ANTHONY DOYLE | A Macro Kindaguy

What does a macro guy do? What can they tell us about the world of investing? Something I learnt from Anthony Doyle is that a growing population is one of the biggest contributors to economic growth. The mature developed economies like ours have deteriorating demographics. Whereas emerging markets like China, Brazil, India and even Singapore and Malaysia are contributing the most to global economic growth.

Anthony Doyle is an Investment Specialist at Fidelity International. He has over 17 years experience in global financial markets, working for some of the largest investment management firms in Australia, Europe, and the United Kingdom. In his current role, Anthony helps to position Fidelity’s broad investment capabilities, strategy, market views and performance to clients. Prior to joining Fidelity International, Anthony worked at M&G Investments in London as Head of Investment Specialists. He has also worked at Pioneer Investments and Macquarie Bank as an economist.

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EPISODE TRANSCRIPT

Phil Muscatello (33s):

G'day and welcome back to Shares for Beginners. I'm Phil Muscatello. What's macro mean? And what does it have to do with your portfolio? What are the great tidal forces that move world markets and pull us little fish around in their undertow? My guest today spends his days planning, strategising and generally trying to predict what these forces are and which way they're going. Hello, Anthony Doyle.

Anthony Doyle (55s):

Hey Phil.

Phil Muscatello (56s):

Thanks very much for coming over today. Now, Anthony Doyle is an investment specialist at Fidelity International. Anthony helps to position Fidelity's broad investment capabilities, strategy, market, views, and performance. And we've actually been trying for two years to get this happening. And the reason why, I mean, we talked two years ago about coming on the podcast and you said, "Well, I'm a macro guy." And I thought, "Ooh, he's a macro. That sounds really important." But I realized, you know, then you collared me at that ASX meeting and said, you know, "When am I coming on?"

Anthony Doyle (1m 30s):

Yeah, we've had a couple of my friends on. You know, Julian and Kyle and I thought, you know, you kind of let those guys take all the, steal all the thunder. So yeah. It was great to finally get on here after a couple of lockdowns and a global pandemic.

Phil Muscatello (1m 47s):

Yeah. It just took that to get us on air together. So macro, you are a macro kind of guy.

Anthony Doyle (1m 53s):

Yeah.

Phil Muscatello (1m 53s):

What does that mean?

Anthony Doyle (1m 55s):

Yeah so, I mean obviously, in terms of macro economics, it is, as you said, the tidal forces, the driving forces of global capital markets. And you really can't make an assessment of how a business or a company is going to perform without having an understanding of the kind of macro environment that it operates in. Now, a lot of equity investors, a lot of share investors who like to say, "Oh, I just focus on the company. And I look at the business and does it have an economic moat around it? You know, what are the products, what are the competitors?" And that's all fundamentally important, of course, but there's no point, for example, choosing the best performing stock in Argentina and it's up 50% when the currency might fall on you by 75% or the Argentinian government may have defaulted on its debt or there's been a great geopolitical event or central banks are raising rates.

Phil Muscatello (2m 49s):

So when we talk about macro economics, when we talk about macro, we're really thinking about what's the business cycle look like? What's economic growth look like? What are the inflationary forces that exist within a economy or the global economy? And what is happening with interest rates? Which is where we start looking at the high priests and priestesses of central banks of the central banking world. And these are really the forces that dominate fixed income investors minds. You know, what's happening with currencies? What's happening with interest rates? What's happening with corporate bond spreads?

Anthony Doyle (3m 24s):

Whereas equity investors, they will not be as impacted by these forces, to some extent, because generally there's a lot more volatility in equity prices. There's a lot more, depends upon the stock specific factors as opposed to these macro factors.

Phil Muscatello (3m 40s):

Let's think about the days before COVID. Can you just think back to a time say, I don't know, three or four years ago and just talk to us about what was happening in the macro side of things and how it was affecting various markets at the time?

