equity manager would, then maybe it is worth paying. So that's the insight we bring. And in the case of infrastructure, a few years ago, we actually, so I said we only invest through external managers. That is true. But there was an opportunity in Australia to buy some domestic airports from a listed company and we wanted to use a manager, but when we started talking to the market, we found that they weren't aligned sufficiently. They all wanted to put it into funds and structures where we couldn't get enough capacity or where they locked themselves in as a manager forever or where they charged fees that were not really sensible for those type of assets. So we actually went out, surprised the market by doing the transaction ourselves in-house.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“However, the second thing is, as I was alluding to when I was talking about equities, there's no point paying fees for things you can buy more cheaply. And so each team thinks very hard about what are their arrangements and are we getting bang for our buck. So I'll give you an example in infrastructure. Some years ago, well, the typical fee model in infrastructure is coming to our fund, we'll charge you if we're not too avaricious, we'll charge you one percent base fee and 10% over 8% or something like that. If we are, we'll charge you 2 and 20 like a private equity fund. And if you're buying core infrastructure assets where most of the return is coming from continued economic growth or flat to declining bond rates, that's not manager skill. That's an economic view that I can buy in my fund using liquid market proxies. So there's no point paying high fees for that.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, we do think a lot about fees. It's very important, of course. But the first point is we're focused on net returns. And some of our local peers here in superannuation who have to compete for members have decided to go down a road of setting a fee budget for the whole fund and then reporting those fees as a competitive advantage in their marketing. And we think that risks cutting out whole swathes of the opportunity set, the higher fee areas of hedge funds and private equity and venture in particular. And that would be fine if they didn't do much for your portfolio, but I think they're really important for a properly diversified portfolio going forward. So we're agnostic as to the level of fees, if I can put it that way, in an absolute sense. Of course, we don't like paying them, but we mainly think about net returns. And so that's the first thing.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess I want to ask one last question about how you thought about fees, because you're in this interesting inflection point where you have a lot of external managers, but you also have a lot of capital and bargaining power. So how have you tackled that with your external managers?”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“But I do think that having a venture program also exposes us to sort of the technology that's out there available to help people collaborate. And we've started to implement some of that. So we're using Confluence and SharePoint, for example, for internal teams to be able to communicate with each other and work on things together. And we're investing into our own technology quite heavily to uphold that. And I think for the next couple of years, a lot of my focus is going to be on that internal structure and team to get to that space. So it's not really about Have to take the investment program here or there. Actually, I have no idea what will happen in investment markets. I know we just have to have an internal structure and process that can adapt as that evolves.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I think that we need to move much more towards a sort of a network organization where everyone knows what their role is, whether they're in touch with a set of opportunities and a set of information and where we have to use our structure to empower those people to make the decisions that's appropriate for them and to take the information they generate and bring it back to the rest of the portfolio and the rest of the investors. Now we're not there. It's a hard thing to do.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the first one is actually about our people and the way we interact with each other. So I sort of look at the traditional organisation which has a top-down hierarchy where you have one person sitting at the top and then a few people below them and so on and so on and the authority cascades down. And I think that structure is just too inflexible and too slow to make decisions to meet the challenge of the world that sits in front of us. And frankly, our portfolio is too complex as well.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“So now that the fund's been up for twelve years, things have sort of settled in, you said there's processes now. As you look out for the next, let's say, three to five years, what are the key initiatives you're looking at to improve what you're doing?”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“That people buy those opportunities are absolutely tremendous. And so we've been playing them a little bit in the equity market. We're working on some further strategies there, but significantly in our private equity program, where we have quite a bit of onshore Chinese exposure really playing those themes. And then the tech space in China is really interesting at the moment too. And they're really market leaders in a lot of cases. And so we have a venture program focused on China as well.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so you're right. So the first thing is, you know, if you're Australian, you have an exposure to China just in the Aussie dollar and the local economy. So we're not setting out, for example, to play commodities because we feel like we've got enough of that exposure already. And if we look at, we sort of loosely call it Old China and New China. So Old China is the investment driven wealth creation through building roads and buildings, particularly property investment. There's all sorts of debates about whether that was overcapitalized and whether capital allocation was efficient. We don't get into that. All we would say is we don't see that as a particularly attractive investment opportunity right now. But the new China, the creation of significant demand for healthcare, for education, for entertainment opportunities as people become middle class, the trading up in terms of the types of goods and services.