VINCE SCULLY | Life Sherpa

In this episode I sit down with Vince Scully, founder of Life Sherpa, to unpack the booming world of private credit funds listing on the ASX. With nearly a billion dollars raised in 2025 alone (or about $700 million by Vince’s count), these funds are catching the eye of retail investors chasing higher yields. But with opportunity comes with risk—and regulators are sounding the alarm.

Vince explains how the decline of bank hybrids—once a retiree favorite—has paved the way for private credit funds to step in. These funds, often structured as listed investment trusts (LITs), offer exposure to “private debt”—unlisted, less transparent instruments that range from corporate bonds to mortgage-backed securities.

Vince breaks it down: private credit isn’t just about private companies but includes debt not traded on public exchanges. Think Qantas issuing bonds in the U.S. 144A market or non-bank lenders like ResiMac bundling mortgages into asset-backed securities. Funds like Griffin, Qualitas, and Realm are bringing these opportunities to the ASX, but they’re not all created equal. Griffin dives into lower-grade credit (think BBB or BB), Qualitas focuses on big-ticket property loans, and Realm’s opaque structure raises Vince’s eyebrows—hinting at hidden fees and manager risk.

For investors, the appeal is clear: yields of 8-10% beat government bonds hands-down. But Vince warns of the pitfalls—complexity, lack of transparency, and reliance on managers to pick winners. He advises starting with your asset allocation: high-grade bonds for stability in a 90-10 portfolio, but as you shift to a 50-50 retiree mix, riskier private credit can juice returns—if you know what you’re doing.

Phil and Vince wrap up with practical tips: stick to reputable managers, read the PDS (product disclosure statement), and diversify. Vince also plugs LifeSherpa’s affordable online advice and portfolios, which skip these specific funds but offer solid fixed-income options. Stay safe, and invest wisely.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

Vince: Historically, when you would have said the word bond to most people and when you don't mean James, you would have meant government bonds or high grade corporate debt. By high grade, that means. Well, investment grade tends to mean rate at AB or better. So the top you can buy is AIPA A and then it steps down a single A and then into the Bs, and then you get into the Cs and Ds. You don't want to be in Ds because D is for default. And the, uh, further down that yield curve you go, the higher return you should expect.

Phil: G'day and welcome back to Shares for Beginners. I'm Vince. Today we're diving into the world of income investing with a focus on the rush of private credit funds. Um, listing on the as. Nearly a billion dollars has been raised this year alone as fund managers target retail investors hunting forhi returns. But with opportunity comes risk and the corporate regulators sounding some alarm bells. Joining me to unpack this trend is Vince Scully, founder of online financial advisor Life Sherpa. G'day, Vincent.

Vince: G'day, Philip. Great to be here again.

Phil: Good to see you again. Now this is based on this Finn review article that you are featured in. And, um, why did they pick on you?

Vince: Maybe they want somebody who's going to tell them the truth, Phil. That the media is full of people spoking their own book. But to be fair, it is a topic of some debate and they did ask some other people as well, so they weren't just picking on me.

Phil: So when they said a billion dollars this year, Elain, are we re talking about like in the first, what is it, two months of this year? Two and a bit months of this year?

Vince: Yeah, I didn't quite get to a billion dollars. I count it's about 700 million, but who's counting?

Phil: That's right, with that sort of y.

Vince: But it is. And it's only the 6th of March or whatever it is. So yeah, that's a big number in the schem of things. And I'm sure we're going to get ono this shortly. But I think it's partly a bit of an opportunistic play given that APRAs put the kibosh on the bank hybrids market. So all those retirees who would have been in bank hybrids need to find a New home.

Phil: So why did they put the kibossch on ran bank hybrids? What was wrong with them?