Anthony Doyle (3m 54s):

I mean, I returned from London, middle of 2018 and started with Fidelity at the start of 2019. And that was a really interesting time to come back to the Australian market. I'd been overseas for 12 years; in Dublin, that's where I saw the GFC unfurl, and then in London for almost 10 years. So to come back in 2019 with almost a fresh set of eyes as an outsider coming back to the Australian market. And it was extremely interesting domestically in that the coalition government was fixated on a balanced budget despite a rapidly slowing economy and house prices were even falling at that stage.

Anthony Doyle (4m 37s):

So you sort of think from the government perspective, they should be stimulating the economy, not going the other way and withdrawing stimulus from the economy from that fiscal perspective, so that's, you know, obviously a macro driver.

Phil Muscatello (4m 49s):

So fiscal that's one of those words, isn't it? That's what government does.

Anthony Doyle (4m 54s):

Government spending, if you cast your mind back to economics 101, high school or uni. You know, growth, economic growth is government spending plus consumption. You know, what we spend money on services, goods and services, plus investment plus net exports, so exports minus imports. So if the government is spending, it's going to boost economic growth. If they're implementing austerity, it's going to cause economic growth to be less strong than it would otherwise be.

Phil Muscatello (5m 24s):

Yeah.

Anthony Doyle (5m 24s):

So that was interesting that the government was following this balanced budget approach. You'll remember just Frydenberg with the, I think the mug. And then on the other side, you had the RBA, Reserve Bank of Australia, saying, "We anticipate that the next move in interest rates was going to be up." And this was the environment from Jan until the election of 2019 in May. When we had the election result, the coalition was returned into government and on, I think it was the Tuesday, the RBA came out and pivoted and said, "We're not going to raise interest rates. We actually think we're going to cut interest rates." And then on the Wednesday, APRA came out and reduced its serviceability measures on loans for banks

Phil Muscatello (6m 12s):

So APRA're the

Anthony Doyle (6m 14s):

Australian Prudential Regulation Authority

Phil Muscatello (6m 14s):

They regulate the banking industry

Anthony Doyle (6m 15s):

Yeah, and loans, right? So when we talk about slowing down the housing market, you'll often hear macroprudential measures. And one of those measures is looking at loans and the serviceability of those loans. So the bank, before they give you a mortgage they will stress test your balance sheet. And previously the test was, could you continue to service this mortgage if the interest rate was seven and a quarter percent and they removed that restriction. So this meant that banks would find it easier to make loans. And again, economic growth should accelerate. More capital, more credit going into the economy means economic growth should accelerate. And guess what? It's also good for banks because banks make profit off those mortgages off those loans.

Anthony Doyle (6m 59s):

So that was the domestic environment. So all of a sudden you had what had been an environment where there were headwinds to economic growth turn around into tailwinds for economic growth. And that had a boost for consumption and if you think about consumer discretionary sectors, that would be the sector that would benefit from that. You know, we're talking about buying, you know, household items or whether it's a JB Hi-Fi or Harvey Norman. And if you think about the banks, they benefit from that. And then from the global perspective, in 2019 there was the famous Powell Pivot. So this guy, Jay Powell, is the chair person of the US federal reserve, the world's most important central bank.

Anthony Doyle (7m 39s):

We say that China sets growth for the world, but the US sets interest rates for the world. So when the US moved their interest rates, it's extremely important, it affects the cost of capital all around the globe. And because the US dollar is the world's reserve currency, there's so many contracts that are priced in US dollars, including commodity contracts. So when we talk about the fed doing the Powell Pivot, so Powell's the guy in charge, he said that we were raising interest rates and he pivoted to saying, "Oh, we might actually start reducing interest rates." So all of a sudden global and domestic headwinds from that credit liquidity perspective turned into tailwinds and we saw equity markets respond accordingly.

Anthony Doyle (8m 21s):

So that's how some of the macro factors from almost three years ago, sort of set up the rally in the ASX 200 at that time to 7,000 points in January 2020. And then we know what happened, obviously in March, 2020.

Phil Muscatello (8m 37s):

Ah, we've talked about that too much. I want to look at other factors. Except, you know, we are in a bull market at the moment, aren't we?