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“That the creation of that middle class, a consumption generation, and an investing population, there's a huge internal domestic investment markets, and they haven't really been opened up to the world yet, but they will be. The currency has become tradable and will become more tradable over time. And so someone who's interested in the long term really needs to be aware of that and learning about it and thinking about what is their strategy.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's probably one of the oldest civilizations in the world. So we've got a lot to learn from them just in that respect. It's an enormous country with an enormous population and it rightly deserves to be the biggest economy in the world and it no doubt will be before too long. And the Chinese government, whether you whatever you think of the political structure and regime in China has done a really amazing job in improving the life of the average Chinese person in the last two generations so that we've had this huge and one-off tailwind to investment markets and global economies from the creation of a middle class in China and the very aspirational that policymakers are very clever and they have a plan. And so one of the things I'm most excited about actually in the world at the moment is the opportunity”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we've probably got a much more open mindset to the benefit of exposure to emerging markets than a lot of the US investors I speak to.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very luxurious to be a US investor these days because you don't have to worry about currency. And that's probably the most important thing, the most important difference, I think, that there's so many opportunities in the US market, in US dollars, and you don't even have to think about it. And if you decide to go offshore, then suddenly that's a big decision. Whereas if you sit here in Australia, we don't have that luxury. As I said before, the Aussie dollar is very volatile compared to the US dollar. So that is a big impact on portfolio construction. But there are other differences too. I would say, and it's easy for me sitting on the other side of the world, but I would say that the US investors largely are quite introspective. You know, I think we have a very different view of the rise of China and the impact China's having on the global economy than most people I speak to in the US who rarely talk about”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“So obviously, we get base salaries, but we also have a bonus arrangement which is linked to some extent to personal goals, which might be about the team or the individual responsibilities and they're assessed by the managers. But the quantitative performance measure, and the more senior you are, the more important that is solely based on the rolling three-year whole of fund performance in an absolute sense. So it's to create alignment, sort of whole portfolio thinking that I've been talking about.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's no, let's just get through this committee so we can do what we want. You're still responsible if you're presenting the paper, but it's, do they know something I don't? Have they got an expertise that I don't? How can I use that so we all get to a better position? And so we're trying to change the culture to that. We've got a way to go, but we're getting there.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Day before the meeting, whether people are inclined to vote for or against something, and why. And then the chair of the meeting gets that information. They can feed it back to the team so that the team can firstly focus their presentation on the issues rather than wasting time just repeating what's in the paper. And secondly, use the time in the meeting where it's most needed. But then we can call out those views so that even if it's only one person who says, I don't like this because the chair can actually say, well, you raised a concern about this. Why don't you share that concern with everyone? And we can see if we can either allay that or agree with it, and that could take us in a different direction. So it comes to how we chair the meeting as well. And it's very important in the dynamic that the chair or me, if I'm not the chair, are supporting those views and encouraging people to do that and have the dynamic where we're all working together for the good of the whole portfolio. There's no us and them.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Loud voices dominate the conversation over others and go around the table and vote one at a time, raising your issues. Well, it takes a strong willed and courageous person then to vote against the chair or it might be your boss or the views of the other people who might have been in the organisation longer than you or in some cultures actually they just never would do that you know in certain Asian cultures they never would argue again”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the first thing is to acknowledge them. And so, you know, we're all very logical, analytical people here working in investment markets. And so actually we've got a really good chief culture officer and she's led our thinking in this space. She's a psychologist. So she's been great at educating firstly me and then the rest of the team using data. So it's very clear from the data that diverse teams make better decisions when presented with cognitive problems and they have time to debate them. As opposed to teams that have to make very quick decisions like a sports team or an armed forces group or something like that. And so using that, getting buy-in across the team for that observation, we've then looked at our own processes. And the classic one is an investment committee where you have some wise and old person, usually a male chairing the meeting, debating things, but then dominating the conversation or letting some people with”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then importantly, it's a no blame culture. So we know we won't get all the decisions right. In fact, we'll get a lot of them wrong. And so as long as we've made those decisions in the right way, we just move forward and learn from it. And we might ask the questions, what do we learn from this? Can we improve our process? But then we just get on with life.