Sonya Sawtell-Rickson – Total Portfolio Approach at Australian Superannuation HESTA (EP.342)

26:19What are the factors we're exposed to? And we bring all of the teams into those at the right level and moment. So I think that really provides that constant understanding of what people are seeing and allows a forum so people can contribute. What are the messages that you reinforce as a leader of this team that you found most impactful in helping the people ensure that they're working together? Yeah, that's a great question. I think I'd start by saying markets require discipline and we are long -term investors. We are patient capital. We need to sort of keep that in mind and maintain our discipline even through times when behaviorally it's very difficult.

27:00I definitely encourage a process that is very data -driven, founded in theory. We're not a team of punters. That is not the process we have built. And I think through that, it allows a level of discipline of decision -making and conversation that is unique and enables people to contribute. So rather than talking about whether equities are cheap or expensive, we're talking about, well, what are our beliefs around how equities behave? What really is driving our views on earnings growth into the future or multiples into the future? How do we see risk premiums evolving or cash rates or term premiums?

27:34And really being able to have a deep conversation about our alignment and our differences. How do you go about making investment decisions? We start with models. And the models, in many ways, will tell us what decisions we should be making. So we ground ourselves in that process and then we challenge it. And then we say, gee, where could we be wrong? What are we missing? We think about the objectives. It's telling us inflation is cheap. Not only is it cheap, but it's a really great hedge for our clients' liabilities. So we were buying inflation back in 2019 when it was pricing at 1%. We were loving inflation.

28:11So let's buy some of that. It's both the values and the insights that gives us, but it's also constantly going back and looking at our portfolio against our objectives and making sure that it continues to make sense. And ultimately, it's a discussion. We get all of our team around the table, all of our leaders, and we talk about markets. We talk about where we are in terms of being risk on, risk off. We talk about any emerging threats and opportunities. We talk about capital scarcity. We talk about liquidity. We always want to have a game plan on liquidity if we need it. With all of that, we make decisions.

28:47How does that actual decision process work once you have all of those inputs on the table? We actually delegate decisions to key decision makers. There are a lot of decision makers in our business. I don't get to make every decision, for example. We're very fortunate that we've got a lot of delegation from our investment committees. They set clear parameters in terms of what they want to achieve and what risks they're comfortable for us to take. And then the team runs that risk taking. We don't do decision making by committee. We allow people to come to hear the conversation, to challenge each other and debate it.

29:19But ultimately, we allow our decision makers to take risk. What is the governance structure that you have in place that allows you and your team to go ahead and implement in the markets? We start with objectives. So the objectives are clear in terms of what success looks like. We actually prioritize those objectives. And the way I talk to the investment committee about that is when I'm making decisions or my team are making decisions, we want to know what matters most. So it's as if you were in our chair and we were making these trade -offs for you. So we do go through a process of prioritising those objectives.

29:55So in moments of conflict, which one matters most? And we also quantify them. So what does good look like? What does great look like? What does poor look like? And what does fail look like? And again, I just think that helps when you're making trade -offs, making sure that you're trading off all the right things to keep everything on the right side of that ledger. Then we set risk parameters. So we have an entire risk framework, which covers everything from absolute risk to relative risk to tail risk to liquidity risk to counterparty risk. We obviously articulate that very clearly and quite mathematically in terms of the limits framework.

30:30And then we have ranges. We can move asset allocations within a certain range. So those things together create the environment for our risk taking. Then we take it down and create the processes internally. Now, obviously, the investment committee also oversees the quality of our decision making. So we not only report back regularly on the risks we're taking and the performance we're generating, but they also have independents come through and review our teams and our processes to make sure that we are maintaining integrity and really leading the market in terms of our talent. As you built out the capabilities with this blank sheet of paper six years ago, how did What do you think about the internal teams compared to the managers that you might select externally?