Anthony Doyle (8m 43s):

Sure. Yeah.

Phil Muscatello (8m 45s):

So this is what you would consider a bull market par excellence?

Anthony Doyle (8m 50s):

Yeah, definitely. I mean the ASX 200 is up around 60% since the low of March 2020. You know, for a bull market, it's not a science, there's no strict rule. A bear market traditionally has been a decline of 20% or more. But yeah, we're definitely in a bull market. But one thing we would say is, again, going back to that cyclical element of the business cycle, we would say that we've moved from a early stage part of the business cycle to more mid cycle now where the initial return from equity market starts to become a bit more fatigued. Those initial returns are fantastic when the business cycle turns, when it goes from bad to less bad and that becomes quickly priced into the market.

Anthony Doyle (9m 34s):

So the outlook from here is that the growth in equity markets that we've experienced, it's unlikely that we're going to see those type of returns, you know, 60% in 18 months. It's going to be very hard to generate that sort of return profile.

Phil Muscatello (9m 47s):

Yeah, and I think it's interesting to reflect on this because there's a lot of people who've never really experienced a bear market. It feels like markets just go up and it's been going that way for a long time, doesn't it? Apart from that little glitch.

Anthony Doyle (9m 59s):

Well, the last bull market after the GFC lasted 10 years. I mean, bull markets don't die of fatigue. And there's a famous saying from a Fidelity portfolio manager, Peter Lynch, I'm sure many of your listeners may have read his books that are quite, you know, held up as, you know, anyone getting started investing have a look at some of Peter Lynch's books. And his saying is "There's more money lost preparing for a bear market than there isn't the actual bear market itself." You know, meaning that, "Oh, I think the market's expensive, I'm going to go a hundred percent into cash because I have utmost safety. Well the market could rally another 20% before you see a correction in that sense.

Anthony Doyle (10m 41s):

So, you know, in terms of bear markets, they are normally short and swift but brutal at the time. You know, we have lived through one in March last year. The other bear market was really 2008, 2009. The difference this time around is traditionally central banks will cut interest rates to support their economies. And that has a stimulating effect on equity prices. This time around where close to zero, I mean an interest rate of only 0.1 of a percent. So the next real recession bear market, a lot of analysts and economists are questioning how can central bank stimulate to the same extent that they have historically done during recessionary periods?

Phil Muscatello (11m 24s):

Tell us about Fidelity. What does Fidelity do? And what's your specific role in it? What are you doing when you first go into the office and turn your computer on?

Anthony Doyle (11m 33s):

I forgot what it's like going into the office

Phil Muscatello (11m 37s):

The home office.

Anthony Doyle (11m 37s):

Yeah. So yeah, thankfully we're starting to open up again and we can start to return back to the office. So Fidelity International is one of the world's largest investment managers. So there are over 400 investment professionals. And when I say investment professionals, people that manage money, people that analyse companies, people that invest across different asset classes like bonds, shares, commodities, currencies and of course we have a very large footprint. We're in over 26 different countries, office in 26 different countries, but the head office is in London. So I'm in Sydney. My role in Fidelity is to represent the investment teams that are off shore, that aren't in Sydney to our Australian client base, which include moms and dads, you know, people that invest in our active ETF on the Australian stock exchange to financial advisors, to superannuation funds, to CIOs and family offices and endowments.

Anthony Doyle (12m 40s):

And I articulate the views of Fidelity in terms of our house view; what is going on in the macro environment, what asset classes are attractive. But we have a team of 14 investment professionals in Sydney. We were established in Australia in 2004 and we run a number of funds for our clients in Australia. So they're around 16 funds that we, mutual funds, unit trusts that we have here available for clients and investors to invest in ranging from Australian equities, run by a portfolio manager named Paul Taylor. So he's very well-known in the industry, he's in the hall of fame of fund managers. Another person that's well-known within the industry that writes a regular column for the Australian financial review is Kate Howitt.