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I would hope it's very collaborative. I think we aren't into star investors or single people taking the glory. We're into a real team effort. We trust each other. We empower people to make decisions and we have to support them with the right framework so they know what decisions they should be making and when they need to escalate something and how much risk they can take. We do vigorously debate ideas with each other in a very open way and we encourage that and so we certainly think that diversity of thinking is really important. Having different people around the table with different backgrounds, different experience and that clearly in investing there's no right or wrong answer and no one really knows what will happen and so the more views you've got the more able you are to make a good decision.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Private equity teams and they obviously focus on their areas, but increasingly they're sharing their skills and resources across those areas as well. And then we have a portfolio strategy team which is a top-down portfolio design team and they're also tasked with looking at the economic situation, how markets are priced and looking at portfolio risk settings and investment process that I've been talking about. My job actually is much more about team structure and process and strategy, and most importantly, culture than about making investment decisions.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the investment team, I said about 60 people, it split into three teams. One is public markets, and there's a group doing equities, which includes the long short. There's a group doing debt, and that includes both public and private debt. There's a group doing all the overlays, all the derivative positions that shape the portfolio and put on interest rate, currency, and some option tail shaping strategies. And then there's the hedge fund team. We call it alternatives. They also do alternative risk premium, things like reinsurance. And so there's a deputy CIO, David George, who leads that team. And we would like to think that those skills are fungible and that we can share the insights across those subteams and benefit from each other's skills and opportunity sets. And then we've got a private market team led by Wendy Norris, and that's infrastructure property.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“And they're appointed by the government, they're appointed for fixed terms, they're not allowed to be current politicians and they've all got financial services skills. So we're very lucky that the governance structure that was designed for us by the creators of the fund is very robust and really I would say is the whole reason why we've been able to deliver what we have.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Depends how big the decision is, and I would say that we're evolving this at the moment. But the big picture portfolio decisions, how much risk should we have in what scenarios are we worried about? We make those decisions at the board level. But obviously those views are filtered up from the team to the internal investment committee and then recommended to the board that way.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Don't have to worry about peer risk. We don't have our performance published in league tables annually, let alone quality, like some funds. And so we can just focus on that long-term goal. The other thing to think about, and as I said before, the industry doesn't do enough of this is thinking about the risk part, not just the return part. And so we sort of think about volatility, but also sharp ratio. It's a hard thing to measure, and there's all sorts of debates you could have about it. But in terms of our 10-year sharp ratio, it's about 1.3, which we think for a fund like ours is pretty good.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, going back to the beginning, you have to have a clear set of objectives and risk parameters as a language that you can talk about, in our case, our board and our investment committee. And we have this very open conversation with the board. And so the sort of scenario we're talking about is, well, if equity markets are doing 10, say, which is pretty healthy considering where they're priced today, and we have a diversified portfolio, and in that scenario, we're only doing seven or eight, which beats our mandate, but in a big drawdown, you know, we might only lose 10% rather than 30, and then we can invest into that and deliver 15 or 20% returns beyond that. Is that a risk worth taking? And we think it is because we're an absolute return investor over the long run.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so the way we think about that is we map every asset onto a factor lens and it's very simplest. We're just think of two factors, a cash and equity portfolio. And so we tend to think about risk in the portfolio on that basis. We don't know whether any of those scenarios will play out and the most likely outcome is some other one will play out completely that we have an open thought of. So it's important to be humble about this. We do know that risk isn't being particularly well rewarded right now and we do know that all the risks I discussed are out there. And so it doesn't seem sensible to be taking a lot more risk than normal in this market. I can't envisage a view other than a very short-term view why you could support taking more than average risk at the moment, for example, for a long-term investor.