Expert Investor: Graham Tuckwell – a pioneer of the ETF revolution

HOSTS Alec Renehan & Bryce Leske|30 August, 2021

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

This episode, Bryce and Alec talk to Graham Tuckwell, the founder and chairman of ETF Securities, an investment firm focused on exchange traded funds. Graham was an early pioneer of exchange-traded commodities and launched the first product globally, the ETF GOLD. Now a noted philanthropist, Graham’s name may be familiar to those studying at ANU as he endowed the Tuckwell Scholarship, one of the most prestigious undergraduate scholarships in Australia.

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Bryce: [00:00:14] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down the barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going? [00:00:29][14.2]

Alec: [00:00:29] I'm very good. Bryce very excited for this interview. ETFs are a massive topic of interest in the Equity Mates community. And today we're joined by one of the pioneers in the ATF space. So very excited to get stuck in and talk all things ETFs. [00:00:45][16.3]

Bryce: [00:00:46] Absolutely. It is our pleasure to welcome Graham Tuckwell to Equity Mates. Graham, welcome. [00:00:51][4.9]

Graham: [00:00:52] Good morning. [00:00:52][0.2]

Bryce: [00:00:53] So Graham is the founder and chairman of ETF Securities there, an investment firm based here in Australia that focuses on exchange traded funds. Graham was an early pioneer, as Ren said, of the exchange traded commodities and launched the first product globally, the ETF gold, which I know a lot of our community are invested in. Now, a noted philanthropist, Graham's name may be familiar to those studying it ANU as he endowed the Tuckwell Scholarship, one of the most prestigious undergraduate scholarships in Australia. So we are very fortunate to have Graham with us today and looking forward to unpacking his journey in finance and business. But as always, we'll kick off with our game Ren overrated or underrated. [00:01:34][40.5]

Alec: [00:01:35] That's right. Great. And we like to kick off with a bit of a game to get your thoughts on some topics we may not otherwise get to in the episode. So if we start at home and we talk about Australia's major index, the ASX 200, overrated or underrated for investors? [00:01:51][16.6]

Graham: [00:01:53] Well, I guess it depends on your view on banks and mining companies, because for years and years that's been the bulk of it. So I think goodness knows what it's going to happen with mining companies and Chinese prices and demand, et cetera. And I think the banks are just going to get squeezed by the fintech industry over time. So where do I think the opportunity is? Probably in some of the smaller mining companies that are doing more bespoke type metals, anything to do with lithium batteries, that sort of stuff? Apart from that, I see it as a big gamble. [00:02:28][35.2]

Bryce: [00:02:31] So, Graham, overrated or underrated, the big sell off that we've seen over in China recently? [00:02:36][5.5]

Graham: [00:02:37] Oh, goodness knows what the Chinese Communist Party is going to try and do to the rest of the world and stock markets in general. Once again, I think that that is a big gamble. But in the longer term, they're going to have to try and they're going to want to build the economy as strong as it can. And I guess with that, equity prices are going to do reasonably well longer term. [00:02:58][20.5]

Alec: [00:02:58] So, Graham, the most talked about asset class in twenty twenty one has to be cryptocurrency. [00:03:03][4.9]

Graham: [00:03:05] And last year and the previous year and the previous year, we've been looking at doing an ETF on this for about five years. [00:03:11][6.4]

Alec: [00:03:12] Yeah, yeah. Yeah. Well, I'm sure that would be a very popular ETF when it comes out. So overrated or underrated bitcoin. [00:03:19][6.9]

Graham: [00:03:20] Oh yeah. I remember looking at it where it was five hundred dollars until it was over. Right then I looked at a thousand dollars and thought it was overrated etc.. So my view on this is block chain is clearly a huge development. There is no doubt about it. And the thing about Bitcoin is you could argue it's not worth anything or it's worth a lot, but it's always at the forefront of everybody's discussion and I don't think that's going to go away. So my betting is it's underrated. I think you'll see that six digits sometime in the next couple of years and it will probably just do what it's always been doing. Goes up, falls like crazy, recovers, goes up again, falls like crazy. Everybody says it'll disappear, but I think it'll be around for some time. [00:04:00][40.3]

Bryce: [00:04:00] I'd love to hear it. Love to hear it. [00:04:02][1.9]

Bryce: [00:04:04] And to close out. Graham overrated or underrated, the Australian residential property market. [00:04:08][4.3]