Anthony Doyle (13m 23s):

She also runs an Australian equity portfolio named the Fidelity Australian Opportunities Fund. And then more recently there's a portfolio manager named James Abela, who has run a Australian small companies fund medium and small companies fund named the Fidelity Future Leaders Fund. And that's generated some very strong performance and he's won a few awards for being one of the best portfolio managers in Australia. And they're all backed up by this team of equity analysts that analyse the companies, you know, to the nth degree. So we get company management have historically, you know, under normal circumstances, they'll come into the office and they'll have the CEO of BHP or the CEO of CBA and their senior management teams, you know, they'll grill them on what's going on, what's the competitive landscape.

Anthony Doyle (14m 14s):

All with the hope of identifying those companies that can generate returns over and above, say, a benchmark index exposure. So a lot of different funds that Australian investors can use but of course, with being a very large investment organization, we have a lot of resources available to us. So I talk to my colleagues in Shanghai, Singapore, Hong Kong, Toronto, of course London, all around the world. So that's the great thing about being a large organization. If I don't know the answer to something, I'm sure there is someone within our organization that does.

Phil Muscatello (14m 47s):

So that's your role as the macro sort of role. I'm assuming that there's all of these investment managers choosing different stocks and companies and analysing them to the nth degree and your particular role is to overlay the macro view. Is that a fair enough way of putting it?

Anthony Doyle (15m 7s):

Yeah, so I cover Australia and New Zealand as part of my role as well. And we'll give a view on how I think interest rates are going to move in Australia. I'll give a view on, in terms of Australian capital markets, what I think represents good value, whether that be the Australian equity market or the bond market or the currency and similarly for New Zealand. So I'll feed those views into our global macro team and our global view, but also I regularly interact and sit in on team meetings with the multi-asset team where we're looking at various regions for where we can find those opportunities for our portfolios. Whereas your portfolio managers, the people that you've had on in the past, you know, someone like Kyle Macintyre from Firetrail or Julian McCormack at Platinum, for example, they'll be far more focused on the individual companies, which is what their roles are, for example.

Anthony Doyle (16m 1s):

As, you know, equity analysts, they'll be far more focused on the domestic landscape. And, you know, if a company has global, they'll think about some of the global markets as well. But as a macro, I mean, my background is I was trained as an economist, I worked at Macquarie bank for five years as an economist and that really lends itself a lot more to thinking about growth, inflation, interest rates. You know, my hesitancy in coming on, you know, originally was that I wouldn't be someone you, you know, you tap up for the next stock pick Ten bagger or 5 bagger and it makes me laugh when people tap me up 'cause I don't really have that insight.

Anthony Doyle (16m 43s):

But I could tell you, for example, if what regions in the world look like good value from that market perspective.

Phil Muscatello (16m 49s):

So getting back to the fact that we're in a bull market, how should investors be approaching purchasing equities at this stage?

Anthony Doyle (16m 57s):

I mean, it's really interesting. So this is where the insights of behavioral finance and behavioral economics can help guide you on your investment journey. So, you know, one of the worst things you can probably do from studies that have been conducted is look at your portfolio on a daily basis. And there was a guy that won the Nobel prize, Richard Thaler in 2017. And he's seen as one of the fathers of behavioral economics. And he said, you know, one of the best things I've done is not look at my portfolio at all. And he wrote a famous paper in 1994, saying that you should just invest a hundred percent in equities. And this isn't obviously advice or anything like that.

Anthony Doyle (17m 37s):

Everyone has different risk profiles, but historically speaking, you know, equities have been a great place to invest. And obviously during the bear market of last year, I had a lot of clients talking to me about what they should do. Should they be selling? Should they be buying? And one of the best things you can do during periods of volatility or bull markets such as this, obviously you look at valuation measures. You look at whether the fundamentals of the market are strong. You look, whether the valuations represent cheapness fair value or are expensive. And you also look at technical factors like whether there are flows coming into and out of the market, but one of the best things you can do. And one thing that I was highlighting last year was that one of the best things to do is to extend your time horizon of investing.