Vince: I mean the challenge with bank hybrids is they are uh, horrendously complicated under the hood, but look deceptively simple when you say it quickly. So if you say ye, uh, senior debt of the Commonwealth bank paying X percent fully franked sounds very seductive, especially when X percent is more than you can get by sticking in a bank account at the cba. But the point of the hybrid and why they're called hybrids is that they're this odd hybrid between debt and equity. And APRA as the bank regulator insists that the banks hold equity or capital against their lending. And the trick with the hybrids was to get them to count as equity for APRA purposes, to behave like debt when it came to funding. And so the uh, requirement was that they converted to equity if something went a bit wrong with the bank's capital position. And APRA has this view that our bank should be unquestionably strong. So I think from a regulatory perspective they went well. We don't really like hybrids, especially ones issued to consumers. And I think this was sort of a bit of a reaction to what happened when. Now which of the Swiss banks was it, which one fell over and which one was taken over? Credit Suiss and ebs. I always get them mixed up. But one last year of the before came close to the abyss and was taken over by the other one and the hybrid or the what subordinated equity note holders got stung. And I think APRA was concerned the consumers weren't in a position to analyze these things adequately. And so two things led them to that conclusion. So that leaves a bit of a hole in the market as to where you come 2026 when these things disappear. What's the retire? And they were mostly retirees m that.

Phil: Love those sort of things in the financial. Yeah, the financial industry ab bores a vacuum, let's face it. And so they always love to fill that hole. And this is where private income fund, I'm assuming comes in.

Vince: So ye, well certainly yah certainly other debt like instruments that pay reasonably high yield given that traditional

00:05:00

Vince: fixed interest being government bonds ain't paying very much these days, more than they were a year or two ago, but still not very much.

Phil: So break that down a bit, explain more about what a private income fund is.

Vince: Cool. Okay. Well the word private is code for unlisted and not subject to public disclosure. So you see it used with equity. So private equity is investments in unlisted companies and private debt or private income in this context is debt instruments issued by borrowers who are not banks and are not subject to the normal disclosure rules. So that covers a multitude and this is where things get a bit spicy. So a lot of debt. I don't know if it's most but it's only a big chunk of the uh, debt markets would fall under the category of private debt. So most of our big corporations going to uh, raise money in the US for example would raise debt under what's called 144A which is a uh, particular disclosure regime. And there the lenders are uh, generally institutions who are not banks. They're generally longer term and often fixed rate. So they are an opportunity for our uh, big corporates to raise longer term money which our uh, banks don't do a particularly good job of. Then you've got a whole raft of financial receivables. You might have heard the expression RMB or residential Mortgage Backed Securities. Um, so anyone who's watched the big short will know about rmb. And then there's a bunch of other equivalents like um, student loans and auto loans which come under the asset backed securities or abs. But they're all broadly similar. They'bundles of receivables that are then funded by the issue of some form of debt instrument which is then sold to investors. And so that's guess the third part really is there's an opportunity for corporates or super funds generally to actually the link between super funds or pension funds generally or Australian super funds and borrowers to borrow and lend money which isn't subject to their capital adequacy rules for the banks. So in theory there's an uh, excess return to be captured there and our super funds have piled in in large quantities. If you're reading a Superfund PDs you'often find this stuff under the category of credit distinct from fixed interest, ah or sometimes diversified fixed interest. So they're the three things that make up a traditional private debt market in Australia. The words also tends to get used to rebrand traditional mortgage funds. So uh, you and I are both old enough to remember the pre GFCs, the MFS and the Cityi Pacific and all these debenture and mortgage funds which many of whom stumbled in the GFC because of the mismatch between providing daily liquidity to investors and lending longer term to borrowers.

Phil: So not having enough money on hand to cope with a run on the bank so to speak.

Vince: Yeah. And of course of course being a uh, managed investment scheme the corporation's law prohibits you from redeeming units when the underlying assets aren't liquid. So of course when the liquidity demanded exceed the liquidity supply they had to suspend redemptions and that's left a sour taste in a lot of people's mouths. And so we're seeing a lot of those being rebranded as private credit and that's a bit of a stretch. Whilst it might technically be true, it's a very different beast. So in the context of that article that you mentioned and the funds that have raised money on the ASX recently they sort of come in a uh, few categories. You've got the I guess what you call a vanilla RMB or ABS fund like the

00:10:00

Vince: Griffon Fund which invests largely in RMBS and ABS and lower grade credit. So double B, single B, tripleb which is how you get higher yield because obviously when it comes to debt there's two ways you can increase your yield. One you can go longer duration or two you can lend to lower credit quality issuers and so this is generally a way into the lower grade credit space and that can yield some pretty good numbers. So you could buy um, 10 year Quantas debt and get 8% plus on it. In fact there's a CBA bond that's issued in South African rand which you can get eight in a bit on.

Phil: So cba but you can't um, exactly participate in products like this, can you?