31:16It was definitely my view that we were always going to have external managers. I think it's really important to know your comparative advantages. It's important to understand that you're never going to be best in the world at everything. I think when we approached this challenge and when I worked with the board and the investment Committee on the path forward with a very realistic view on those things. So what we decided and we sort of broke it into horizons and as we were looking at horizon one it seemed sort of clear to us that there were opportunities for us in our own market to really internalise some functions that were really going to drive net performance for our members as well as most importantly bring another plank of breadth and insight into our decision making process for HoloFund.

32:03So that led us to internalize Australian equities. And we've attracted a great team into our Australian equities who have been on the ground and running portfolios now for over a year. We've also moved into Australian fixed interest and cash. And again, if you think about treasury and liquidity management as a key plank of superannuation funds, the more effectively we can manage liquidity, the more effectively we can deal in chaos. Again, that was much, much bigger than just adding a bit of alpha. It was about having a whole function to help us underwrite credit risk for our counterparty risk that we're undertaking every day, help us manage liquidity, help us engage with important financial stakeholders such as the Reserve Bank.

32:44So really building not just return, but definitely insights more broadly. We're coming to the end of that horizon one, and we're starting to think about, well, what next? Where does that arrangement go to? And I think again what's been interesting is that by having that sophistication in -house it actually makes us better partners. It's been fascinating to watch how the relationships with our active managers globally and even domestically have really improved. They really enjoy having deep market conversations with people who deeply understand markets in a different way when you're operating in them I think to when you're selecting managers.

33:19So being able to blend those skill sets has really we think made us a more attractive partner in the broader industry. What does that horizon two look like? Obviously, a big part of our portfolio and a big part of our fee spend is in unlisted assets. So we're thinking about, well, how do we become a better partner in those areas? How do we form more strategic partnerships? So we think we'll probably have fewer, deeper partners into the future. And then how do we create capability so that we have more discretion in our building? Maybe it's more co -invest. Maybe it's more, we call it managed direct, where it's in our name.

33:59We hold the asset, but we have a fiduciary there running it and underwriting it for us. Or maybe it is more asset management where we can run assets in perpetuity, often big assets that we want to hold for a very long term. We might think to internalize some of those assets. Maybe it's co -underwriting in consortiums where it makes sense. So that's probably our next big piece to bite off, which is quite exciting. We're going to take a quick break in the action to tell you about SRS Aquium. Want to make sure your M &A processes aren't stuck in the past? Partner with a company that's been defining the future of dealmaking for nearly two decades instead.

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35:37Again, it's about having a clear employee value proposition. Those EVPs can take many forms. They can be salary. They can be purpose, business, growth, culture, and we think we're hitting all of those. Hester is very much a purpose -driven organisation. Our purpose is to invest in and for people who make our world better. And we found that that has attracted a certain type of person into Hester who wants to really make an impact. And it's an incredible time to be at a place like Hester, an incredible time to be in sustainable finance. We talk a lot about investment excellence with impact. That is our guiding star.

36:14That is what we're going after. And the reality is this is a brand new field of finance. Nobody tells you how to invest with impact when you're coming through university. They tell you how to calculate risk, how to sort of think about return. Maybe if you're lucky, a bit of correlation work, factors, but not much on, gee, how do you price carbon? Gee, how do I think about natural capital and biodiversity impacts, water scarcity? How should I be thinking about modern slavery and underwriting these risks and helping to transition communities and just transitions through climate. I think it's an incredible time to be an investor.

36:50It's an incredibly challenging time. These are not small issues to solve. And we definitely see ourselves as a universal owner. We are a large global investor. We are exposed to the global economy. And these risks and externalities that individual companies create have an impact on the system. We pay the cost, whether we pay it directly or we pay it indirectly. We pay that cost in our performance. We have chosen eight of the SDGs, the United Nations Sustainable Development Goals, to focus on as systemic risks and opportunities. These include things that you would expect, like gender equality and climate, sustainable communities.

37:30It includes healthcare and wellbeing, being a healthcare fund. I think we're really trying to put our energy and efforts into understanding these risks, looking at what they might mean, managing the downside. but also finding the opportunities as huge amounts of scale and policy is being deployed to try and drive these changes that is creating opportunities. And I think being a leader in this area is really helping us to get ahead of the pack a bit and leverage those things. So I think our brand in this space is really strong. And I think we've been incredibly fortunate to attract great talent.