Anthony Doyle (18m 23s):

So on any given day, there's a higher probability that the market is up than down because markets generally trend higher over time, because guess what the economy is growing, which is again, that link back to macro. So there's a 54% probability that the market is up from 1979, the ASX 200 in total return terms. Whereas if you extend your time horizon to five years, no one has lost money. Even if you bought the day before a huge bear market like black Monday, 1987, like the tech crash, like the GFC, like COVID-19 obviously you have experienced great volatility, great falls at the time, but after five years in total return terms, you're up.

Anthony Doyle (19m 10s):

So this is the way that generational wealth thinks long-term investors. This is the way that superannuation funds think this is the way that endowments think family offices. And too often, we get caught up in the noise. And the reason is, again, going back to those behavioral insights, we feel losses far more acutely than we feel windfall gains, which is why we're so hesitant to sell a company at a loss because of that loss aversion, which is why so many investors will hold on until they get back to their entry level. When you should really be assessing a company, if you are looking to sell on the fundamentals, then and there, as opposed to, you know, any sort of price target that you might have in mind.

Anthony Doyle (19m 51s):

So one of the best things to do is extend your time horizon. And I often talk to investors and they'll say I'm a longterm investor, I'm patient capital. But when it seems like the world is going to hell in a hand basket, and the headlines are screaming at you and everywhere running from the door. And if everyone's running and everyone's investment time, horizon collapses to a day to a week. So having those goals in mind, when you're investing, understanding your own time preference of money, understanding what liabilities you might have as well. Often we see that those that are forced to sell because of margin calls. These are sophisticated investors leverage like hedge funds, therefore sellers, even if you see some of the crazy price action on individual stocks, it might be short covering.

Anthony Doyle (20m 37s):

They've been short and they've had to buy back the stock, which has the effect of increasing the price. Exactly this explosive Tesla, one of the most shorted stocks, obviously, and you've seen the price action there too. This is just noise. Really? It is fundamentally. And again, when you think about the evolution of humans from the African savannahs we're hardwired to fear things, you know, is that a stick over there or a snake. And this is why when you open a paper, it's not good news, you're reading, right? It's always, you know, that's, what's going to attract your attention. That's, what's going to get your eyeballs. And in this world of social media and amplification of messages, it's something that you have to be really acutely aware of.

Anthony Doyle (21m 23s):

And, you know, to tell you the truth, the advice of a good financial advisor, I think held Australians in good stead last year, overwhelmingly clients were putting money to work at that time. When I say putting money to work, investing in the market, as opposed to selling equities, selling shares, it was generally the institutional client basis that we saw around the world that were the ones doing the selling. And it was actually the retail buyer that came in most quickly after the bear market occurred. So that's something to consider as well. So I would say that an important lesson is that being liquid, what we call the, you know, having a large cash buffer in place when you can deploy, when markets do have those sell-offs is another good way, you know, tilting into risk is another good way to generate long-term returns as well.

Phil Muscatello (22m 11s):

It's interesting that there is say that that retail investors were the ones that were holding their heads high and institutional investors were the ones selling because Gemma Dale who was on few months ago now was mentioning, cause she's got a lot of data about what people are buying and there are younger retail investors, buying banks, buying BHP, just buying Wesfarmers and those regular stocks. And it seems to be a real turnaround that they're keeping their heads as opposed to the institutional investors.

Anthony Doyle (22m 38s):

Well, again, remember when I spoke about at a time preference of money, the great advantage that the retail investor has is they're not reporting their returns. It's the

Phil Muscatello (22m 53s):

Quarterly, monthly, quarterly annual

Anthony Doyle (22m 54s):

Three year return cycle. They're professional investors. It's very visible where they're underperforming or outperforming their index and it attracts inflows. Or you might have redemptions from your portfolio as a result as well. So retail investors have a great advantage in that they can extend their time horizon and they can also withstand volatility to a much greater extent relative to the institutional professional portfolio managers. So that is a great advantage that retail investors have in terms of the time preference of money. They aren't forced sellers. When the volatility occurs a lot of the times as a professional money manager, your fund may be facing withdrawals. So you have to meet those withdrawals by selling equities when you might not want to sell them.