Vince: Can you? Not as a retail investor, as a wholesale.

Phil: Within a fund structure possibly.

Vince: Yeah, yeaheah. Or if you're a sophisticated investor but obviously it's difficult to spread it across enough investments to give yourself diversification even if you do qualify as a sophisticated investor. So the Griffon Fund is invested in ABS lower grade credit and is think uh, it's probably delivered underlying Funds delivered probably 10 percentage over the last few years which is a huge premium over what you're going to get with higher grade M mostly government credit of threes maybe. So that's at the vanilla end of the market. Clearly you've got seek to understand what you actually be invested in. Um and that's where it starts getting a bit murkier. So it's very hard to get visibility through to the individual underlying security. So you are relying on the quality of the manager and that's certainly not a comment on Griffin. As a manager they very high quality manager who've been around for a long time. You then move into the more traditional mortgage space. So uh, Qualitas for example is a pool of larger ticket loans to property owners and developers and obviously that's more concentrated, less scrutiny on the issuer and you're relying very much on the manager'ability to select the borrowers. And qualitas obviously have a good track record in that space. They are well versed in the property development space so you would expect them to understand what they're doing. You are heavily exposed to real estate and property development and commercial property specifically, which that's a lot different to buying an investment property down the road but it does give you diversification. And then the third category, which was the one I was particularly negative on in that article, which is very similar underlying assets to the Griffin Fund but put together in a very opaque structure, one that has all the hallmarks of my previous employer being the silver doughut. But I didn't find the menu were in the disclosure documents so it's obviously catching on. So it's a bond or a note issued to buying units in a trust and the trust invests in a uh, loan to the manager which then goes and buys all these underlyingss bonds but gets to keep all the upside. So you get a fixed or at least a capped return and the manager gets to keep the extra bit. So that's a fee in effect that doesn't need to be disclosed in the way a traditional fee gets disclosed. And there'the temptation not necessly suggesting that realm will sucumb to this but there's always the temptation for the manager to take a bit more risk because they get to pocket all the upside and don'll suffer any of the downside. So that's three wildly different products and these are not bank deposits by any measure. So you do need to know what you're doing and that's the real struggle when you move away, when you move away from your government bonds and high grade bonds, you struggled from this information asymmetry. So.

Phil: Ok, well let'let's get on to that. Just but I just wanted to just keep with some of the basics first.

Vince: Sure.

Phil: Because

00:15:00

Phil: we will cover that definitely.

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Phil: You mentioned the word bond. Are these the same as corporate bonds? So it's like you can buy a corporate bond. You can buy a corporate bond in a company, you know, like a triplea rated company and it's going to be very safe and I'll give you maybe a slightly higher return, but then there's a lot of different levels of quality. I'm um, assuming.

Vince: Yeah, I mean bond is just a term for what amounts to a tradable loan. So it's a instead of or a.

Phil: Notetion I heard you mention as well.

Vince: Yeah, I mean that's a very arcane legal distinction between the two. But essentially a bond is a portion of a loan that you can trade, just like a share is a portion of a company that you can trade. I think you're fond of the being an owner, not a loner when it comes to.

Phil: I was resisting the urge of using that analogy yet again. Um, but yes, you can own it or loan it, can't you, with your money.

Vince: And so in this context we're talking about the loan piece and bonds historically have tened to be used. When used on its own, it's tended to mean high grade investment grade or government bonds. And hence the distinction between using credit instead of fixed interest. These aren't particularly settled terms, but historically when you would have said the word bond to most people and when you don't mean james, you would have meant government bonds or high grade corporate debt. And by high grade that means. Well, investment grade tends to mean rate at aip B or better. So the top you can buy is aipa A and then it steps down a single A and then into the Bs and then you into the Cs and Ds. You don't wa want toa be in D'us. D is for default. And the further down that yield curve you go, the higher return you should expect. And then the second dimension is duration. So part of the uh, expression fixed interest comes from the fact that bonds historically have had a fixed rate of interest. So the government will issue a, let's say uh, 3% bond which will pay 3% of its face value annually, usually quarterly or semi annually. And that doesn't change over the life of the bond. So if you buy $100 10 year 3% bond, you'll get 3% a year for 10 years and then you get your hundred dollars 100 back in year 10. And the value of that bond moves up and down as market interest rates move up and down, but your $3 doesn't change.