Graham: [00:04:09] Oh, my goodness. That's been just you know, I was having a chat line is the chief economist at one of Australia's banks, and he said, look, it's got to be the best investment for the next couple of years. And this was a year ago and he was absolutely dead set. Right to things are going to drive it. Obviously, the pump priming that's going on and with government spending money like it's nobody's except, you know, all the young people out there, you don't have to pay those bills back. And and property's gone through the roof. And I think it will continue to and you might say, well, it's really expensive, et cetera. But, you know, when you look at the cost of servicing a loan, I mean, my first one and it was a 14 per cent per annum right now, these days you're paying, what, three per cent or something so you can afford four or five times as much. So this idea that property is expensive compared to people's wages, forget that. How expensive is it compared to the cost of servicing a mortgage? So plenty plenty of opportunity to make money that in my opinion. [00:05:06][57.4]

Alec: [00:05:07] Yeah. Yeah. So, Graham, we love to start with.... [00:05:10][2.9]

Graham: [00:05:10] Sorry for sitting on the fence, with always these guys... [00:05:12][2.0]

Alec: [00:05:17] That we love, that we love, we've interviewed someone from Vanguard before and they literally did sit on the fence for everything they said, fairly related to every question. So we love the fact that you're you're bucking the trend in the industry and forming a view. So we love to start these interviews by unpacking these expert investors personal backgrounds, hearing how you got into investing and your story to where you are today. So to kick us off, can you tell us the story of your very first investment? [00:05:47][30.1]

Graham: [00:05:49] Oh, my God. Okay, so my very first investment, when I started at Schroder's just out of university, there was a thing called the film industry was being heavily subsidised by the Australian government. Tax rates were at 60 per cent. They gave one hundred and fifty per cent tax deduction. So for every hundred dollars you invested in any cost you because you got a tax refund of 90. So this prospectus came across my desk of a film for Crocodile Dundee. [00:06:15][26.0]

Speaker 4: [00:06:17] Right. [00:06:17][0.0]

Graham: [00:06:18] And I thought this was a really interesting thing to look at. So I went through the detail as to how much the promoters were getting out of it. And so it's not this. This will have to make too much money in order for the investigate too much. So I put my money into another another film that actually just went broke. So it's almost my first investment that should have been was Crocodile Dundee. And I wish I'd kept that prospectus going to be a museum piece. These are the highest grossing film in Australian history. [00:06:48][29.7]

Bryce: [00:06:51] So Graham, after graduating from ANU and working at PM&C, you had a career in finance that included time at Salomon Brothers and Credit Suisse. What did you learn about financial markets at that time? [00:07:06][14.5]

Graham: [00:07:07] Well, I started actually try to Darling, which was a wonderful company in Sydney. I learnt a little bit about the Australian financial markets, but it was when I got hired by Credit Suisse First Boston to move to London that it was a huge eye opener working on desks where you had the person speaking French and then one speaking German and then one speaking and very refined English and Italian. And you could never hear yourself speak because I always speak with the hand so loudly. And it was just amazing to see how much money flowed through the whole of the European market and just how international it was. And the numbers were just, you know, ten hundred times anything I'd ever seen in Australia and many more products. So that completely changed my view of the whole world and how financial markets, which is why basically I've always stayed in the international financial markets pretty well, focussing on London and New York my entire life. [00:08:05][58.2]

Alec: [00:08:06] Yeah, I love that. It's a big thing in the Equity Mates community, Australia's two percent of the world. And we we have this opportunity to invest globally and and it's never been easier. So I think talking about how much money is moving overseas and how much opportunities overseas is a is a really good reminder for [00:08:24][17.8]

Graham: [00:08:25] Australians, a very good and they punch above their weight in the international markets. There is no doubt about that. I mean, you've got one guy running Morgan Stanley in in New York, for example. So it's I mean, pretty, pretty clever group. It's just the market here is a fraction of what it is overseas. I mean, that's the fact. [00:08:44][18.9]

Alec: [00:08:44] So you've had a you know, you've had an incredible career in finance. Credit Suisse Salomon Brothers founding ETF securities saying that grow into a massive international player and finance through that journey. Have you developed a personal investing philosophy? [00:09:02][17.3]

Graham: [00:09:05] The simple answer is no. I don't buy and sell shares, I sort of now buy and sell companies and investments and all that sort of stuff. But definitely I do. And and, you know, I'm a very conservative guy. I basically put any money we've got in just a few ETFs and, you know, not not surprisingly and gold. And that's pretty elite. So as far as I'm concerned, I just view it as almost like a deposit that grows better over time than it would if you had the money in the bank. So I don't actually try and stop it because it's just not one of my interests. I think you've really got to be interested in things and read and follow them, because if you can do well, but if you do badly, at least you say, well, I had to go and I'm interested in it. [00:10:01][55.9]