38:05As you look at the opportunity set today, where are the areas that you're interested in tilting? There are some things that are getting interesting. We often see market segments moving at different paces. It feels definitely like credit has been early to dislocate. We're obviously seeing defaults really starting to pick up in the US especially. We're seeing credit becoming more difficult to access. We're seeing balance sheet repair being required in certain segments, especially US real estate. That provides an opportunity for people like us that are providing capital to really come in, try and help solve those balance sheet challenges, but do so at a price that makes sense for the risk that we're taking.

38:47And probably, to be honest, we think we're being overpaid for the risk we're taking in the current environment of scarcity as banks are pulling back. We're definitely looking for opportunities like that to really leverage and create value for our members. I would argue inflation is still looking really reasonable. And again, in an environment where we see a lot of secular themes, really probably quite positive for inflation. It seems to us like a cheap hedge to be adding to the portfolio, especially even ILBs now. Inflation -linked bonds with real yields really rising over the past while, locking in and protecting some of that real yield for our members is attractive.

39:26On each of those two, there's very different ways you can think about implementing. You're thinking about the gap of credit in the US. How are you going about that? There's lots of ways you can implement. You can do it synthetically. You can do it through listed markets. You can do it in private markets. And at the moment, we're preferring private markets. We think the dislocation is better and more targeted in private markets. But that's not always the case. We were playing in listed markets. We have played in synthetic markets. So I think the first thing is understand the opportunity. And then the second decision we need to make is our implementation access point.

40:04Well, you did that directly or is that the type of activity you'll do with managers? At the moment, it's indirect. We use partners to do that globally. What are the characteristics of the partners that you prefer? I think the name partners says it all. We like people that actually think of this as partners. So not as a third -party capital provider into a pooled fund. We want people that can come to the table, share research, share insights and craft mandates together. We like people that see it as a long -term relationship. They see us as growing capital. They understand the growth that we can bring and the sophistication with which we can act.

40:42And they price that appropriately. So obviously, part of our role is to make sure that we're generating strong net performance for our members. We want to be partners with people that really drive our thinking. We want to share ideas and insights. And some of those partners publish great research. They have dedicated people available to talk through deep issues. So yeah, I think it's much more now than just managing money. It's definitely a deeper, more sophisticated relationship. When you see an opportunity like that on the margin, how do you go about diving in? Existing relationships are obviously easier.

41:18We're staying in touch constantly. When they're existing relationships, it's quite easy to accelerate investment. Oh, great. Let's just add another clause in our mandate and add another mandate to the side or change the nature of the existing mandate up or down. I think that's a very easy execution point. New managers, we want to start with that clarity of what are we going after, what does great look like, and then find a universe of managers that fit that niche. Start with a funnel, start with your universe of managers. We actually work with global advisors to do that as well. We have our own contacts, we have our own networks, we shake the trees globally with all of those.

41:55But we also work with advisors to shortlist the universe and then we compare and contrast our lists and sort of start to shortlist into our preferred managers. From there, we'll go through an RFP process, really starting to get deep in terms of the team and the process, the philosophy, talent, et cetera, ultimately makes a decision. New managers can take more time. When you want to invest, you want to be doing those 12 months out. So we've spent the last 12 months really getting ready in case markets do provide attractive opportunities in various areas. And inflation as an opportunity set, there's a lot of ways you can go about tilting your portfolio.

42:31How have you chosen to do it? There are a lot of ways. You can trade directly through breakeven inflations, swaps. You can trade with real yields through inflation -linked bonds. We can trade further indirectly through real assets, obviously constrained by the cost of replacement. And as the cost of replacement rises, inflation rises, they can hold value in a way that other things may not, as well as often having inflation -linked income streams. So we've added some protection through real assets as well. You mentioned markets being complex adaptive systems, which also means there are occasional periods of chaos.