Phil: Yeah, don't get into the inverse relationship e to have a complicated.

Vince: The only reason, the only reason I went there, Phil, was just to distinguish that from variable rate debt. So most rmbs, residential mortgage backed securities or asset backed securities, and much of the corporate issuance in Australia tends to be variable rate, usually priced off the uh, bank bill swap rate. And so you'll be quoted bank bills rate or BBSSW, usually the 90 day benchmark plus a margin. So if you go and buy CBA hybrids you would have got BBSSW plus 1, 2, 3 plus franking. And that means whilst you've got duration risk because it might be a 10 year bond, you don't have a fixed interest rate risk because as market rates move up and down, your yield moves up and down and so the price really is a reflection of demand and changing credit quality of the issuer. So that's the traditional bond market and as I said they are generally fixed flows of income, principal and interest. When you move into things like R&MB, what you're getting is the underlying cash flows. So, so uh, typical residential mortgage backed security might be a bundle of 1,000 or 2,000 home loans. And as you'd appreciate people payid off their loans

00:20:00

Vince: at different rates, people make additional payments, people sell their home and move and repay their loan. They get the shits with your bank and want a better rate so they refinance. And so what starts out as a 30 year cash flow is usually repaid at some point of those. And those cash flows flow directly to the bond holders or not holders in those uh, securitization vehicles. And what that means in practice is that the uh, pool of loans is funded by a series of bonds and various credit rates. So the most secure ones will usually have a AAA rating and that could be 80, 90% of the pool. And so those ones are very highly unlikely to suffer a loss because the lower rated ones suffer the loss first. So when all the uh, people's mortgage payments come in each month, that money is then split out into principle and interest. And that's all divvied up in accordance with a define set of rules called the waterfall. And the interest waterfall will pay interest to the senior debt first, the AIPAA bonds and then to the double A and then the single A and eventually to the lower grade ones. And similarly the principal waterfall repays the principal first. So what that means is that the AAA tranch of debt will get paid quite quickly and the lower rate ones will take much time to be hang.

Phil: Around like a bad smell, huh?

Vince: Uh, and the downside of that for the issuer is that as you pay off the higher grade and therefore lower cost ones, your cost of funds rises. So in practice what happens is they all get called and repaid early when everything goes well, and so you don't quite know how long your bond's going to be out for, which is one of the reasons why you get a premium for. So a AAA RMB bond will trade at a premium that is a higher yield than the similar AAA note issued or bond issued by a government where there's a fixed redemption. So all of those can be attractive to investors looking for income and individuals are less concerned about the reinvestment risk than an institution would be. And so they can be attractive to retail investors. But obviously as you said earlier, you can't unless you've got an awful lot of money. It's pretty hard to go and pick uh, a uh, tranche of these notes because you just can't get the spread. Well a, you've got to be a sophisticated invest to buy them generally and you've got toa be able to put enough in each one to make it worthwhile. So that's why a fund is particularly important.

Phil: So can I just find out what kind of vehicle are they listing on the ASX ad? Are they ETFs or are they um.

Vince: Um, uh, the Griffin ones are listed investment trust. They're generally trusts of some form or another. The uh, qualitas one is a uh, trust as well and the, the realm one is a trust, but the only asset of that trust is this loan to the manager. So that's bit of a hybrid, but they're generally trusts.

Phil: Okay, so the difference between an lic, an L it is the way of tax treatment is the tax flows or the tax obligations flow through a trust as opposed to an lic.

Vince: So an ETF is generally a trust as well. And the uh, benefit of a trust is that they flow through vehicles for tax purposes and therefore they're easy for credit ratings agencies to rate because they don't have to worry about the tax payments inside the company. And so you generally find that most of those funding structures are trusts. And in Australia if you're listing something to sell to retail investors, the trust is probably the uh, preferred option. It wasn't always the case. So certainly in the 20s and 30s when most of our uh, big popular listed investment companies were listed, it wasn't the thing. But now most investment vehicles that you would list would generally be trusts.

Phil: And what are some of the companies that these trusts represent? I mean, who are some of the private companies? I mean s. Because, because they're not, they're not household names so they don't come trickling off the tongue. But like.