Alec: [00:10:01] So on that point of gold, I read a quote in the IFR, I think it was from a few years ago. And I quoted you as saying, I'm not sure there would be anybody else in the world with a bigger exposure to gold as a percentage of their assets. So I guess I guess the question is, why gold? [00:10:18][17.3]

Graham: [00:10:20] Well, that's where the product started. I mean, we gave we invented the idea of giving people access to the gold market for buying something on the stock exchange that started in Australia. I moved over overseas and built out that business that became almost 40 billion dollars. But even then, more than half of it, almost two thirds of it, was still exposed to gold. And that's why I made the comment. But I was quite fortunate in the timing. I mean, if you're going to start a business, you might as well start one way. The price that your main product price or your assets starts at two hundred and fifty dollars an ounce, which is where gold was trading in 2002 when Gordon Brown famously sold all the UK's gold into the Bank of England. And then it went all the way to nineteen hundred dollars. So it is definitely easy building a business with your key focus on a product that goes from 30 to 50 dollars an ounce to nineteen hundred dollars an ounce or within a matter of seven years. So that that was how the runs. And I remember, you know, at one stage somebody came to us and tried to buy the entire business and they said, Grimes's an ETF business or is this a gold business? And I said, well, you know, whichever way you look at it, as long as you pay the highest price for it. [00:11:35][75.0]

Bryce: [00:11:38] So let's talk about ETF securities. You launched it back in 2003 with the product that you're talking about, you know, products that tracks gold. Can you take us back to that time? What was the reaction like from the finance community around exchange traded products that tracked a commodity? [00:11:56][18.2]

Graham: [00:11:58] Well, in Australia, it was really tough work because we had a quite a sophisticated report put together by PricewaterhouseCoopers as to why every superannuation fund should have about five percent exposure to gold because it helped their overall returns adjusted basis, but nobody picked it up. Now, that has gradually been picked up by institutional investors all around the world. But way back then, it was a case of, well, if we're sitting in Australia and we want exposure to gold, we can buy gold miners or gold explorers and get a much better leveraged return. I said, yeah, you can also lose all your money. So I eventually got invited to present to one of the world's major gold events in Denver, Colorado. And I got up there and I put some numbers up which said, OK, you want leverage out of gold and therefore you bought gold mining companies. I said, OK, now here's an example is that if you bought our product on leverage, you wouldn't have any company, you wouldn't have any exploration failures. And I proved that by buying the gold product, you could actually outperform all the gold miners and all the explorers. And therefore, you shouldn't put money into equities. You should put it into gold now that this was a gold equity conference and I didn't ever get invited back. [00:13:20][82.1]

Alec: [00:13:24] So from that first product, Graham, you built an international business with over 40 billion in assets under management and ETFs listed on all the major exchanges around the world. What were some of the major lessons you took from growing that business? And I guess how is Australia as a as a stock market different to some of the other major markets around the world? [00:13:46][21.9]

Graham: [00:13:47] Putting it in context is I didn't even know what an ETF was when I launched the gold product. I was just listening gold on the stock exchange. Right. Because the only ETF around was the State Street ordinary ETF and property. So as the third ETF. Existing, but it became very apparent the big demand for this was going to be over in Europe and either in the United States, but even then it's a bit like Bitcoin. You know, it hadn't been approved by the regulators. It was it took three years to find its way through approval for the S.E.C. in the US. But the big markets in ETFs were the US and Europe was still a nascent market. It was about seven years behind in terms of developing a following for ETFs. And Australia was about seven years ago, has been about seven years behind Europe. So the big market was well into the US. So the lessons I learnt was Europe was good on the uptake. I mean, we end up raising about eight hundred million dollars in about the first six or eight weeks, which isn't a bad start, and that's US dollars Saraiva billion. In retrospect, instead of we built the business out in Europe, but then we started to look further afield. I mean, we my guys pushed me very heavily to go into Japan, to Hong Kong. I even looked at the listing in Mexico. But really, in retrospect, what I should have done if I did it all again, I would have just just focussed on the US and done nothing other. I would have just said, okay, let's not try to diversify too much. Let's just pick two areas and do nothing else, and that's it. So that's the sort of lesson. In other words, don't try and spread yourself too thinly over too many markets, but don't be afraid to at least choose one other market or two other markets. But just keep going and going and going and spreading yourself. It does depend on what type of business you're running, I guess, as to whether it's leverage across all countries. I mean, something like Facebook, of course, goes global. So it's no big deal as to whether they open in five countries or 50 countries, whereas something like ours was very specific on a country by country basis. [00:16:04][136.8]