43:09How do you build your portfolio in such a way that you feel like you can respond as well as possible to those periods of time? Firstly, we start with a dynamic asset allocation process. So we try and be patient, be a little bit counter -cyclical. We try and sort of look for those potential tipping points. I started in investments and I was leading a team going into the tech rec. And so that was my first sort of foray into true chaos, even though obviously going through university in early days, studying the Asian financial crisis was interesting. I think being a portfolio manager leading a team at the time definitely was an interesting experience in chaos.

43:50And then going through the global financial crisis, that was a much more significant and impactful experience and extended time of that really created different challenges and problems, including burnout for the teams. And then thinking that having had two, I was probably done for my career. We obviously then had COVID and COVID was completely different again and really required us to adapt in a different way in a world where all of our models and all of the data actually didn't make sense anymore. We knew the data was wrong. We knew it would take months to update. And so I think by having models, by having a frame of thinking about what drives forward returns and risks and doing that in a way that is highly quantitative but understood deeply and theoretically grounded meant that when COVID happened, for example, we were able to within a day sit down and go, okay, what's changed?

44:40What do we think the impact of these things will be on earnings and multiples and cash rates and term premiums and very quickly form a view on where we felt value was at. So I think that agility and that comes with deep understanding. So you've got to have the preparation to be able to make decisions in the moment. You have to have found that alignment and belief on how you believe markets will work. And then you need a culture that you can come together with agility and make decisions quickly when needed. It's having that framework with clear understanding of what drives markets and what drives our models and having the ability to intervene and adjust those assumptions when needed.

45:19What are the types of changes you would have made your portfolio, say, in a period of time like COVID? COVID was interesting for Australian superannuation funds because not only were we dealing with all of the financial market challenge, at the same time, we had the government coming out and announcing that people could take money out of their superannuation. In Australia, when markets tend to go south very quickly, the Australian dollar also tends to go south very quickly, which means where we hedge some of our international exposure, we can end up with lots of collateral calls on our currency hedges.

45:54So liquidity in those moments is already in demand. And then to have the government turn around and for the first time ever actually allow people to take money out of superannuation for their own personal use in COVID created an additional liquidity challenge for us. So I think first and foremost, in a crisis, this is always true, liquidity, cash is king. We were fortunate we actually went into that period through our dynamic asset allocation process, underweight risk assets and overweight cash. So we were running about 9 % cash going into COVID. So that helped enormously. First, be prepared. So we entered from a position of strength.

46:32I think then as COVID started to present, following our process, we quickly formed a view on what we thought that collateral that would go out of our fund, so the external liquidity demands would be. And it turned out we were within 5 % of our estimate, which was a fantastic outcome. From there, we could make good decisions. So we leaned heavily into risk assets in COVID. And we were buying, once we saw fair value emerge, we were leaning into that and adding risk. And that really helped us outperform in that environment. How do you manage liquidity when you have eventually retirement needs and then you could have what happened in COVID or just sort of an open kimono of cash that could leave?

47:17We spend a lot of time on liquidity. It's not just making sure that you've paid your hygiene and you understand what's needed from you, but also so that you can take advantage of dislocations. We have a liquidity management plan, which outlines what we think are triggers that we should consider and escalate if liquidity hits them. We outline exactly what stress tests we want to analyse and undertake and assess and make sure that we're comfortable with how the fund performs under those stress tests, which might include, for example, significant member outflows, you know, redemptions, whether that comes through competitive switches or whether it comes through government decision -making.

47:56So we analyze those things. It also comes through currency. Currency, as I mentioned earlier, is a key driver of stress. So we don't do them individually, we add them on. We do scenarios which are cumulative and look at what that could mean for the fund. And then we try and position our illiquidity budget appropriately to make sure that we're comfortable and able to respond in those different environments. And in most environments, where do you land in terms of a range of very liquid assets? We currently target around 30 % in illiquid assets. Illiquid is a bit of an interesting term. As you know, some of those assets could probably be traded in a quarter and some of those assets could take 10 years.