Vince: No, but you will

00:25:00

Vince: find Most of our big corporates being BHP Fortescue, Qantas, BHP we all issue bonds in the 144Amarket in the US so if you buy.

Phil: But we're talking private credit here or private income funds.

Vince: Yeaheah. So those bonds would get issued to investors and then potentially get packaged up. So you're super fund where it's got an investment in corporate debt will have some of these things in them. There'll be brands you'd recognize. So if you go through your portfolio holdings disclosure statement for your super fund, you'll find all these brand names in there.

Phil: Private companies are uh. They.

Vince: Well I mean sor. They're both private and public companies but the public companies are the ones.

Phil: Yeah, no, because I'm just. I'm just interested because it is private income fund. What are the private companies?

Vince: Yes.

Phil: So uh, I sort of think like one of the biggest might be Hems Group. You know the restaurant. No, I mean youity chain and yeah, so.

Vince: So private debt doesnzen t initly have the same connotation the private company does.

Phil: Okay, I'm getting confused here now.

Vince: Well, private is really just an expression uh description of the fact that it's not listed on an exchange of some sort. The so you can go if you go and buy government an Australian government bond, it will be traded through Austri Clear and there's price discovery. So the price that it trades at is available to the market. Probably hard for Filmma Caatella to find out the trading prices of every batch but they are available to market participants. Private on the other hand means it's. They're often um, unrated and secondly they're generally not widely traded. So when Qantas goes and raises some money on the 144Amarket it will issue bonds to a handful of investors and they will often not trade. Particularly often when our mortgage uh, non bank lenders. So if you take Resimac first Mac, the other big non bank lender Bluestone, they will all bundle their mortgages up into pools and sell those bonds off with fairly obscure trust names and they will get bought by institutional investors. They will generally be rated but not necessarily traded all that often. So think about private as being not listed and not often traded is probably a better description than the distinction between a public company and a private company.

Phil: Okay, that's where I was getting confused.

Vince: So public companies can issue private debt. Um. Which sort of sounds a bit sound Love this world.

Phil: Y.

Vince: That's a bit obscure Phil. I appreciate. And private debt is Distinguish also from bank debt. So if you look at Qantas balance sheet for example, it will have corporate loans from probably two, I haven't looked recently, but two or three of the major banks, they'll have a main bank and then they'll have some more bank debt and then they will go and issue notes or bonds of some sort, some of that specifically for an aircraft. So they might go on leasea one or two or three aircraft and those aircraft in turn might get funded by, by debt that would be effectively bundling up the cash flows on that Qantas lease. Or they might be corporate debt but just raised in the debt capital markets rather than from a bank. And that's where our super funds are starting to play big time.

Phil: Okay, so any mug punter can go on to the ASX and buy one of these trusts. What sort of warnings would you give people? Because you know, obviously they're being marketed as providing quite a nice rate of return and there s, you know what's becoming a low interest rate environment. Yeah. What should people look out for?

Vince: Yeah, I mean the first thing is to understand what you're buying and that's partly structure. So you, the underlying assets in the Realm fund compared to the Griffon Fund are um, largely indistinguishable but the way you get your return is completely different. So certainly want to look for a reputable manager who's been around for a while, might be looking for simple transparent structures

00:30:00

Vince: and then understand what it is that you're investing in. So the distinction between a qualitas being relatively ah, small number of bigger loans in contrast to the Griffin Fund which has a wide range of holdings in bonds, um, notes issued by a wide range of issuers. So completely different, they've got different yield characteristics and they give you, I get picking a bit of each would be a bit of diversification. So but I think you probably want to start with why am I investing in these in the first place? And so traditionally uh, a diversified portfolio would include some equities and some bonds. How much bonds, how much equity depends on your specific needs. And at the small allocation term bonds or fixed interest, you really want to be looking at high grade bonds. So if you've got a 9010 or an 8020 portfolio you're really looking for very high grade bonds starting with local currency bonds. So if you're going to construct a uh, 90% equities, 10% bond portfolio in Australia, that 10 should probably be high grade Australian fixed interest which mostly means governments and semi governments and Maybe a smattering of some of the big banks that you don't want to be taking material risk in that space. So you certainly don't want to be taking credit risk. You will be taking some duration risk but the point of doing that is to smooth out your returns on your equities. And so um, you want to get it as close to risk free as you can. As you start adding bonds you probably then need to look at some global bonds, again very much at the upper end of the credit quality score. And for a lot of investors you'd be looking at something like uh, an IAF which is the iShares Composite Bond Fund for an Australian investment and maybe something like VBND which is the Vanguard Global Bond fund. And you want to be hedging your global bonds. When you start moving up beyond that to a uh, 30, 40, 50% bond allocation now you've got to start looking at income because you're giving up much more return in order to get that lower volatility. And that's where I see these, because.