Anthony Doyle (23m 36s):

And the reverse again, as a good portfolio manager, that will typically be liquid enough to deal with those sort of redemption profiles. But guess what a lot of professional portfolio managers aren't like that they chase returns. So again, doing your due diligence on individual companies and shares, you should do the same sort of due diligence on fund management firms like Fidelity, for example, you know, do your due diligence on our strategy. Look at the return profile, look at the volatility, look at the sharp ratio, look at their competitors that we're competing against and see if our funds stack up. And I'm confident that they will. They don't all of course, I'm confident that they will, but definitely do your due diligence when you're looking at an active ETF or a unit trust

Phil Muscatello (24m 20s):

As well. So you don't have a short term incentive in place or there's short-term imperatives at Fidelity.

Anthony Doyle (24m 27s):

No, portfolio managers are remunerated on their performance against a benchmark. So all the funds have benchmarks. So the Australian equity fund will try and outperform the ASX 200 in total return terms. So there is a quantitative element in terms of the performance of the fund itself and also qualitative element as well in terms of teamwork and the contribution to Fidelity as a business and things like that.

Phil Muscatello (24m 52s):

You're looking at emerging markets as well. And what's a definition of an emerging market. And what are you seeing there for investors at the moment?

Anthony Doyle (24m 60s):

So there's some confusion around that definition of an emerging markets.

Phil Muscatello (25m 4s):

So is China considered an emerging market? It's not really, it's considered an emerging.

Anthony Doyle (25m 8s):

Yeah. Yeah. So Singapore, South Korea. So these airport, yeah. You go to these places they're pretty developed, right. Malaysia as well. So you go to these places they're pretty developed. The international monetary fund will tell you that they're around 137 emerging market nations or low income nations, developing nations, basically anything that's not a developed market. And they will classify an emerging market, according to things like gross domestic income per capita and standards of living and things like that. So we are a very wealthy nation Australia. We punch well above our weight in terms of our population relative to our economic growth.

Anthony Doyle (25m 48s):

And I think our GDP per capita or our gross national income per capita is around 70 to $80,000 US. We're one of the world's wealthiest nations.

Phil Muscatello (25m 58s):

Yep. And our GDP where we about 13th in the world, or

Anthony Doyle (25m 60s):

I think, yeah, something like that. Yeah. We're in, we're in the top 20, we just on the cusp of the top 20, if not in the top 20, what a result, right. For a country of 25 million people, whereas low income nations might have a GDP of $1,000 per person or even less. Now that's the IMF definition, the international monetary fund. The ratings providers, the index providers like MSCI. They classify emerging markets according to the depth of their capital markets and the liquidity of their capital markets and the development of their financial systems. So according to MSCI, who is the index provider of emerging markets, generally the broad vanilla index MSCI emerging market index they will tell you there's 27 nations because a lot of those countries are uninvestible.

Anthony Doyle (26m 50s):

They just don't have the equity market, the depth, the liquidity. So we're talking about countries that range across a number of continents. We're talking about Asia. So we're talking about China, Malaysia, Singapore, Vietnam. I'm sure we can think of other countries, Latin America. So about Brazil, we're talking about Mexico, we're talking about Peru. And of course we're talking about Eastern Europe, the middle east and Africa. So places like Poland, places like South Africa, places like nations in the middle east as well. So 27 nations, very large investment universe in the index. I think there's around 13,000 companies. They're just the companies that are in the MSCI emerging market index.

Anthony Doyle (27m 33s):

There's more obviously outside of that. And of course the majority of the world's population reside in these nations as well. So, you know, India an emergency India is an emerging market, so it is going to

Phil Muscatello (27m 46s):

Be, yeah. So

Anthony Doyle (27m 46s):

You're looking at, you know, China, India, Brazil, Indonesia, Brazil, Russia. So yeah, you've got a huge populations that are continuing to develop. And again, bringing it back to the macro, generally a stronger economic growth outcome will lead to higher standards of living for the individuals that reside in those nations. Then of course they're coming from a low base, but your listeners may be surprised that the majority of the world's growth today comes from the emerging markets. Really?