48:35It's a very broad universe. But assuming that those couldn't be traded, we do different scenarios and try and make sure that we're not breaching 40%. What are some of the things you're most concerned about? Where should I start? I think just in terms of where we are in the cycle, it is definitely feeling late cycle to me. It doesn't mean it's tomorrow. We're spending a lot of time thinking about, well, how long is late cycle this time? We're seeing a lot of indicators that are traditional recession indicators triggering. Obviously, we've got an inverted yield curve. We've got leading indicators starting to slow.

49:08We're seeing employment starting to turn, high inflation, rising interest rates. These things are quite traditional late cycle indicators. But we do have a few things that are a bit different this time, as is always the case. We have fairly strong corporate balance sheets at the top end of town. We sort of are seeing a bifurcation in terms of the haves and the have -nots. The haves being those that are fortunate enough to have savings, to have locked in debt at low terms. So they're actually generating surplus earnings and interest at the moment versus those that were already stretched, maybe don't have many assets, are suffering the cost of living crisis, suffering higher cost of debt and really starting to feel the pinch of a slowing economy.

49:51That is something we're watching closely and we just don't think equity markets have really priced that risk at the moment. Longer term though, I think we're really thinking deeply about the climate transition. We know that we need to get global temperature increases down. We know if we don't, that we're going to face significant tipping points and significant physical risks and physical costs. I think biodiversity loss is the other big systemic risk that we're facing. And again, we're starting to go into negative natural capital. We're using more and depleting more than we're replenishing. Biodiversity is one of these beautiful systems which is self -replenishing.

50:28You can eat an apple off a tree and it will grow again next year unless you cut down the tree. And we're cutting down the trees at the moment. We really need to find a way to reverse that, understand it and really start to drive change in our natural capital markets. Geopolitics, I think that's something we're all grappling with. Obviously, the nature of global relationships and trade is changing. The instability is rising and our ability to deploy capital into these regions or the risk that we're taking in doing so is less predictable. I think inequality, and look, I'd probably link that to populism, is another rising challenge, which sort of goes to the heart of democracy in some ways.

51:09And some of that is linked to inequality. Some of that is actually linked to things like climate, where people are just seeing the risks and feeling like governments in their traditional forms maybe just aren't acting the way that we need them to. I think we're going to see more societal risks emerging as a result. How do you integrate that common but concerning list of risks into the actions you take in your portfolio? We start with a deep dive. So with these risks, we start by going, okay, these are very complex, challenging risks. We need to do deep research on these. So we form squads of experts.

51:44We form squads across our team and they're multi -team squads because we want to make sure we're getting all these different perspectives and talents to the table. And we leverage global partners on think tanks and research firms and talk to as many people as we can to get a really deep, good perspective on the challenge. From there, we go, okay, that's great. And often that's 10 ,000 feet. And then we bring it down to, okay, well, what does that mean at 1 ,000 feet? What does it mean for our assumptions on earnings growth, our assumptions on risk premium? What does it mean for future volatility?

52:15Who will be winners? Who might be losers? Are we overexposed to either of those? So we really try and bring it down to, okay, what could it mean for the portfolio? And then I think when you bring it down to 100 feet, you're really saying, well, what could we do today that would build resilience given those potential outcomes? Then we're maybe making changes to our regional weights or changes to the sectors we prefer as a result. I'd love to circle back to this very unique feature of HESTA of being so concentrated in a female membership base. How have you thought about how you might approach investing differently with the importance of diversity coming through in your membership?

52:57It is something we're incredibly passionate about. Firstly, I want to make sure that I'm harnessing diversity in my investment team. We're quite unique at Hester. We have a female chair, a female CEO, and a female CIO. Not by design, just sort of by accident, but again, it's quite unusual in the market and broadly 50 -50 over time across the board and executive management. Within the investment management team, we're running over 40 % female, which is very high relative to the financial services industry and benchmark. So we've been fortunate. I often get asked, well, how do you do it? How on earth do you find these women?