Phil: Of riskier assets, listed companies, riskier assets which are going to go up and down over time but generally in the long run they're going to return more.

Vince: Yeah. So if I'm going from 1000 down to about an 80 20, I really want to be looking at very high grade bonds to deliver that smoothing and I can afford to give up a little bit of return. But when I start getting down to a more retiree like portfolio which might be a 60, 40 or a 5050 now I've got to start getting some better return uh on some of my bond allocation. So I don't give up too much return which for a retiree is effectively daily spending money. So there's a trade off here between how much you ve got to save for retirement and what risk you have to take in your portfolio. And so once you get beyond that sort of 20% bonds, you now startr of need to looking to juice up the return a bit. And in order to do that you really have to start moving to the riskier end of that credit rating spectrum.

Phil: Yeah.

Vince: So when you do that you, you can uh, move into more corporate debt and that's going to start getting you down into the single A S triplebe's and then you can start moving down into the non investment grade space. And that's where things like bank hybrids and these sort of vehicles fit that you want to get, you want to try and keep your return up but benefit from the less volatility of fixed interest investing and that's where I'd start looking for lower investate corporates some structured debt like an RMB or an ABS investment. And if I'm a uh, retail investor I've really got to be buying a diversified

00:35:00

Vince: pool of those because I can invest in them individually practically. And so that's why I think these sort of products have come along. I mean I've long been a fan of Couliba which is Christopher Joy's fund. Great fixed interest manager had a great hybrid fund which Betash shares had an ETF that or an ETP of some sort that invested in it was managed by Cooliba so that I would always have uh all of our hybrid allocations would have been via Cooliba. Just so you've got that layer of analysis and the ability to trade which is pretty hard to stay on top of it because every one of those hybrids is subtly different and the detail is what really matters and they're pretty arcane differences that I wouldn't want to be trying to teach my 90 year old father to read those prospectuses.

Phil: Sorry, I just got another question to go on to but I just wanted to highly recommend Christopher Joy's ex account to follow on X formerally known as Twitter because it's great he gives some really fantastic information about this kind of market and the bond market.

Vince: Very strong fan he is and he's not afraid to tell you how smart he is. But uh, case in his case I think he's with some great justification and he is a great speaker so if you ever get a chance to listen to him in person I can thoroughly recommend.

Phil: It's fantastic.

Vince: Absolutely fant. And he ret. Ret. He retweeted that article.

Phil: That's where I saw it as well. Yeah.

Vince: Or whatever you do on X. Rex you Rex something?

Phil: Nothing.

Vince: Posting.

Phil: It's called posting these days uh, going backwards in. In the terminology. So okay to my question if an investor was going to look at Griffin Qualitas and Realm does it mention in the PDs what kind of rated bonds you'd be investing in?

Vince: Yeah, it does. I mean the Griffin one's got a fair bit of history and there's are quarterly disclosures to what the spread across the ratings are and what the spread across duration, the spread across sectors. So you get a fair bit of high level portfolio information. Where it starts becoming harder is so below being told that now you've got x percent in single B corporate bonds. Working at the underlying credit quality is pretty hard that you are Very much relying on the manager and the ratings agencies to do your due diligence for you. It's very hard to scrutinize what's below that level. But you can certainly take a view that where do I want to be on the credit curve and can I rely on S and P? I think you probably you can. That they do have a fairly good track record of rating bonds. You do get a little bit of a lag. So that's where diversification comes in. So as credit quality of a company declines, the rating agencies don't update it every five minutes. So it can take a while for a credit danggrade, uh, to come through. Whereas the market would have had a view that this particular issue was heading for a downgrade. And you can see that in the pricing. But it is hard to look through that portfolio or any of these portfolios and look at it line by line. And I guess that's part of what you have to do as a consumer is you've got to trust the manager and trust the process and be aware of what sector you're in. So your analysis should start with asset allocation, which drives 90% of your risk and returns.