Bryce: [00:16:05] What about a podcast business? [00:16:06][0.8]

Graham: [00:16:07] Oh, I think that can go global if people understand the accents. [00:16:09][2.8]

Alec: [00:16:13] That is the big question. [00:16:14][0.9]

Graham: [00:16:17] Don't try and go to Northern Scotland. [00:16:17][0.4]

Bryce: [00:16:21] So, Graham, throughout your journey, you've pioneered a lot of the first that's been the first petroleum ETF in 2005, the first carbon ETF in 2008, the first ETF to allow physical redemption in 2013. What were your insights that enabled you to be first on a lot of these products? How were you able to perhaps rate the market better than some of your competitors? [00:16:44][22.6]

Graham: [00:16:46] Well, it was really a matter of talking to a lot of the investors. I mean, I did feel that gold was always there because I was doing advisory work in the gold industry and a number of investors said, look, we definitely want to bring this out. We could bring it out, we'll put some decent money. And so a lot of it's just talking to the investors. But that saying, you know, some people have their own particular pit likes and, you know, it may be that they're the only investor. I mean, you know, for years people have talked to us about can you do a diamond DTF or can you do an iron ore ETF? Well, there are certain reasons as to why that doesn't necessarily work as well, because there's no homogeneity about them. So you've got to take a about. So really, it's getting get driven by what investors are telling you is the answer, and then you've got to go and do it. Now, the what the benefit we had is because we're a small company, we didn't need to get these massive head of office approvals. If I actually tried to put down and justify launching some of these products in a business plan, I would have been destroyed by some investment committee risk. Someone said to me, look, you know, you don't know what the demand for this is. I said, well, there's one way to find that we'll build it listed and then find out what the demand is. And I said, well, sort of market research is that I said, what's the biggest market risk that you get? And if we lose some money, well, it's our money we've lost. You know, I'd rather do that than pay some marketing company to tell us the demand. [00:18:19][92.7]

Alec: [00:18:19] And I love that attitude. I think that's very similar to what Bryce and I had when we started the podcast. No, no business plan would have made sense for podcasting back then. And we just sort of did it. [00:18:30][10.7]

Graham: [00:18:31] You know, it's a great business, though, so I mentioned it. [00:18:34][3.5]

Alec: [00:18:34] Oh, so after fifteen years of ETF securities growing globally, you'd sold the US and European businesses in twenty eighteen to refocus back on Australia. Why? Why sell the business? And I guess why focus on Australia? [00:18:53][18.8]

Graham: [00:18:55] Well the answer is I. I didn't sell Australia, not just I didn't sell the entire bit. I mean the business was. Sold for seven hundred million or whatever. And Australia's five per cent of that or less. The answer was the industry was moving to a high that had to keep expanding and get the benefits of scale or exit. And the European market was one where our firm was the only firm in the top 10 that was not basically built by a bank. Or a major institution. OK, all of the others. So, you know, in terms of an individual being a majority shareholder in an ETF, we were absolutely unique in Europe. Happens a bit more in the US for various reasons. So I thought our guys are going to have to double up and double up and double up or sell out. So I thought at that time it was meant to sell out, in fact, that I got a huge bid for Australia. I might have sold that, too. But the strategy was, as I said, 14 years behind the development in Europe, in the US and sitting behind Europe. And I know there's a lot more to go in Australia. And this was four years ago. And even then the assets weren't that much, whereas now people actually know how to spell ETFs, as I used to get emails thinking it was electronic funds transfer and people would never get my email correct securities. Now it's ETF securities. How many times do I need to tell you? So people are learning and it's guys like you that are educating the market on what ETFs are, why they should bother. So, you know, but, you know, I'm pleased the business here is growing and I'm pleased, frankly, the entire Australian market in ETFs is growing because that's what it should have been. [00:20:42][107.0]

Bryce: [00:20:43] Yes. Certainly feels like there's a lot more growth to come, which we will chat about in a second when we talk further on the wider state of the ETF industry. But before we do, we'll just take a quick break to you from our sponsors. So, Graham, let's turn attention to the state of the ETF industry more broadly, you journey with ATF securities was notable for being the first to market with a lot of innovative ETFs, as we've discussed. So I guess the big question is, what do you think is the next innovation in in this space? [00:21:14][31.6]