Phil Muscatello (28m 18s):

Yeah. I suppose mature economies that mature,

Anthony Doyle (28m 22s):

The biggest contributor to economic growth is a growing population. So the mature economies, the developed economies, they're at a higher base, but they also have deteriorating demographics in that. A lot of people are, are older and they may be retired. So generally you have a smaller proportion of a nation's population that are actually in the workforce doing the hard yakka. Whereas the other people are rightly enjoying their retirement. So a growing population is one of the reasons why Australia avoided a recession for 30 years. And while we're in that one at the moment, it's our international borders are shut. Because if you think about it, if you have a growing population, well, then you have a child and they grow up, they leave the nest, hopefully, you know, 24 and out the door or whatever the case may be.

Anthony Doyle (29m 7s):

They find a partner, they establish a home, they buy a house, they feel the house full of stuff and kids. The kids need stuff. You know, this is all economic growth. This is contributing to generating a stronger economic growth profile over time. So you combine that population growth with productivity growth. So the workforce is working more productively and that's generally what you will get to stimulate economic growth and higher standards of living for the population. So

Phil Muscatello (29m 36s):

If someone was interested in investing in emerging markets, what are some of the vehicles that are available?

Anthony Doyle (29m 44s):

Well, speaking of Fidelity. So we have a unit trust, the Fidelity Global Emerging Markets Fund. So the unit trusts are that global emerging markets fund. We have a Fidelity India fund. We have a Fidelity China fund. We have a Fidelity Asia fund. So you can look at broadly global emerging markets. The benefits are a more diverse, disparate investment universe that is available to our portfolio managers to invest in. And we have 45 analysts that specialize in emerging market companies. And importantly, we're on the ground. So we have an office in Shanghai. We have a large team in Mumbai where in with all these regions. So we're there, you know, investing in Latin American companies.

Anthony Doyle (30m 26s):

And we have a very large team working together in order to identify those opportunities for our portfolios and articulate that to our portfolio managers. That's the unit trust side of things. If your listeners are familiar with the unit trust,

Phil Muscatello (30m 41s):

We've never really talked about, well, we talk about ETFs all the time because they claim all the glory. Yes, of course. But before ETFs people had unit trusts and managed funds.

Anthony Doyle (30m 55s):

And LICs of course these are not exchange traded products. Yeah. So you will go so unit trusts that.

Phil Muscatello (31m 2s):

Yeah. Correct. So, so you have to buy these...

Anthony Doyle (31m 3s):

Through the firm, through the investment manager that owns the product. Yeah.

Phil Muscatello (31m 6s):

That's incredible. Now, just to think that, you know, a few short years ago, these were the only ways that you could really invest, you know,

Anthony Doyle (31m 14s):

Active ETFs have been such a game changer and you're now seeing dual listed as well. So it's whatever your preference is. I'm sure there's

Phil Muscatello (31m 21s):

Someone, Julian's got a few of those hasn't he? I

Anthony Doyle (31m 24s):

Know, I know Magellan do, and we are doing it as well. Going forward

Phil Muscatello (31m 28s):

Sorry Magellan. They're the ones that have yeah.

Anthony Doyle (31m 30s):

Magellan I think have been in the forefront of it. Yeah. But yeah. So I think that's the way the world is traveling and, and we're certainly headed in that direction as well, depending on the preference of the investor, whether they want to get exposure, say to emerging markets via unit trust. So they come through Fidelity or whether they buy on the Australian stock exchange, which is our active ETF. The ticker is FEMX. And the reason it's dual listed, essentially the benefits of that is they're the same fund. They're the same portfolio manager, same team that there will be slight differences in terms of cash flows. The unit trust might be an inflow and the active ETF may not be and vice versa.