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because we think the cost of foregoing some return in good market scenarios over the next year or two is far, far outweighed by the opportunity cost of getting caught up in a downturn in markets and not having the ability to invest into that at the time when asset prices are cheaper.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“That to become far more significant. And so I think if we look at the world today, I would say there's a lot more downside risk than upside that we can see. And the only upside scenario is we can really come up with a sort of productivity boost based on things that aren't in the data yet and we don't know what they are. And so it's not really likely that central banks can respond again in the same way they did after the last financial crisis because they've used up that ammunition. So we're not expecting a financial crisis. We think banks are more robust now and markets are better regulated, but we certainly think the risk of a recession and some repricing of risk assets to below average is likely in that scenario. And markets aren't pricing for that. So we have been reducing risk in the portfolio gradually. And as we sit today, we're just slightly below neutral.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, we think the chance of a recession in the US is quite high over, say, a three year time horizon, and it doesn't appear that markets are currently pricing that in. Secondly, we've got really, as a consequence, I would say of the financial crisis and the monetary policy response, which inflated asset values, but kept wages down, we've got a growing populist politics trend across the world. And that's true in almost every developed market. It's more reported against in the US, obviously, at the moment, but it's true in most markets. And populist politics, which is not unusual in history, usually ends in lower growth because tariffs and trade restrictions usually lead to that or other types of protectionism and higher inflation. And so we've got some skirmishes going on between the US and China currently, and there is the potential for”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, today we look at the world asset prices are expensive. They're probably slightly less expensive than they looked a year or two ago because we've had at least in the US and in other places a strong earnings print or series of prints. So the economy is quite healthy. And so risk has become more attractive. And towards the end of last year, we increased the risk in the portfolio as a result. But on the horizon, we've got a couple of really significant issues. One is just the business cycle returning in the US. We've got the Fed raising rates and shrinking its balance sheet, liquidity coming out of the system. And usually that ends in a recession. In fact, while we've got some unusual experience here in Australia, you would expect a recession in the US in the next two, three, four years, something like that. We've also got a very strong fiscal impulse at the moment going through, but the current view is that that will roll off around the same time.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“An event, but something close to it, we actually want to be able to buy cheap assets. And the option value of flexibility is not something that traditional portfolio theory really takes into account. And so that's why you see us sitting with sort of a bit over 15% in cash and why we manage our illiquid asset pool carefully. Because while you would hope you get an illiquidity premium from those assets, it also means your portfolio isn't as flexible as it might be in those sort of scenarios and there is an opportunity cost that arises. So we try to build the portfolio to those liquidity metrics or flexibility constraints and then look at, okay, if that's our capital budget, our risk budget, our illiquidity budget, how should we best spend it? What are the things that are returning the best risk adjusted returns given those whole portfolio budgets?”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've built a lot more process in the 10 years since then, which is both good but also we need to be careful not to let that lock us into a position that isn't the best position. So we run a couple of tests. We suffer like many Australians from a very volatile currency and so it also tends to be correlated with risk or more particularly risk-off scenarios so that as someone with a large global portfolio we have to worry about liquidity in those type of scenarios quite a lot. So the first thing we do is run a sort of a crash test liquidity test every night through the portfolio where we expect a currency fall and a equity market fall to be correlated and make sure we can survive that. And that test is somewhat worse than the financial crisis overnight. So we've been somewhat cautious appropriately around that test. The second thing though is if we have not quite so”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, this was all senior and investment grade credit at that time. There wasn't much point in buying high yield if you could get those returns in investment grade. As the crisis unfolded, that portfolio started to rotate out of investment grade into higher risks, high yields and other things. And at some point we decided that it was appropriate to start the investment process into equities again and kick that off. And also by then we had started to build teams in the private markets and so we started to get set in the private markets. In fact, back then in about 2009, end of 2008, 2009, we were buying core infrastructure and core property because they looked very attractive given where prices had gone to. So in the decade or so since then we've rolled those assets out of the portfolio and replaced them with higher risk assets where we think we're getting better rewarded.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably about 15 to 20% of the portfolio into credit over about three months. So it was quite a big decision and clearly that decision paid off very well. Those initial investments returned above 20%.”
2025-09-01 · Capital Allocators · CIO Greatest Hits: Sovereign Wealth Funds – Raphael Arndt (Australia Future Fund) · IDENTIFIED FROM THE TRANSCRIPT · source