53:34And my answer is often they find us. They're great women in the industry who want to work in an inclusive environment with purposeful capital, and they find us, which is an incredible big brand opportunity. We then want to make sure that our managers are leveraging diversity. So every two years, we undertake a survey asking our managers to outline the people managing our capital. So we don't want to know how many women are in your finance team or your marketing team or your HR team. We want to know how many people are in your investment team managing our money. And when we started that survey back in 2018, the number was 17%, so quite low.

54:14So from there, we started sharing case studies of excellence about the different processes different managers were using to create more inclusive environments, to manage unconscious bias, to grow and develop and retain great female talent. And roll forward to today, we've just completed our 2022 survey and published the results and came in at 24%. So thrilled to be seeing that moving in the right direction, but slowly. Here in Australia, we've been strong supporters of the 30 % Club, aiming to get 30 % female representation on boards around Australia. And pleasingly, we've hit that hurdle and we now have 30 % and we're starting to think about great, making sure that we've got the right number of women on boards.

54:54We've been the founding member here in Australia of 4040 Vision, which is driving towards 40 % female representation on executive leadership boards in Australia. And again, been thrilled to see the amount of support that that initiative has received both from corporate Australia and other institutional investors here in Australia. But that's not enough. We've got to help our members. We do a lot on policy advocacy. Our members, I mentioned they're in the health and community services sector. They work in aged care sector. They work in early education. And these are often not highly paid industries.

55:28So we see ourselves as having a really important role in making sure that people understand and value the care economy, that people understand time out of the workforce creates gender inequity and that women who have casual roles in the past haven't got superannuation paid on sub $400 a week. We've advocated to get that change now that everybody who works is entitled to superannuation. So we do a lot on the sort of policy side and equity as well. And then finally, I think gender lens investing is an area we're spending a lot of time on. We know there's a lot of research showing that there is bias in how female entrepreneurs, for example, are funded and the number of female entrepreneurs that are funded.

56:09So that's something, again, we're really hoping to do more work on in the near term. I'm curious about the competitive landscape across superannuation funds. You mentioned performance being great. What does that mean both for your team, for your constituents, relative to who you view as your peers and potentially competitors? The superannuation industry in Australia is definitely a competitive industry. So it's sort of different to the United States where you tend to have more closed funds. If you're in a part of that employment universe, you're with a certain fund. Here, members have the right to switch.

56:48So it's sort of similar to funds management in many ways. They have the right to change funds within three days. There is a real competitiveness that that brings into the market. The reality though is that most members tend not to switch a lot. Most members come to a fund, they're aligned with their sector. So for us, it's the health and community services sector. They feel we understand them and their needs deeply. Often there's customised insurance and customised financial planning and all of these things to really support them in their needs. They go into what's called a My Super option, which is the default option for all of the accumulation phase as they're sort of growing and paying tax before they start to draw an income.

57:30And that My Super option is reported against all other My Super options and all other sort of balanced options publicly in terms of performance. We have rating agencies and they publish the performance in the newspapers and they show the top 10 and there's definitely a very high focus on performance outcomes. It really comes down to trust. How do we evidence to our members that we are good at what we do? And so we think that is a way to build trust for them, whilst also obviously achieving outcomes. It's very aligned with financial performance. That's one of the measures that most of the industry now looks at is making sure that they are performing strongly relative to that universe.

58:06The regulator here has also actually added another dimension. They've introduced a performance test, which almost, if you think about it as proxying your asset allocation to listed benchmarks and then assessing whether you are out or underperform those benchmarks over time. And that next year will be a 10 -year rolling period. And if not, if you underperform that benchmark by more than 50 basis points, then you fail and you have to write to your members and tell them that you failed this test. And if you fail for two years in a row, you can't accept new members. So that has added another dimension to risk, I guess, for all Australian superannuation funds to have to measure and manage.

58:46You can imagine the game theory that goes around making sure you beat that benchmark. How does that translate into risk taking? I think differently depending on where you are relative to the benchmark. We're fortunate we've got a lot of margin. So for us and our board, they want to be great investors. they understand that that requires us to take some risk and we've got the capacity to do that. I think we'd be having probably a very different conversation if we didn't have capacity, like if we hadn't banked in significant outperformance over 10 years. If we were at 0 .49 % per annum against the 0 .5%, I'm sure the conversation would be very different.