Graham: [00:21:15] I think the next innovation is basically people being able to invest on what we call themes in one of our cities, AC, DC, where you're buying batteries. So in other words, is battery power going to be a thing of solar power or whatever? So what used to happen is people would buy the whole market because that was one way of getting into ETFs and that's a very good thing to do. But I think what it's now coming down to is what exposure do you want, what seems you're wanting? And when you think about it, that's actually all about asset allocation. So if you if you and it used to start asset allocation, used to start on industry subgroups. So if you bought into Australia, you might say, do you want to buy into mining companies? Do you want to buy the banks? You want to buy into transports? And that's our MSCI started sending country indices and some groups and all that sort of stuff. But the question is, I think people are saying, well, the world's more global now. So you don't just want to pick know car companies in Japan or drug companies in the US or something like that, you actually want to pick global top companies and that's where the themes come in. So and I think once you get to that, that's really active fund management because you say, well, what are the themes that that are really going to work? I mean, for example, you know, if you really make a lot of money, the idea is to be like Rip Van Winkle and go to sleep for 10 years, wake up, understand what the big theme is going to be, invest and then go back to sleep for another 10 years. I mean, for example, if you say, okay, US technology companies are going to make a fortune in the next decade and you did that 10 years ago, then you would have just outperformed every other index by country. I mean, the last seven years, for example, 37 per cent per annum compared to all the world indices, about 14 per cent. That's crazy. Yeah. I mean, if you did this in the 1990s and said I think Japan is really going to come right and just invest like that, it make a fortune. So actually, you've got to make one investment every 10 years as long as you get it right. [00:23:32][137.1]

Alec: [00:23:34] It's not easy. That is the big challenge. So one trend that we're starting to notice in twenty twenty one is the rise of active ETFs. We're seeing a lot of active fund managers to go from listed investment companies to active ETFs or unlisted funds to active ETFs. How do you think about this, I guess, extension of the ATF concept to active managers? And what do you think, like the growth in that part of the industry is going to be? [00:24:09][35.1]

Graham: [00:24:10] Well, I think if I had technology existed years and years ago, you would never have had funds established in the way they were. You would have you would have been invented day. Well, because when you think about it, years ago, people used to just buy individual stocks. And then there was this concept of funds came in and people would write out a check, send it off to the fund manager. They'd get allocated units and then they'd read in the paper how weight and then they'd write in and say, can we have some of our money back or whatever. But if you had, you know, mainframe computers and all the technology, we've got an Excel spreadsheets, then that's worth of ETFs. So that's the exchange business. But in terms of active fund managers, what is an active fund manager? Basically, it's a person who makes asset allocation decisions. That's all they. Now I say, well, that's on an individual stock basis, but, you know, asset allocation is 90 per cent of the performance of a portfolio. The individual stock selection, the tactical allocation is like almost 10 percent of a portfolio performance. So it's all about this whole point, you know, which industries or which type of companies are going to do well for the next year or two or three years. And is that active fund management or is that asset allocation? So I say asset allocation is actually the active fund management that the investor can always do themselves. And that's why you're getting the merging of the two. When you say active fund managers rising, don't forget it's ETFs that have been eating active fund managers for lunch for the last decade or two or three for a good reason because I offer better value for money. [00:25:56][105.8]

Bryce: [00:25:58] Mm. I've noticed, Graham, that a number of the ETF securities products are much more concentrated than some of the competitors in terms of the funds, the companies within it. Is there is there a is there a strategy behind that, a conscious decision? And if so, what is it [00:26:16][18.0]

Graham: [00:26:16] that the conscious decision is to get what we think is more focussed products? Because I think this should be done if you're going to take it. Don't tell me that you got to spread your bit. So many different things to try and focus and give people the themes that they're after. Because Gold's is a classic example of that. You know, it's completely you that one thing, but, you know, put a hundred percent in your portfolio unless you're someone like me from time to time. [00:26:43][26.6]

Alec: [00:26:45] One other feature of one of the feature of ETF securities, that I quite like is you're much more willing to equally wait rather than wait by market cap. Yes. Is that again is that because of a philosophy you have about the difference between the two and one might be better than the other in certain situations? [00:27:07][21.5]

Graham: [00:27:09] Yes, yeah. I mean, you can argue for hours and days about the difference between equal weight and market cap weighted. But I think from just the simple messaging point of view, you say, look here, these different companies and you know, whether one small way, the ones large, the question is which is going to perform better. And, you know, if you really do have a conviction about it, I mean, why would you put something in your portfolio that represents point one per cent? Because you it's not going to make a difference. You know, if you go if you're going to have a view, you might as well back yourself to have that. [00:27:49][39.1]