Phil: Asset allocation based on, um, the rating, well, alloc.

Vince: So starting at a very high level in terms of putting my portfolio together as an investor, I'm going to start off with the broad high level stuff. Am I looking for a 9010 or a uh, 8020 or a 6040 within that, how am I going to split my stocks between markets? Big companies, small companies, value companies, growth companies, profitable companies. And then within my bond allocation, how much am I allocating to Australian bonds? How much am I allocating to global bonds? Am I hedging or not hedging? And how much am I allocating further down the risk curve? And once I've done that and say, look, I want to get 10% in investment grade, but low end of the spectrum.

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Vince: So from single A downwards probably. Now how do I get that? And as a consumer I've really got to pin my investment to a manager. So now I'm going to select a manager and you obviously want to make sure that the manager has been around a while. So you're looking at philosophy, process, portfolio people and all of that should be in the P, where the manager has some history. You'll find they'll often do quarterly portfolio updates. They should be read and that's how you should go about looking for a manager. And once you're into fixed interest, fixed interest is very much a, uh, sector where A good manager can add a lot of value. We talk a lot about markets being efficient and certainly if you're buying ASX 200 equities, it's pretty hard to beat the ASX 200 without taking more risk. And so often we look for an index manager in that space to keep my costs down. When it comes to fixed interest though, managers can add a lot of value, some of which is factor based. In fact, they're playing the D, they re buying duration different to the index or they're buying credit quality different to the index. And getting that mix right is where the return comes from. And then once you start moving into the lower investment grade and sub investment grade stuff, there is no index. So you really are now relying on a manager. So you've got to look at, well, who is the manager, what are the people, what are the processes, what's their investment philosophy and what does the portfolio look like? And that takes some work. You can look at some of the research houses. So people like Morningstar, LonSC, Zenith, all produce research on um, many of these managers, many of the best ones are not listed on the asx. So I think that was, that's probably the unusual bit here that historically you would have bought a unlisted managed investment fund, which is obviously easier to do when you're using a platform than when you're trying to buy direct. And this move to listed vehicles I think is reflecting that trend that people are now looking for more listed products, which is why we see more ETFs compared to managed funds. Twenty years ago, if you were going to buy even an index fund, you would have bought a unlisted index fund from Vanguard rather than buying an ETF because they just didn't exist. And so the move on market is now getting into these areas, but there are no indexes you can track in this space. So this is an ACTE position.

Phil: So tell listeners about how they can find out more about Life Sherpa, uh, and also how they can access fixed income within a live Sherpa, uh, portfolio.

Vince: Yeah. So we are obviously Australia's most affordable financial advice service. So we've invested heavily in technology to deliver advice to everyday Australians online. It's everything you'd expect from a traditional financial advisor without the price tag. And that obviously covers all of the traditional things that you'd look for in uh, a financial advisor, whether that's insurance, whether it's investing, whether it's super, whether it's debt. So we're also a mortgage broker and we also offer our portfolios directly online. So you can go to invest lifeshhper.au uh, do and buy our portfolios direct from $5,000. So they start at the highest risk portfolios in 90 10, and then we stepped down through 80, 20, 70, 30 and 50 50. So our 5050 obviously does have a significant fixed interest component to it. It doesn't have exposure to any of the other products that we talked about this morning. In terms of Griffin Realm qualitas, they're not, um, in those portfolios, but we certainly have a range of fixed interest products in those portfolios. And you'll find us at lifeshurea.com.au.

Phil: Vince Sculley, it's been great chatting with you again and I'm sitting here in pretty nice weather when apparently there's a cyclone about to hit tomorrow. So

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Phil: fingers crossed.

Vince: Well, yes, we'll stay stape Phil, and thanks for having me.

Phil: Thank you. Vince Seeia, CIA.

Chloe: Ah, thanks for listening to Shares for Beginners. You can find more at chesforbeginners.com. if you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing for their future.

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Any advice in this blog post is general financial advice only and does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs before acting on the information. If you do choose to buy a financial product read the PDS and TMD and obtain appropriate financial advice tailored to your needs. Finpods Pty Ltd & Philip Muscatello are authorised representatives of MoneySherpa Pty Ltd which holds financial services licence 451289. Here's a link to our Financial Services Guide.