59:26And I know that is happening at some tables around Australia at the moment. What are some of your other key initiatives going out the next couple of years? I mentioned climate and biodiversity. We are on a number of global think tanks. We've joined the Task Force for Nature -Related Financial Disclosures, trying to drive the taxonomy around how we should report and account for natural capital. We're working with some other global asset owners on an initiative around antimicrobial resistance, which is the resistance we're all building to antibiotics as they're used through the food supply chain and overuse in the medical industry.

1:00:02Again, we see that as a big systemic risk. If we don't have antibiotics that work, that's incredibly problematic for the future of healthcare. I think we're working significantly on affordable housing here in Australia. Again, like mentioned, our members are in the lower cohort of salaries. Having access to affordable housing near their place of work is so important for their well -being. And yet in Australia, the pricing of housing has just become so significant that it's a real challenge. So we're trying to build sustainable solutions to provide affordable housing near hospitals, near places of work, and really trying to sort of push supply into that market.

1:00:42And we're thrilled we've just announced a platform that we've launched to do exactly that here in Australia. So it's an exciting, again, outcomes -based initiative for us. What would you like to achieve internally in your investment operations that you're not yet doing? We're starting to play with artificial intelligence and how it might make us better investors. There's a few early models on neural networks and equities, which are starting to sort of show some promising signs. Making sure that we understand exactly the assumptions that are feeding models and we can still make good decisions is critical.

1:01:17We're balancing those two things. We haven't really incorporated a lot of alternative data yet. So I think that's a really interesting opportunity for us as we move forward is how will the whole nature of investing change as we get these new tools and these new data sets and how do we make sure that our ability to add value isn't eroded and better still how do we make sure that we're on the right side of that taking advantage of those opportunities. I think that's going to be a really big emerging area in the future and I do think as an asset owner we are in an incredibly privileged position having access to such a broad range of information.

1:01:55We get information from investment banks. We get information from researchers, think tanks, global peers, consultants. You just think about the oceans of data and information coming into our building. I think our opportunity is to use generative AI to maybe harness some of the insights better and really achieve something unique and different. Sonia, I want to make sure I get a chance to ask you a couple of fun closing questions before I let you go. What's your favorite hobby or activity outside of work and family? Look, I've always played a lot of sport growing up. So for me, it's usually anything active.

1:02:30I'm a beginner surfer. I'm often hiking or I'm out sailing with my son. What's your biggest pet peeve? I'd say overconfidence or lack of humility and ability to sort of be open -minded. Which two people have had the biggest impact on your professional life? I'd say the CEO that saw more in me than I saw in myself and really changed the trajectory of my career into finance. And secondly, another female who became a really informal mentor for me and really has over time coached me on everything from financial markets to leadership to stakeholder management and pushed me to do more. What's the best advice you ever received?

1:03:11Very early in my career, I worked for a CFO who actually asked me to take over a management role and I was a little bit nervous about doing it. He said to me, look, Sonia, do you drive a car? And I said, yes, of course I drive a car. And he said, do you know how to fix it if it breaks down? I said, no. Do you know how to change the tires? Shamingly, I said, no. And he said, no, but do you know where to go to get them fixed? And I said, yeah, of course. And he said, well, look, leadership often is about that. It's about getting great experts who work for you that you can trust and you know who to go to to get things done.

1:03:43And your job is really to know the direction and set the vision of where you're moving towards. And I've always remembered that. It's just such a great way to think about how we should all leverage greatness around us. Great. Sonia, last one. What life lesson have you learned that you wish you knew a lot earlier in life? I think it's all about people, which is funny for finance because we think it's all about numbers. But I think if I'd known earlier just how critical people are to our success, I'd like to think I would have invested even more time in trying to become a great leader. Sonia, thanks so much for sharing all this great information about what you're doing, Anessa.

1:04:20Thanks very much for having me, Ted. Thanks for listening to the show. To learn more, hop on our website at capitalallocators .com, where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one, and see you next time. www .wuh Joan