Bryce: [00:27:51] So Australia is relatively early in the ETF journey. I think less than 10 percent of ASX turnover is ETFs compared to somewhat forty five percent in the US or thereabouts. [00:28:01][10.3]

Graham: [00:28:02] And increasing every year. [00:28:03][0.8]

Bryce: [00:28:04] Yeah. What do you think the future holds for the Australian ETF industry? What are we looking at? [00:28:11][7.3]

Graham: [00:28:12] Well, I think it will continue to grow in terms of assets under management or as it's called in this part of the world from China and Australia, like some anyway. I think it'll continue to grow in that respect and I think it will continue to grow in terms of trading. I don't think it will get to the level of trading that they've got in the US, for example, because it's a much, much deeper market. There are many, many more bespoke ETFs out there and that gives rise to the trading. So you don't have the depth of market. But I think it will just continue to rise because it's simply a cheaper and more effective way. Of investing, I mean, you know, I've got adult kids now and then they say, well, then, you know, if I've got some money, why would I put in the bank and get know, zero point zero zero percent? I can just buy this ETF, I can buy the whole market, or I can buy, you know, Sangwa CDC or whatever it takes their fancy. But they don't view it as ultra high risk because by definition they're exposed to so many different shares. So it's, you know, and they're not necessarily going out buying houses every day of the week either if they got some spare money. So, you know, if you're a young kid coming through, you'd say, well, why would I hand it to an active fund manager? Why would I pay a financial adviser? I mean, it's all pretty straightforward. I'll just buy these ETFs and that's it. So and I think you guys are onto the audience that are just going to appreciate this. I've always said ETFs will only really come into their own once all the previous financial advisors are retired. Yeah. And we move into a new generation of people who actually understand what the world should look like. [00:29:55][103.1]

Bryce: [00:29:56] Mm hmm. Well, yeah, there's certainly in decline, but there's still a little while away until all those financial advisors are retired. But, yeah, it's it's a fascinating space that's playing out at the moment. It's a game you mentioned at the start there that you're now interested in in oh, we're actively investing in and selling businesses. So let's turn our attention to sort of the work you're doing in that they say space. We had a chat offline about your interest in in media and and what you're doing there. Are you able to talk us through what you're currently doing at the moment and what space is a particularly interesting you? [00:30:35][39.6]

Graham: [00:30:36] Yeah, what I did when we when we sold the businesses were sitting on heaps of cash and it was a question as to what we do with it. So my base case was I'm just going to invest it in a dozen different ETFs. Right. On a global basis. And how the hell am I going to outperform that? And I thought, well, the only way you can outperform it is if you're investing in venture capital or private equity, doing it yourself, because otherwise you're paying two and twenty fees to a fund manager or whatever. And because we do know that er because we, you know, we were running a business and we thought, well, we need this particular tool or we wish things could be done in this particular way, or this person's got a great idea. But if we added company to Company B to C, we could create something really, really interesting. So we've only invested in companies associated with the with the ETF area and those and we've got about a dozen ways. And I mean, one company came in to us and the business plan was for slides, right. PowerPoint for slides. There was nothing else. But the guys had a good track record. And, you know, five years later, we turned that from, I don't know, a two million dollar investment into a 60 million dollar company. And they did a lot of work that we helped them. So what we tried to do is actually mentor people because we've been through the journey of actually running a company. I think, you know, in some sense, it's not so much just money. You want to run a company. By the way, what lessons have you learnt? And, you know, how should we handle this particular situation? What should we do here, et cetera, et cetera? So we we're still operators in some sense, but that's really what we're about. And that work is really all being done in London because the team I sold the business, all my guys, they went with the assets and then I thought, OK, can we come back now? Because we're having a lot of fun together. So all the teams back together, it's like putting the band back together. Blues Brothers. [00:32:42][125.9]

Alec: [00:32:45] I love that. And I love the fact that that company's been successful. All four slides. I think that's a lesson for Bryce that we don't need a beautifully designed forty page. [00:32:55][9.9]

Bryce: [00:32:56] Hey, hey my slides to talk in my slides to the talking. [00:32:59][2.8]

Graham: [00:33:01] I told you that as soon as that we had that discussion last week, I thought, well, why didn't you give me the chance to buy another bloody company? I think you guys, because what you're doing is just something sensible that's needed. I mean, that's not that's what we need to do. And you've got to have a bit of sense of humour and have some fun all the way through it, because, you know, a lot of businesses and [00:33:19][18.2]

Bryce: [00:33:20] Well, it hasn't been easy convincing people that podcasting is an investable business. So if only we had come to you before. [00:33:26][6.2]