Anthony Doyle (32m 10s):

But generally what you find is that they're mirror they'll have very similar performance. So I think it's quite unique to Australia. I think Canada is another market that has active ETFs. But when I came back, I had to educate myself on this because I'd been used to investors getting exposure via unit trusts in Europe and the UK. And I think it's just a fantastic way that democratizes the ability of investors to get access to these hard to access parts of the world for themselves. You know, I've spoken in the past presentations and I've identified companies that Australian investors just had no idea, you know, one was Techtronic right. So they've, they've gone to Bunnings and they've bought a Ryobi hand tool.

Anthony Doyle (32m 53s):

Well, it's a Hong Kong domiciled company that own Ryobi and Hoover. Yep. I've spoken in the past about the guy that lit the Olympic cauldron of the 2008 Beijing Olympics. He's got a company called Li Ning, a sports manufacturing and equipment company. That's up, I think around 300, 400% in the last couple of years, no one had heard of Li Ning and obviously is, you know, extremely household name in China, for example, mean having that Cathy Freeman type profile. So there's just a plethora of opportunities in these markets, emerging markets, where they can follow the sort of growth trajectory that we've seen say an Amazon have, or a Netflix have in terms of the tech areas.

Anthony Doyle (33m 37s):

But also they are increasingly competing with developed market companies on other areas, not only tech, but healthcare and finance, and they have huge markets that they can tap into. Remember Australia population is 25 million. And I think the adult population is around 18 million, right? Whereas you look at China and you're talking about 1.4 billion people, and you're talking about a global middle class that's growing by around 150 million in the next 10 years. And most of that in Asia and for anyone that's traveled, no one's traveled in the last couple of years, but you go to these areas and you see how dynamic they are. And there are companies that can tap into that growth. I think increasingly Australian investors will have to have an allocation to emerging markets.

Anthony Doyle (34m 20s):

They haven't historically had to, they've been really spoiled by the returns that they've been able to generate by just being invested in Australian assets. Yeah. But in a world of ultra low interest rates where the cash rate may not move for years, the RBA is telling us 2024, maybe 2023 term deposits yield nothing, increasingly I think Australians will want to allocate to riskier parts of the world with the aim of generating those higher returns and help them meet their investment and savings goals over a long period of time.

Phil Muscatello (34m 51s):

You write a lot of interesting articles for Fidelity, where can listeners access these articles?

Anthony Doyle (34m 55s):

I mean, the great thing at Fidelity is, as I said, there's a lot of clever people and we regularly interview them on webinars. You know, I write a lot as well. So we want to really democratize our research and provide that to clients or prospective customers. And the best place to look at for any of that information is our website fidelity.com.au. But we host investment seminars and webinars where we'll have on a geopolitical expert or our team that have been focused on COVID-19 and the development of vaccines or particular companies that may or may not benefit from the reopening trade and access to some of the best thinkers within Fidelity access to someone like Paul Taylor, you know, hall of fame portfolio manager.

Anthony Doyle (35m 40s):

That's been investing in equity since 2004. And some of the lessons that he's learned over his investment career as well, or talking to Kate Howard. So it is really a great place. We have the resources that we can help investors on their journey. And we specifically focus content on those investors that are perhaps new and feel a little bit overwhelmed. We have investor specific content for them as well at our website, fidelity.com.au

Phil Muscatello (36m 6s):

Oh, well we'll put links in the blog post so people can follow up and learn.

Anthony Doyle (36m 10s):

Of course they can contact me as well on LinkedIn or anything like that. More than happy to

Phil Muscatello (36m 15s):

Have a chat about fantastic Anthony Doyle. Thanks very much for coming in today.

Anthony Doyle (36m 18s):

Thanks Phil.

Shares for Beginners is for information and educational purposes only. It isn’t financial advice, and you shouldn’t buy or sell any investments based on what you’ve heard here. Any opinion or commentary is the view of the speaker only not Shares for Beginners. This podcast doesn’t replace professional advice regarding your personal financial needs, circumstances or current situation