Alec: [00:33:30] But, Graham, I guess, you know, you've built this really successful business and successfully sold it. You're now investing in businesses that you know you're looking to. Do you help them on the journey and do similar things with as the Equity Mates community. We're always looking at companies and trying to figure out what makes a good business. What are some of the things you've learnt both from running your own business and investing in other businesses? What are some of the key sort of hallmarks of a of a really good, really good business and therefore a really good investment? [00:34:04][34.0]

Graham: [00:34:06] Well, hopefully something that well, something is either first to market. Ahead of a Trent. And something that hopefully what once you there you've got is Warren Buffett calls it a bit of a moat around that people just instantly come in and eat your lunch. But I think so much of it's getting first market and most big companies do not want to do entrepreneurial things, because if you're an individual in a bigger company and you can see the opportunity. If you put up your hand and say, look, you know, I need five or ten million dollars to do this, that you might or might not get the money. But if you get the money and it does really well, everybody else around you will claim credit for it. And if it does really badly, everybody will be pointing to you. That's why big companies are always much better off buying little start-ups. So now how how your audience accesses them. But that's harder. But, you know, there are some examples I'm sure you know better than I do is to where people could have bought companies ages ago and and made, you know, huge returns. There's some good examples of that. [00:35:22][76.7]

Bryce: [00:35:23] So just to close out before we move on to the final three questions that we always ask our guests, Graham, a number of the investments you've made have been in the media space around ETFs and finance. How do you see the market in that space here in Australia versus what's happening over in London and America? [00:35:42][19.1]

Graham: [00:35:43] Well, we started a family business online in Europe called ETF String, and we had it here. And the problem and it's going really well in Europe. Problem is, you just don't have enough news flow in this market in ETFs. So it sort of becomes a tenth or twentieth of the overall business. And then we bought ETF Tocal, which is the world's biggest ETF media site, and that has a lot of news flow. So between the two of them. So basically those two between the biggest coverage in the world, free tips. And, you know, I'm interested in that, not just from a pure investment point of view, but from an academic point of view, because I do believe that we are saving people huge, huge amounts of money. And I've been banging on about this for years in Australia. I said, look, instead of having all these, you know, active fund managers, etc, the entire super industry should have channelled all its money in a compulsory super and could have been managed like Norway does, or the federal government could have managed it for two basis points, whereas you've got this massive industry out there that's sucking fees out of the system through yourself. Many super funds, you're paying 50, 100 basis points a year plus all plus these, plus, etc. All that money could have been saved. [00:37:09][86.5]

Alec: [00:37:10] Hmm. [00:37:10][0.0]

Alec: [00:37:11] Mm hmm. Well, I think on that point of the government managing super, I think a Liberal senator came out this morning and said they want the Australia's sovereign wealth fund to manage super. So maybe they're listening to you. That's right. [00:37:29][18.0]

Graham: [00:37:30] The problem is we all that is set up, nobody in Australia would have trusted the state governments not to grab all the money and build their favourite infrastructure projects as well. [00:37:42][12.2]

Alec: [00:37:43] We we want to say a massive thank you for taking the time today. We'll close out with the final three. But before we do, if people want to follow, I guess you online or ATFP Securities online, where should they be going? [00:37:59][16.0]

Graham: [00:38:01] Well, to the website ETF Securities dot com today. And if they want to fall out and if they've got friends or siblings at school, I'd love them to go to the the scholarship website Tuckwell Scholarship and learn about that, because that's what we're trying to do. There is celebrate excellence in education. We celebrated in the Olympics. We love people who do really well. But every time you talk about education, people just want to focus on the people who are struggling rather than actually celebrating the people who are right at the top, because they're the people that really can make a difference. To the rest of people, [00:38:40][38.8]

Alec: [00:38:41] As fellow ANU alumni's and as two mates who met at ANU, yeah, I think you should be really commended for all the work you've done done down there to help to help that university and to start that scholarship. Unfortunately, neither Bryce or I won it. [00:38:54][13.5]

Bryce: [00:38:59] If we applied, we would have won Ren, if we had applied. [00:39:02][2.3]

Graham: [00:39:04] All the good things about the scholarship designed by my wife. Not me. So... [00:39:08][3.3]

Alec: [00:39:10] Umm we'll jump into these final three questions. The first one is, do you have any books that you consider a must read? [00:39:18][7.3]

Graham: [00:39:18] Oh, yeah, absolutely. No, I'm not going to give you all this thing about rich dad, poor dad, the miss and all that. Here is the book: The Curmudgeons Guide To Getting Ahead by Charles Murray. And it's all about how you can behave in the workplace, what you need to do, what you don't need to do. So I'm just taking it if you want to get ahead. Yes, you've got to have all the technical knowledge. But actually what you've got to do is work with people and be enjoyable to have around. And there was another one ago. I got to know quite well, Seymour, surely, which is one of the most successful guys in the Canadian mining industry. Great. With number one best seller in the US, you know, life and business lessons get smarter. Another great book and once again, a variation on it here, life's lessons on how you should go about business as you go about investing, et cetera, et cetera. [00:40:10][51.6]

Alec: [00:40:11] That's great. There two books that I haven't heard of before, so I'll definitely add them all. You got to [00:40:16][4.5]

Graham: [00:40:16] Read the Curmudgeon's Guide. Go ahead. It'll just make you laugh the whole way through. And then you have to work out whether you're the recipient or the giver, whether you're automatic budget cuts, people like Sir Graham. [00:40:31][15.5]

Alec: [00:40:33] Second question in this final three, if you think about your career in finance and and in business, what's the best company you've ever come across? [00:40:44][11.4]

Graham: [00:40:47] From an investment perspective? [00:40:47][0.9]

Alec: [00:40:48] It doesn't have to be based on valuation or anything. But just. [00:40:53][4.4]

Graham: [00:40:53] Well, there's two things about it. Firstly, I haven't so much come across great companies. I've come across great people within companies because often there's one or two great people and it could be a fad or whatever. But the further you get away from that individual, the more it becomes a more noble company rather than something really special. So to me, it's I've met some great people is say one company that absolutely stands out. Not particularly. I'm I've got to tell you, I'm very admiring of dangerous forests of ninety degrees. I mean, anybody who had started build a billion dollar company in Anaconda and then start again with a little company called Fortescue Metals or whatever, and build a second billion, that there aren't too many people that have built two billion dollar company. So, you know, he's an interesting guy. But if you put your money behind it, you've done pretty well. And, you know, creating a company that's one of the biggest oil producers in the world. And that doesn't happen very often. You know, CSL, I mean, you know, there are some great companies out there, the Atlassian boys. You know, we should be proud of those efforts. [00:41:59][65.3]

Alec: [00:42:00] Yeah. Yeah. We were actually speaking about the Atlassian boys this morning and how that company doesn't get enough credit in Australia. A true tech success story, which is pretty rare in Australia. [00:42:10][10.5]

Bryce: [00:42:11] Mm hmm. Absolutely. And if and we'd love to get Twiggy on the show, so if you can work your magic and. [00:42:17][6.8]

Alec: [00:42:20] Absolutely right. Good. Good. And then final question, Graham, if you think back to your youngest self when you were passing on Crocodile Dundee, investing in another movie instead, what advice would you give to your younger self? [00:42:37][16.8]

Graham: [00:42:38] What to correct all the errors I made? Wow. There's two bits of advice. One, I followed in the other I just didn't anybody starting out, I'd say, you know, once you finish work, go home and read a chapter of a book and learn and learn and look and just keep doing it and say, you're never too young, don't go to all these courses and all these diplomas, just get books and read them yourself and just but if you do it in small bits, you can actually get through security institute, all that sort of stuff. But from my point of view, the thing I did do that, but the thing I didn't do is I didn't just do enough reading and thinking. In other words, I think there's a balance between how much time do you spend just working and rolling your sleeves up and learning as compared to how much do you actually sit back and contemplate and look at the bigger picture? And that's what I understand. Warren Buffett does a huge amount. He just reads and reads and reads and I. I think it's too easy not to allocate yourself time to do that. I certainly don't do enough so that that would be advice I'd give people. And, you know, listen to some podcasts, of course. [00:43:48][70.2]

Bryce: [00:43:49] I couldn't agree more. I think it's so valuable to be able to do that. And, you know, but if you're running a business and in the day to day chaos, if at all, sometimes it's very hard to allocate that time. But yeah, great piece of advice. Well, Graham, it's been a very enjoyable conversation. We thank you for coming on and sharing your journey in finance and pioneering the ETF industry. I know that a lot of our audience would have taken a chunk of value from this conversation. So we look forward to continuing to see the innovations that ATF securities keep pumping out. I know there's some great ones on the horizon, so we're looking forward to seeing those. And as always, it's been a pleasure. So thank you very much. [00:44:29][40.8]

Graham: [00:44:30] Thanks, Bryce. Thanks, Ren. Good chatting to. [00:44:30][0.0]


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